• Skip to main content
  • Skip to secondary menu
  • Skip to primary sidebar
  • Skip to footer

Optimized Portfolio

Investing and Personal Finance

  • Start Here
  • Investing 101
    • Beginners Start Here – 10 Steps To Start Building Wealth
    • What Is the Stock Market? How It Works & How to Invest in It
    • How To Invest in an Index Fund – The Best Index Funds
    • Portfolio Asset Allocation by Age
    • How To Invest Your Emergency Fund
    • Portfolio Diversification – How To Diversify Your Portfolio
    • Dollar Cost Averaging vs. Lump Sum Investing (DCA vs. LSI)
    • How To Invest Your HSA (Health Savings Account)
    • Factor Investing and Factor ETFs – The Ultimate Guide
    • more…
  • Lazy Portfolios
    • All Weather Portfolio
    • Bogleheads 3 Fund Portfolio
    • HEDGEFUNDIE’s Excellent Adventure
    • Warren Buffett Portfolio
    • Golden Butterfly Portfolio
    • Paul Merriman Ultimate Buy and Hold Portfolio
    • Ben Felix Model Portfolio
    • Permanent Portfolio
    • David Swensen Portfolio
    • 60/40 Portfolio
    • more…
  • Funds
    • VOO vs. VTI – Vanguard S&P 500 or Total Stock Market ETF?
    • The 7 Best International ETFs
    • The 8 Best Small Cap ETFs (4 From Vanguard)
    • The 5 Best REIT ETFs
    • The 5 Best EV ETFs – Electric Vehicles ETFs
    • VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETF’s
    • The Best Vanguard Dividend Funds – 4 Popular ETFs
    • The 5 Best Tech ETFs
    • The 7 Best Small Cap Value ETFs
    • The 6 Best ETFs for Taxable Accounts
    • The 5 Best Emerging Markets ETFs (1 From Vanguard) for 2023
    • more…
  • Leverage
    • What Is a Leveraged ETF and How Do They Work?
    • How To Beat the Market Using Leverage and Index Investing
    • The 9 Best Leveraged ETFs
    • Hedgefundie’s Excellent Adventure
    • Leveraged All Weather Portfolio
    • Leveraged Permanent Portfolio
    • Leveraged Golden Butterfly Portfolio
    • NTSX – Review and Summary
    • TQQQ – Is It A Good Investment?
    • PSLDX – A Review
    • SWAN – A Review
    • RPAR Risk Parity ETF Review
    • more…
  • Dividends
    • The Best M1 Finance Dividend Pie
    • The 11 Best Dividend ETFs
    • The Best Vanguard Dividend Funds – 4 Popular ETFs
    • VIG vs. VYM – Comparing Vanguard’s 2 Popular Dividend ETF’s
    • 8 Reasons Why I’m Not a Dividend Income Investor
    • QYLD – A Harsh Review
    • more…
  • Brokers
    • The 5 Best Stock Brokers
    • The 4 Best Investing Apps
    • M1 Finance Review
    • Brokers with the Lowest Margin Rates
    • M1 Finance vs. Fidelity
    • M1 Finance vs. Vanguard
    • Webull vs. Robinhood
    • Stash vs. Robinhood
    • M1 Borrow Review (How M1’s Margin Loan Works)
    • more…
  • Retirement
    • The 10 Best ETFs for Retirement Portfolios in 2023
    • The 4% Rule for Retirement Withdrawal Rate – A Revisitation
    • Sequence of Return Risk in Retirement Explained
    • Traditional IRA Explained
    • Roth IRA Explained
    • 401k vs. Roth IRA
    • Roth IRA vs. Traditional IRA
    • Backdoor Roth IRA Explained
    • more…
  • My Toolbox

David Swensen Portfolio (Yale Model) Review and ETFs To Use

Last Updated: July 17, 2023 10 Comments – 3 min. read

Financially reviewed by Patrick Flood, CFA.

The David Swensen Portfolio, as the name implies, is based on the late David Swensen's management of the Yale endowment fund. Here we’ll take a look at its components, performance, and the best ETF’s to use in its construction.

Interested in more Lazy Portfolios? See the full list here.

