Family Investment model
April 8, 2018 3:38 PM Subscribe
Should I use the Yale university endowment investment model
David Swensen is successful at running the Yale University endowment. He has simplified his method so that small-time investors can make use of his concepts. He suggests keeping a broadly diverse portfolio using several "total index" Vanguard mutual fund. He proposes allocations among these funds that are maintained by reallocating the portfolio every 2 to 4 times a year. Is this a good idea?
David Swensen is successful at running the Yale University endowment. He has simplified his method so that small-time investors can make use of his concepts. He suggests keeping a broadly diverse portfolio using several "total index" Vanguard mutual fund. He proposes allocations among these funds that are maintained by reallocating the portfolio every 2 to 4 times a year. Is this a good idea?
This link to the Bogleheads wiki compares "lazy portfolios," of which Swensen's is one.
posted by Short Attention Sp at 4:24 PM on April 8, 2018 [5 favorites]
posted by Short Attention Sp at 4:24 PM on April 8, 2018 [5 favorites]
Top universities have astonishingly terrible investment returns on their endowments, so don't copy them. (They mostly lost money during the ongoing 7-year stock market boom!) But the advice of buying a cheap index fund and sticking to it is not what the universities are doing, and it's a much much better idea.
posted by miyabo at 5:11 PM on April 8, 2018 [1 favorite]
posted by miyabo at 5:11 PM on April 8, 2018 [1 favorite]
If this is for retirement, Vanguard has Target Retirement Funds where you tell them what year you want to retire and they invest your money in a mix of index funds appropriate to your timeline and automatically rebalance the mix as you approach retirement. What you're describing sounds pretty similar.
Nthing that individuals should NOT follow the same investment practices of institutions. Institutions are perpetual whereas individuals have lifespans.
posted by Jacqueline at 5:37 PM on April 8, 2018
Nthing that individuals should NOT follow the same investment practices of institutions. Institutions are perpetual whereas individuals have lifespans.
posted by Jacqueline at 5:37 PM on April 8, 2018
Top universities have astonishingly terrible investment returns on their endowments, so don't copy them.
This is not true of Yale, and Swensen's advice is more nuanced than "buy a cheap index fund and stick to it." This site has Swensen's recommended portfolio for individuals.
posted by crookedneighbor at 6:50 PM on April 8, 2018 [4 favorites]
This is not true of Yale, and Swensen's advice is more nuanced than "buy a cheap index fund and stick to it." This site has Swensen's recommended portfolio for individuals.
posted by crookedneighbor at 6:50 PM on April 8, 2018 [4 favorites]
Going by your name...most people would recommend a reduction of risk as one enters into retirement. And most of these "lazy portfolios" are at least primarily intended for people still in their working years. In retirement, you will want to give somewhat greater weight to bonds. But the basic idea is sound.
posted by praemunire at 8:44 PM on April 8, 2018
posted by praemunire at 8:44 PM on April 8, 2018
The Swenson portfolio is very interest rate sensitive. Beware the “real asset” story (which he accesses through reits ) as they are heavily rate linked ( and not mtm in institutional portfolio so give the impression of lower vol). Especially if you are young you can take vol.
posted by JPD at 1:48 AM on April 9, 2018 [1 favorite]
posted by JPD at 1:48 AM on April 9, 2018 [1 favorite]
That seems to be pretty frequent rebalancing. There is little benefit to rebalancing that frequently. Once a year is fine. The actual Yale model has had a lot of asset classes that individuals can't easily access, like private equity and venture capital.
The stocks portion of the linked portfolio looks a lot like the total investable universe of stocks. You can buy that from Vanguard in ETF form, ticker VT, Vanguard total World Stock ETF. There's probably a mutual fund version too. This would simplify the portfolio.
The hard part in investing is not picking the investment portfolio, but sticking with it for a long, long time. There will be other portfolio approaches that will have better returns than this for significant periods, and you might be tempted to switch to one of those. It is the investor's resolve, and subsequent trading behaviour that is a bigger determinant of success than the initial portfolio allocation. Write down an investment plan that will help you to have the resolve to stick with this
posted by thenormshow at 9:59 AM on April 9, 2018 [1 favorite]
The stocks portion of the linked portfolio looks a lot like the total investable universe of stocks. You can buy that from Vanguard in ETF form, ticker VT, Vanguard total World Stock ETF. There's probably a mutual fund version too. This would simplify the portfolio.
The hard part in investing is not picking the investment portfolio, but sticking with it for a long, long time. There will be other portfolio approaches that will have better returns than this for significant periods, and you might be tempted to switch to one of those. It is the investor's resolve, and subsequent trading behaviour that is a bigger determinant of success than the initial portfolio allocation. Write down an investment plan that will help you to have the resolve to stick with this
posted by thenormshow at 9:59 AM on April 9, 2018 [1 favorite]
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posted by david1230 at 3:50 PM on April 8, 2018 [3 favorites]