Modern Investing, Made Simple

A Health Professional's Guide to the 3-Fund Portfolio

As a health professional, you make decisions using evidence, probabilities, and risk management. Investing deserves the same mindset, especially when your time is limited and your work is demanding.

One approach I often consider for clients is the 3-fund portfolio: a simple, low-cost structure designed to capture broad market returns with minimal moving parts. It is not the only good option, and it is not a criticism of anyone who chooses a managed solution. It is simply a strong default worth understanding.

Why simplicity deserves a seat at the table

Many investors end up with portfolios containing 10, 15, or even 20+ shares/funds. Sometimes that happens for good reasons (specific tax, ethical, or risk constraints). Other times, it happens because complexity feels reassuring.

The key question is not is it sophisticated? It is: does the extra complexity improve your outcome after fees, after tax, and after behaviour?

For many long-term investors, the honest answer is: not usually.

Fund management vs financial planning

Many Financial Adviser are actually Fund Managers, focus mainly on portfolio construction: fund selection, rebalancing, and market commentary. Other Financial Adviser deliver : cashflow strategy, debt planning, KiwiSaver alignment, insurance, practice ownership decisions, retirement projections, estate planning considerations, and keeping the whole plan coherent.

There is nothing wrong with paying for expertise. The point is to be clear on what you are paying for.

If the ongoing fee is primarily for investment selection and rebalancing, it is reasonable to compare that against a simpler portfolio that can often be maintained with a basic annual rebalance.

You could be paying ongoing percentage-based fees (often 1% annually) for investment management you don't need, when you should pay one-time fees for comprehensive planning.

The 3-Fund Portfolio Solution

Instead of 15+ funds with overlapping holdings, hold just three broad-market index funds

That's it. Three funds give you thousands of stocks and bonds globally, with minimal fees and maximum simplicity. This approach, pioneered by Vanguard founder John Bogle, is elegantly simple.

Complexity doesn't justify their fees.

What The Evidence Shows

Industry scorecards like S&P Dow Jones Indices’ SPIVA reports have repeatedly shown that many active managers underperform their benchmarks after fees, especially over longer periods. Even when good performance shows up, it is difficult to rely on it continuing.

That does not mean active management never works. It means you should treat it like any intervention: the default assumption should be sceptical, and the burden of proof should be clear.

The Real Cost in New Zealand

Investment advisors typically charge 1% annually. On a $500,000 portfolio earning 7% before fees, that 1% seems small. But over 30 years, it compounds into devastating wealth destruction:

With 1% Advisor + Fund Fees	3-Fund Portfolio (0.15-0.30%)
Total fees: ≈1.3% annually	Total fees: 0.15-0.30%
Value after 30 years:	Value after 30 years:
≈$2.85 million	≈$3.64 million
Difference: $790,000 saved with 3-fund approach

The purpose of this table is not to attack managed solutions. It is to highlight that fees are a decision with long-term consequences, and it is fair to pressure-test what you get in return.

A friendly implementation (simple 3-ETF idea)

A practical NZ version is often built using broad ETFs available locally, for example via Smartshares and platforms like ASB Securities, InvestNow,etc.

The exact ETFs and percentages should match your timeframe and risk profile, but the structure stays consistent: NZ/Australia shares, global shares, and bonds.

The 3-fund portfolio won't give you dinner party stories about beating the market. But the evidence overwhelmingly supports simple, low-cost index investing over expensive active management.

Bottom line

This is not about being harsh on fund managers or managed portfolios. Many people value delegation and guidance, and that can be completely valid.

It is simply worth knowing that there is an alternative that is:

• simple

• low-cost

• evidence-aligned

• and often good enough to beat more complex solutions after fees

  
  

Ready to Take Control of Your Financial Future?

If this article resonates with you and you're ready to explore a smarter, evidence-based approach to your wealth, I'd love to help. At MoneyPlan, I work with health professionals across New Zealand to create comprehensive financial strategies.

I understand the unique financial challenges health professionals face: irregular income patterns, student loan burdens, practice ownership decisions, and the need for strategies that work with your demanding schedule, not against it.

Let's have a conversation about your financial goals and whether the modern, evidence-based approach to wealth building is right for you.

Contact me at: luis@moneyplan.co.nz

Visit www.moneyplan.co.nz for more resources

Book a free discovery call to see if we're a good fit.

Key Reference: S&P Indices Versus Active (SPIVA) reports show consistently that most actively managed funds underperform benchmarks over 20+ year periods. Available at spglobal.com/spdji

Disclaimer: This article is for educational purposes only and does not constitute financial advice. Consider consulting with a qualified fee-only financial Adviser for advice tailored to your circumstances.