Nothing on this page will make sense if you haven’t read The 3% Signal. If that’s you, please read the book and return here when you’re ready to begin this life-changing new approach to stock market investing.
This one-page primer containing four simple steps will have your 3Sig plan up and running in no time. Free. Get the guide
This is the easiest way to generate your plan’s customized signals, including a convenient email feature to create a personal history of quarterly actions. Included with a Kelly Letter subscription. Subscribe to the letter
Below is a link to the single-page printable version of Mark’s plan that you read about in Appendix 1 of The 3% Signal, page 299. It might be helpful to keep handy when rereading Chapter 7 of the book.
[PDF 68 KB]
Here’s where you can get a working spreadsheet like the one Mark used, named My 3% Signal Plan. The first three lines of the sheet still contain his data. To make the sheet yours, you’ll want to change the names of the investments in the header from their current IJR and VFIIX to the funds you’re using (if they’re different), and then edit the appropriate data cells as explained next. Please read the following when looking at the sheet for the first time:
That’s it! Now go vanquish the z-vals. Here’s the spreadsheet in two file formats:
My 3% Signal Plan
Spreadsheet on Google Drive
[Cloud-based. No file download.]
You need a Google Drive account to save a working copy for yourself, which you can then manage online. Do not request permission from me to work directly in the source file. Instead, open the document then go to File > Make a copy... to create your own working copy. Here’s how the File menu drop-down looks in Google Drive:
File > Make a copy...
My 3% Signal Plan (with auto update of Cols Q and W based on whether Col N is blank)
Spreadsheet on Google Drive
[Cloud-based. No file download.]
Don’t want to update the formulas in Columns Q and W yourself, as explained in Bullet 6 above? Then download this version of the sheet. I’m still offering the non-automated, original version as well because some readers said they prefer updating manually as a way to better understand what’s going on.
My 3% Signal Plan
Spreadsheet as a Microsoft Excel file
[XLSX 9 KB]
Just about any spreadsheet software can open this file format.
The 3% Signal is popular in Canada, but you poor Canucks don’t have access to all the investing options your friends south of the border enjoy. This tipsheet will point you in the right direction. Free. Read the tips
I recently finished reading The 3% Signal and would like to implement this strategy but I have a question on the GNMA bond fund. I realize interest rates do not look like they will dramatically rise any time soon, however I plan on using this strategy long-term and am wondering if interest rates do begin to quickly rise will the GNMA fund be the best place for cash reserves or would shorter term bond funds be safer?
Ignore all bond market warnings. They’ve been wrong for years. The z-vals are just as clueless when it comes to bonds as they are when it comes to stocks. None among us knows if or when or by how much interest rates will rise, much less what that will mean for bond funds. In addition to this:
1. 3Sig moves capital into and out of its stock and bond funds, so fluctuating prices on both sides are sometimes advantageous and sometimes not, balancing out to neutral meaning you have nothing to worry about. If bond-fund prices fall for a while, then stock-fund sales that direct capital into bond funds will benefit from the lower bond-fund prices.
2. For long-term bond-fund holders, 95% of a fund’s profit comes from distributions, not price appreciation. Because you’ll be a long-term user of the bond fund, this will benefit you.
In short, go with just what the book suggests: a general-market bond fund, medium-term bond fund, or GNMA bond fund. Some of my favorites in the ETF category due to very low expenses and good performance are AGG, BND, CMBS, and SCHZ.
Go get ‘em!
I have used the 3% Signal investing technique & tool for 1 year now and all has been successful, I think?
In any case, I need to clarify how I should be making contributions to my chosen BOND fund (VAB, in Canada). Here’s my situation:
I currently contribute $75 into my RRSP account on the 15th & last day of each month — $150 Total each month; $450 Total per quarter.
Consequently, I currently purchase $150 of VAB each month, until the last month of the quarter where I have to use the 3%Sig tool; given, that I have not purchased VAB in the signal month, I am confused as to what to include in the tool. Do I purchase first VAB as per usual in the two previous months and then run the tool or should I run the tool without the current’s month contributions?
I am really trying to make this process as seamless as possible. Please advise if you feel there is a more advantageous method to make my contributions of $450 quarterly (current deposited semi-monthly to purchase VAB).
It’s good to see your first 3Sig year has gone well, guiding you through the various media confusions offered up, including endless Fed predictions, getting the bond market wrong, meaningless guesses as to the presidential campaign’s impact on stocks, and the Brexit. The plan is beating the market and the pros, and you’re running it. Great!
