Building a 3-ETF Portfolio: Simple and Effective Method
Creating an optimized and easy-to-manage ETF (Exchange Traded Fund) portfolio is an accessible and relevant approach for the French retail investor. Inspired by the famous â3-Fund Portfolioâ method popularized by Jack Bogle, founder of Vanguard, we adapt this approach here to the specificities of the French market, notably by including ETFs eligible for the Plan dâĂpargne en Actions (PEA) to benefit from advantageous taxation.
The Jack Bogle 3-Fund Portfolio: Basic Principles
The concept of the â3-Fund Portfolioâ is based on geographic and sector diversification through three major ETFs, each representing a key investment bucket:
Developed World Equities (70%)
Emerging Markets Equities (20%)
Government Bonds (10%)
The goal is to ensure broad and balanced exposure to different asset classes, with minimal fees and complexity.
French Adaptation: ETF Selection and Allocation
For a French investor, it is crucial to select ETFs compatible with the PEA to benefit from favorable taxation (capital gains tax exemption after 5 years, excluding social contributions). With this in mind, we recommend the following combination:
Asset Class
ETF
ISIN
Target Allocation
Annual Fees (TER)
Geographic Coverage
Developed World Equities
Lyxor MSCI World (CW8)
FR0010315770
70%
0.30%
22 Developed Countries (ex USA)
Emerging Markets Equities
iShares Core MSCI Emerging Markets IMI (EMIM)
IE00BKM4GZ66
20%
0.18%
26 Emerging Countries
Global Government Bonds
iShares Global Govt Bond UCITS ETF (IEAG)
IE00B1FZS350
10%
0.20%
Global Sovereign Bonds
Note: CW8 is a very popular ETF on Euronext Paris, PEA eligible, offering broad exposure to developed equities excluding the USA. EMIM and IEAG are only eligible on a standard brokerage account (CTO) as they are not PEA compatible.
100% PEA Alternative: Eligible ETFs and Allocation
For investors wishing to remain 100% within their PEA, it is possible to replace EMIM and IEAG with PEA-compatible ETFs, although this reduces diversification:
CW8 (70%): still the core, developed world equities.
Amundi MSCI Emerging Markets PEA (AEME): about 20%, ISIN FR0013412021, TER 0.25%.
Amundi Euro Government Bond PEA (EGA): about 10%, ISIN FR0010754061, TER 0.20%.
This alternative ensures 100% PEA management but with bond exposure focused on the Eurozone and slightly narrower emerging equities diversification.