Disclosure:  Some of the links on this page are referral links. At no additional cost to you, if you choose to make a purchase or sign up for a service after clicking through those links, I may receive a small commission. This allows me to continue producing high-quality, ad-free content on this site and pays for the occasional cup of coffee. I have first-hand experience with every product or service I recommend, and I recommend them because I genuinely believe they are useful, not because of the commission I get if you decide to purchase through my links. Read more here.

Contents

  • Video
  • What Is the David Swensen Portfolio?
  • David Swensen Portfolio Performance
  • David Swensen Portfolio ETF Pie for M1 Finance

Video

Prefer video? Watch it here:

What Is the David Swensen Portfolio?

The David Swensen Portfolio – also called the David Swensen Lazy Portfolio – comes from portfolio manager David Swensen, who was the CIO at Yale University from 1985 until his death in May, 2021. You can get his book Unconventional Success: A Fundamental Approach to Personal Investment on Amazon here, which details how retail investors can use the portfolio outlined below to mirror the Yale Model, though note that the specific portfolio Swensen used for the Yale endowment is not exactly the same as the Swensen portfolio below because he was able to use somewhat “exotic” products only available to institutional investors like private equity, hedge funds, venture capital, etc.

The David Swensen Portfolio asset allocation looks like this:

  • 30% Total Stock Market
  • 15% International Stock Market
  • 5% Emerging Markets
  • 15% Intermediate Treasury Bonds
  • 15% TIPS
  • 20% REITs
david swensen portfolio

Similar to the Ivy Portfolio, we see a heavy 20% allocation to REITs. Unlike that one though, the Swensen Portfolio doesn't include commodities, and I like that. I also like that this portfolio does not use gold.

Swensen had a particular affinity for TIPS, or Treasury Inflation Protected Securities, a relatively new type of treasury bond indexed to the CPI, the common measure of inflation. This is interesting, as most lazy portfolios ignore TIPS altogether or give them a smaller allocation. Rick Ferri is fond of TIPS as well, suggesting that retirees should probably have them as half of their fixed income allocation.

In this sense, the Swensen Portfolio is not unlike the famous All Weather Portfolio, attempting to sail through different economic environments unscathed, though Dalio uses gold and broad commodities as an attempt at inflation protection instead of TIPS. In fairness, TIPS weren't even around yet when Dalio first proposed the All Weather Portfolio's components.

I also agree with Swensen's use of treasury bonds and exclusion of corporate bonds. He maintained, like I do, that treasury bonds offer superior downside protection alongside stocks, and corporate bonds don't sufficiently compensate the investor for their extra risk. That said, 15% in intermediate treasuries is not really going to provide much protection. I think it would probably be more sensible to make them long bonds instead of intermediate.

Furthermore, TIPS and intermediate bonds are likely unsuitable, unnecessary, and almost certainly suboptimal for the young investor with a long time horizon and high tolerance for risk. In my opinion, this portfolio is better suited for retirees and those approaching retirement, but at that point I'd also want to increase the bonds.

The Swensen portfolio relies heavily on REITs, having them comprise 20% of the total portfolio. This seems a bit odd to me, as we now know REITs are not a distinct asset class, are not a reliable inflation hedge, and don't offer much of a diversification benefit. Moreover, their returns seem to be explained by exposure to the Size, Value, and Credit factor premia, thus they can be replicated with small cap value stocks and lower-credit bonds. I don't have a problem with 10% or so in REITs, but 20% seems like too much in my opinion when that valuable space could be given to stocks or bonds.

David Swensen Portfolio Performance

For the period 1997 through May, 2021, the David Swensen Portfolio and the S&P 500 have been pretty close from a pure returns perspective, with the former obviously having a higher risk-adjusted return (Sharpe) due to its lower volatility:

david swensen portfolio performance
Source: PortfolioVisualizer.com

David Swensen Portfolio ETF Pie for M1 Finance

M1 Finance is a great choice of broker to implement the David Swensen Portfolio because it makes regular rebalancing seamless and easy, has zero transaction fees, and incorporates dynamic rebalancing for new deposits. I wrote a comprehensive review of M1 Finance here.

