I don't shoot for groups at 20 yds, to much of a chance of wrecking an arrow. I try to group at 30 and 40yds. Depending on the amount of practice I am getting and how good I am shooting IN SEASON, I will then decide what my effective range is. Sometimes, I can easily kill at 35yds, sometimes I have to narrow that down to 25yds. One thing many bowhunters make the mistake of is they stop shooting once season begins. This will kill accuracy. All of sudden those pretty summer time groups at 40 yds start spreading all over the target.

To answer your question, 3 inch groups is plenty accurate enough. Always try to get that first arrow right where you want it.