As for your bond-fund contributions, it doesn’t matter whether your “last” payment for the current quarter is counted toward the current quarter’s contributions or the next quarter’s. In fact, just know that you contribute $450 per quarter, and add half of that amount (so $225) to your signal line value. Remember, the signal line is 3% growth plus half of the quarterly contributions. Until you change your contribution amount, just add $250 per quarter to the 3% growth balance to get your signal line.
On the calculator above on this page, you would enter 250 in the field “New Cash Added to Bond Fund In Current Quarter ($)”.
Keep up the good work!
I would like to try this in my son’s 401K, the only options for Vanguard domestic equity are:
V Extended Market Index
V Institutional Index
V Prime Cap Fund
V Windsor or Wellington
which of these would be an okay substitute for the small cap as these are all large caps
for the bonds they use V Total Bond Market Index Fund which I assume is close enough
Yes, the Total Bond Market is perfect for the bond allocation.
Please provide the symbols and expense ratios in the plan for the stock funds mentioned, and I’ll help you choose the best one. Sometimes the expenses differ per account type at Vanguard.
I just finished reading your book and am amazed at how simple and easy to follow you make your plan. Everything you wrote about the stock market and the way people react to it is so true and well written! I can’t wait to start implementing your plan in my account. I have a few questions first:
1) I have a TIAA CREF retirement account that doesn’t seem to have the best offerings. For my stock fund, would you suggest the cheaper Vanguard mid-cap index fund (VIMAX; 0.08% expense ratio) or the only small cap index fund that is offered at a more expensive 0.31% expense ratio (TRBIX)? I’m not sure if the more expensive fund is worth the higher price to get exposure to the volatility of small caps.
2) The bond funds available are all expensive. The best options include the following:
Not very good, right? Any suggestions here?
3) Finally, this account doesn’t allow market orders. Trades happen at closing prices. Is that something your plan can account for? I’m guessing it’ll just be a little more work.
Thanks and keep up the great work!!
You’re welcome, Kyle, and thank you for the enthusiastic comment!
To your questions:
1. Go with VIMAX.
2. TIHPX is more volatile than the others. The point of the bond fund in the plan is safety with some income while the capital awaits a signal for deployment. The remaining two funds are almost identical, but TBPPX has a slightly higher yield so go with it.
3. Closing prices are fine. The 3Sig Calculator (included in a Kelly Letter subscription), will automatically adjust your next quarterly signal to the prices your last quarterly orders filled at. If you’re doing it manually, just calculate from the price you desired the orders to fill at rather than the price they actually filled at. In your case, the desired price would be the previous day’s close.
Enjoy your new life of profit without stress running 3Sig!
I read the book and am considering investing per the book. Why do we put the money from each check in the bond fund and then calculate quarterly as opposed to 50% from each check into the bond and index stock fund? Since they are both dollar cost averaging, is it for ease of quarterly calculation.
All contributions go into the bond fund first because we can’t know for sure as they’re going in whether it’s a good time to buy the stock side. By allocating half of their amount to the quarterly signal line, we preserve some buying power but also put money to work based on the price action of the stock side.
This has worked better historically. Besides, it’s just easier to manage. The 3Sig Calculator and the spreadsheets are set up to factor in half of your quarterly contributions, so the final signal accounts for everything.
Easy as pie: Put all new money in the bond fund, and follow the resulting signals.
Just finished reading your book and I’m going to get started. Wondering what you think of managing two accounts? I have a 401k at work, only equity index fund is an S&P 500 index (0.03% fee) and only bond fund is intermediate term (0.05% fee). Also have an IRA with etrade that I can rollover my employer match into. My thought is to run the plan in my 401k with my contribution using the available S&P 500 and bond funds, and rolling over my employer match to the IRA on a quarterly basis and running the plan there with a small cap index and a different bond fund. doe that seem reasonable and are there any cautions you may have?
Glad to have you!
Your plan seems fine to me. Those low expense ratios in your 401(k) are fantastic. I’m not sure it’s worth the trouble of moving the rollover into the eTrade account where you’ll be hard-pressed to find expenses that low. However, I see that you’re eager to get some of your money into small caps per the plan, which is reasonable. The performance will be better over time, and there are some very cheap ETFs in every brokerage list these days.
So, go for it! I hope the plan improves your performance while reducing your stress, as billed.
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