Low. This portfolio is optimized for stability. Over the long term, it will likely underperform when compared to the S&P 500 index, but it is designed to protect your investment during turbulent market conditions.
You want to enjoy equity growth gains while maintaining downside protection by diversifying.
This is the portfolio that David F. Swensen (Chief Investment Officer of Yale endowment fund) recommends for individual investors in his book Unconventional Success. It has a blend of equity and fixed income investments. This portfolio invests in core assets that depend on market driven results, and consists of basic building blocks with well-established, enduring marketplaces. The assets used in the construction of this portfolio can be broken down into three core asset classes - stocks, bonds, and real estate - which can be further broken down as follows:
For this portfolio, we have identified the below companies:
| Company | Description |
|---|---|
| iShares TIPS Bond ETF (TIP) | This fund invests in U.S. Treasury Inflation-Protected Securities, fulfilling the Swensen model's need for a stable asset class that specifically protects the portfolio against inflation. |
| Vanguard FTSE Developed Markets ETF (VEA) | This ETF provides exposure to stocks in developed international markets, which is a core component of the Swensen model for achieving global equity diversification beyond the U.S. |
| Vanguard Intermediate-Term Treasury Index Fund ETF (VGIT) | By holding U.S. government bonds, this fund represents the allocation to safe, nominal Treasury securities that provide portfolio stability and low correlation to equities in the Swensen model. |
| Vanguard Real Estate Index Fund ETF (VNQ) | This fund invests in real estate investment trusts (REITs), satisfying the Swensen model's specific allocation to real estate for diversification and potential inflation hedging benefits. |
| Vanguard S&P 500 ETF (VOO) | Tracking the S&P 500 index, this fund represents the Swensen portfolio's foundational allocation to U.S. domestic equities, which serve as the primary engine for long-term growth. |
| Vanguard FTSE Emerging Markets ETF (VWO) | This ETF provides exposure to stocks in developing economies, fulfilling the Swensen model's allocation to emerging markets for higher growth potential and further international diversification. |