A portfolio of diverse major asset classes with emphasis on quality and issurance effect of fixed income portion is an effective way to achieve a long term investment success.

David Swensen, the Yale Endowment Manager, proposed this one size fit in all model portfolio for individual investors. The major difference between this portfolio and other conventional portfolios is that it emphasizes international equities (including emerging market equities) as well as real estate investment. Compared with various diversified portfolios, an interesting asset class missing is the commodities, which has been considered to be an excellent anti-inflation diversifier.  This is complemented with its emphasis on the inflation-protected treasury bonds. We assume annual rebalance although Swensen actually pointed out that in Yale’s institutional portfolio, they rebalanced daily, which, by his estimate, gave about 1-2% of excessive returns vs. annual rebalancing.

Note: it has been confusing whether Swensen advocated using long term treasury bonds or just an average duration treasury bonds. In his book Unconventional Success: A Fundamental Approach to Personal Investment, he wrote "The purity of noncallable, long-term, default-free Treasury bonds provides the most powerful diversification to investor portfolios".  Based on this sentence, it has been interpreted that he meant to use the long term treasury bond. However, recently, a reader posted a reply from David Swensen on this question in morningstar.com, which indicates the average duration of treasury bonds.

The portfolio consists of the following:

- 30% in Vanguard Total Stock Market Index (VTSMX)

- 20% in Vanguard REIT Index (VGSIX)

- 20% in Vanguard Total International Stock (VGTSX) or (15% in VGTSX and 5% in VEIEX)

- 15% in Vanguard Inflation Protected Securities (VIPSX)

- 15% in Vanguard Long Term Treasury Index (VUSTX)

See Also

• David Swesen, "Unconventional Success: A Fundamental Approach to Personal Investment".  Free Press, Aug 2, 2005. 
• Paul Farrell, "Marketwatch.com  Lazy Portfolios". marketwatch.com. It maintains a list of lazy portfolios including the one called "Yale U's Unconventional".