Monday, April 7, 2008

David Swenson Yale Portfolio Management Allocation

I am learning about portfolio management right now and was reminded of David Swenson and his portfolio allocation methods. I searched for it and didn't find it easily but luckily remember the NPR story about him. Google needs to improve its search results.

From NPR:

David Swenson Yale Portfolio Management Allocation

The chart below represents Swensen's basic formula for creating an investment portfolio likely to give you good returns while still managing risk:

  • Domestic Equity (30 percent): Refers to stocks in U.S.-based companies listed on U.S. exchanges.
  • Emerging Market Equity (5 percent): Refers to stocks from emerging markets around the world, such as Brazil, Russia, India and China.
  • Foreign Developed Equity (15 percent): Refers to stocks listed on major foreign markets in developed countries, such as the United Kingdom, Germany, France and Japan.
  • Real Estate Investment Trusts (20 percent): Refers to stocks of companies that invest directly in real estate through ownership of property.
  • U.S. Treasury Notes and Bonds (15 percent): These are fixed-interest U.S. government debt securities that mature in more than one year. Notes and bonds pay interest semi-annually. The income is only taxed at the federal level.
  • U.S. Treasury Inflation-Protection Securities, or TIPS (15 percent): These are special types of Treasury notes that offer protection from inflation, as measured by the Consumer Price Index. They pay interest every six months and the principal when the security matures.

My Personal ETF Favorites:

iShares CDN S&P/TSX Cppd Mtrls Indx Fnd. (Public, TSE:XMA)

iShares S&P Latin America 40 Index (Public, NYSE:ILF)

iShares Dow Jones US Home Const. (Public, NYSE:ITB)

Note: I don't actually own these because I still want to speculate with risky stocks and get 50% returns a year. I will probably move to these over time as I become wealthier and have more commitments.

Useful Tool

iShares Charts


Fenridal said...
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endowment wealth advisor said...

There is a more up-to-date study of this subject - All-weather portfolio: how Yale and Harvard endowment invest for bad times.

Portfolio Manager said...

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Portfolio Manager