Utilizing mostly low-cost Vanguard funds, we can construct the David Swensen Portfolio pie with the following ETF’s:

  • VTI – 30%
  • VXUS – 15%
  • VWO – 5%
  • VGIT – 15%
  • SCHP – 15%
  • VNQ – 20%

You can add the David Swensen Portfolio pie to your portfolio on M1 Finance by clicking this link and then clicking “Add to Portfolio.”

Canadians can find the above ETFs on Questrade or Interactive Brokers. Investors outside North America can use eToro or possibly Interactive Brokers.

Are you nearing or in retirement? Use my link here to get a free holistic financial plan from fiduciary advisors at Retirable to manage your savings, spend smarter, and navigate key decisions.

Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.


Disclosures: I am long VWO in my own portfolio.

Interested in more Lazy Portfolios? See the full list here.

Disclaimer:  While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.

m1

Don't want to do all this investing stuff yourself or feel overwhelmed? Check out my flat-fee-only fiduciary friends over at Advisor.com.

77 percent of millenials report their finances are a source of anxiety

Related Posts

  • The 3 Best International Small Cap Value ETFs for 2023
  • The 9 Best Leveraged ETFs To Enhance Portfolio Exposure (2023)
  • The 7 Best Ecommerce ETFs for Online Shopping Stocks in 2023
  • AOK ETF Review – iShares Core Conservative Allocation ETF
  • The 3 Best Volatility ETFs For Periods of Market Turmoil

About John Williamson, APMA®

Analytical data nerd, investing enthusiast, fintech consultant, Boglehead, and Oxford comma advocate. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit.

Reader Interactions

Comments

  1. Raja says

    January 29, 2023 at 6:28 pm

    VXUS should already have emerging market, why add VWO again?

    Reply
  2. Aakash says

    February 1, 2022 at 3:46 am

    What are your thoughts about mixing in other REITs into the REIT allocation from https://www.optimizedportfolio.com/best-reit-etfs/ and perhaps NURE since the allocation to REITs is larger?

    Thanks.

    Reply
    • John Williamson says

      February 1, 2022 at 9:36 am

      Swensen’s already includes 20% to REITs.

      Reply
  3. Ryota Muranaka says

    December 16, 2020 at 8:55 pm

    Would you consider David Swensen portfolio as low-risk, medium, or high-risk?

    Reply
    • John Williamson says

      December 16, 2020 at 9:49 pm

      I think I’d say medium risk.

      Reply
  4. Lee says

    December 6, 2020 at 4:57 pm

    Dear Sir: I looked at your recommended funds, and iShares’ TIPS fund has an expense ratio of 0.19 percent. I thought that was a bit high, so I looked at Vanguard’s comparable fund, VTIP, and its expense ratio is only 0.05 percent, almost one-quarter of iShares’ fund. Why did you selecte a higher-cost fund (iShares TIPS)? Is it so much of better quality than Vanguard, the least expensive, and how is it better?

    Reply
    • John Williamson says

      December 6, 2020 at 5:18 pm

      Hey Lee. VTIP is short-term TIPS. Its effective avg. maturity is less than half that of TIP. You can see the historical effects of that difference here.

      Reply
    • Jerry says

      May 19, 2023 at 12:33 pm

      I’m slightly puzzled by your question. The lazy Swensen portfolio on this page uses a Schwab TIPS fund (ticker SCHP) and not any iShares TIPS funds. SCHP’s expense ratio is 0.04%, just like VTIP’s. There are, however, two TIPS funds from iShares :
      iShares 0-5 Year TIPS (ticker STIP, expense Ratio 0.03%), and
      iShares TIPS (ticker TIP with expense Ratio 0.19%)

      As far as maturities, it looks to me that SCHP and TIP are comparable (avg. maturity/duration for both are around 7.4/6.87 years) while VTIP and STIP are around half that … so around 2.6/2.5
      (as of May 2023)

      Reply
  5. Alfonzo says

    May 18, 2020 at 1:48 pm

    M1 has the holdings listed incorrectly. As of 5/18/20 it shows only 15% in VTI (total Stock market)- not 30 %. Instead of showing 15% for Intermediate Bonds it has it at 30%.

