P David Swensen Yale Individual Investor Portfolio Annual Rebalancing
0.05%May 01 | MyPlanIQ portfolio symbol P_407

  • Portfolio Overview
  • Asset Allocation and ETFs
  • Performance
  • Calculators
  • Rolling Returns
  • Drawdowns

Portfolio Overview


1. Background and Philosophy

David Swensen, the Yale Endowment Manager, proposed this one size fit in all model portfolio for individual investors (see Unconventional Success: A Fundamental Approach to Personal Investment). 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. Swensen's philosophy emphasizes:

  • Diversification across uncorrelated asset classes to reduce risk.
  • Equity-heavy allocation (70% stocks, 30% bonds) for long-term growth.
  • Inflation protection via Treasury Inflation-Protected Securities (VIPSX) and real estate (VGSIX).
  • Avoiding commodities, unlike other portfolios, as he believed TIPS and REITs suffice for inflation hedging.

Note: it has always been somewhat confusing whether Swensen advocated for long term treasury bonds or just 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, many interpreted that he meant to use long term treasury bonds. However, more recently, a reader posted a reply from Swensen himself on morningstar.com, which seems to indicate he was referring to average duration treasury bonds.

2. Asset Allocation Analysis

Allocation Breakdown:

  • 30% VTSMX (U.S. Total Stock Market): Core U.S. equity exposure.
  • 20% VGSIX (REITs): Real estate diversification and income.
  • 20% VGTSX (International Stocks) or 15% VGTSX + 5% VEIEX (Emerging Markets): Global equity diversification.
  • 15% VIPSX (TIPS): Inflation-protected bonds.
  • 15% VUSTX (Long-Term Treasuries): Interest rate hedge and stability.

Key Advantages:

  • Diversification: Covers U.S./international equities, real estate, and bonds with low correlation.
  • Inflation Resilience: Heavy allocation to TIPS and REITs mitigates inflation risk.
  • Simplicity: Only 5-6 funds needed for broad market exposure.

Potential Drawbacks:

  • Higher volatility due to 70% equity allocation (may not suit conservative investors).
  • No commodities, which could underperform during commodity bull markets.
  • Interest rate risk from long-term Treasuries (VUSTX).

3. Practical Application in Retirement Accounts

The following shows how to apply Swensen lazy portfolio to retirement accounts,

For 401(k) Accounts:

Step 1: Match Available Funds

  • U.S. Stocks: Look for a "Total Stock Market" or "S&P 500" fund (e.g., VFIAX).
  • International Stocks: Use a "Total International Stock" fund or combine developed/emerging market funds.
  • REITs: If unavailable, allocate to a broader "real estate" or "equity income" fund.
  • Bonds: Substitute VIPSX with a "TIPS" or "inflation-protected" bond fund. Replace VUSTX with an "intermediate-term Treasury" fund if long-term bonds are unavailable.

Step 2: Adjust for Missing Asset Classes

  • If REITs are unavailable, increase U.S. or international stock allocation.
  • If TIPS are missing, use a general bond fund or increase Treasury allocation.

For IRA Accounts:

Investors can directly replicate the portfolio using the specified Vanguard funds or equivalent ETFs (e.g., VTI for VTSMX, VNQ for VGSIX).

Rebalancing Tip: Swensen recommended annual rebalancing to maintain target allocations. Some have suggested that more frequent adjustments, like quarterly rebalancing, might help reduce volatility a bit more. That could be true in theory. However, we still think annual rebalancing is probably the best approach, especially in the spirit of "laziness" (which, in investing, is often underrated). Less tinkering, fewer chances to outsmart yourself.

Click here for more portfolio details and features ►

Asset Allocation


Symbol Category/Sector Target Weight
VTSMX
VANGUARD TOTAL STOCK MARKET INDEX FUND INVESTOR SHARES 		US Equity 30%
VGSIX
VANGUARD REIT INDEX FUND INVESTOR SHARES 		Real Estate 20%
VGTSX
VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND INVESTOR SHARES 		International Equity 20%
VIPSX
VANGUARD INFLATION-PROTECTED SECURITIES FUND INVESTOR SHARES 		Fixed Income 15%
VUSTX
VANGUARD LONG-TERM TREASURY FUND INVESTOR SHARES 		Fixed Income 15%


Historical Performance


The return data shown below all have the same latest date: 05/01/2025.
AR inception is since 12/31/2000.
Name YTD Return 1Yr AR 3Yr AR 5Yr AR 10Yr AR 15Yr AR 20Yr AR Inception
P David Swensen Yale Individual Investor Portfolio Annual Rebalancing 0.46% 9.98% 5.00% 7.63% 6.48% 7.73% 7.49% 7.66%
VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES) -4.37% 13.03% 12.04% 16.35% 12.16% 12.80% 10.20% 8.27%
VSMGX (VANGUARD LIFESTRATEGY MODERATE GROWTH FUND INVESTOR SHARES) 1.21% 10.24% 6.96% 8.03% 5.81% 6.59% 6.00% 5.62%

P David Swensen Yale Individual Investor Portfolio Annual Rebalancing Return Calculator

Calculate Performance

Start date (MM/dd/yyyy)

End date   (MM/dd/yyyy)

Calculators


Dollar Cost Average Calculator for P David Swensen Yale Individual Investor Portfolio Annual Rebalancing

Starting Amount:
Investment Length (years):
Investment Symbol:
Regular Investment Amount ($):
DCA Frequency:
Share on

Retirement Spending Calculator for P David Swensen Yale Individual Investor Portfolio Annual Rebalancing

Starting Amount:
Period (Years):
Investment Portfolio or Fund:
Withdrawal Rate (%) :
%
Withdrawal Frequency:
Share on

Rolling Returns


From 12/31/2000 to 05/01/2025, the worst annualized return of 3-year rolling returns for P David Swensen Yale Individual Investor Portfolio Annual Rebalancing is -9.62%.

From 12/31/2000 to 05/01/2025, the worst annualized return of 5-year rolling returns for P David Swensen Yale Individual Investor Portfolio Annual Rebalancing is -1.18%.

From 12/31/2000 to 05/01/2025, the worst annualized return of 10-year rolling returns for P David Swensen Yale Individual Investor Portfolio Annual Rebalancing is 5.82%.


Maximum Drawdown

P David Swensen Yale Individual Investor Portfolio Annual Rebalancing Maximum Drawdown