    Reply
    • John Williamson says

      May 18, 2020 at 1:59 pm

      Alfonzo, sorry about that and thanks for letting me know! I must have accidentally switched those 2 ETF’s. It should be correct now!

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

  • Facebook
  • Instagram
  • Reddit
  • Twitter
  • YouTube
  • Patreon

Join 5,372 other investors

Take control of your financial future by subscribing to receive exclusive emails with expert tips, news, and notifications of new posts and important updates.

Don't worry, I hate spam too. No ads.

John Williamson, APMA®

Analytical data nerd, investing enthusiast, fintech consultant, Boglehead, and Oxford comma advocate. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit. Read More…

Most Popular

Ray Dalio All Weather Portfolio Review, ETFs, & Leverage (2023)

HEDGEFUNDIE’s Excellent Adventure (UPRO/TMF) – A Summary

Golden Butterfly Portfolio Review and M1 Finance ETF Pie

David Swensen Portfolio (Yale Model) Review and ETFs To Use

54 Lazy Portfolios and Their ETF Pies for M1 Finance (2023)

VIG vs. VYM – Vanguard’s 2 Popular Dividend ETFs (Review)

Warren Buffett ETF Portfolio (90/10) Review and ETFs (2023)

Bogleheads 3 Fund Portfolio Review and Vanguard ETFs (2023)

Paul Merriman Ultimate Buy and Hold Portfolio Review & ETFs (2023)

The Best M1 Finance Dividend Pie for FIRE & Income Investors

m1 sidebar

rocket money

m1 sidebar

visor sidebar

retirable

Portfolio Asset Allocation by Age – Beginners To Retirees

The 7 Best Small Cap ETFs (3 From Vanguard) for 2023

9 Best International ETFs To Buy (6 From Vanguard) in 2023

The 3 Best Inverse ETFs to Short the S&P 500 Index in 2023

Ben Felix Model Portfolio (Rational Reminder, PWL) ETFs & Review

Factor Investing and Factor ETFs – The Ultimate Guide

NTSX ETF Review – WisdomTree U.S. Efficient Core ETF (90/60)

The Ginger Ale Portfolio (My Own Portfolio) and M1 ETF Pie

TQQQ – Is It A Good Investment for a Long Term Hold Strategy?

QYLD – Avoid This ETF as a Long-Term Investment (A Review)

The 5 Best T Bill ETFs (Treasury Bills) To Park Cash in 2023

JEPI ETF Review – JPMorgan Equity Premium Income ETF

SPAXX vs. FZFXX, FDIC, FCASH, FDRXX – Fidelity Core Position

Recent Posts

Buy Borrow Die Strategy Explained – How the Rich Avoid Taxes

Whole vs. Term Life Insurance – Which Is Best for You?

“Should I Invest in International Stocks?” Yes. Here’s Why.

Return Stacking Explained – Greater Returns With Lower Risk?

RSSB ETF Review – Return Stacked Global Stocks & Bonds ETF

Fees, Trees, & Forests – Stop Obsessing Over Expense Ratios

Optimized Portfolio “Best in Class” ETFs List for 2023

7 Best Covered Call ETFs for Income Investors in 2023

Roth IRA vs. Traditional IRA – Which Is Better for You? (2023)

How To Build a 3 Fund Portfolio at Fidelity in 2023

Fidelity ZERO Funds Review – What’s the Catch?

Jack Bogle Was Wrong About These 3 Things

I Bonds Explained (US Savings Bonds) – Ultimate Guide (2023)

Sharpe Ratio vs. Sortino vs. Calmar – Risk Adjusted Return

Portfolio Risk Explained – How To Think About Risk and Volatility

View All...

Footer

  • Facebook
  • Instagram
  • Reddit
  • Twitter
  • YouTube
  • Patreon

Amazon Affiliate Disclosure

OptimizedPortfolio.com is a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com.

Email Newsletter

Sign up to receive email updates when a new post is published.

Don't worry, I hate spam too. No ads.

About - My Toolbox - Privacy - Terms - Contact


Copyright © 2023 OptimizedPortfolio.com

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Ok, Got ItReject Read More
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT