Financially reviewed by Patrick Flood, CFA.
The David Swensen Portfolio, as the name implies, is based on 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.
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Contents
What is the David Swensen Portfolio?
The David Swensen Portfolio – also called the David Swensen Lazy Portfolio – comes from portfolio manager David Swensen, who has been the CIO at Yale University since 1985. You can get his book Unconventional Success: A Fundamental Approach to Personal Investment on Amazon here.
The David Swensen Portfolio asset allocation looks like this:
- 30% Total Stock Market
- 15% International Stock Market
- 5% Emerging Markets
- 15% Intermediate Bonds
- 15% TIPS
- 20% REITs
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.
David Swensen Portfolio Performance
Going back to 2001 when TIPS data starts, the David Swensen Portfolio has beat the S&P 500 with less volatility and smaller drawdowns, thereby achieving a much greater risk-adjusted return (Sharpe):
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%
- TIP – 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.”
Disclosures: I am long VTI and VXUS.
Interested in more Lazy Portfolios? See the full list here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational 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. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Would you consider David Swensen portfolio as low-risk, medium, or high-risk?
I think I’d say medium risk.
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?
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.
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%.
Alfonzo, sorry about that and thanks for letting me know! I must have accidentally switched those 2 ETF’s. It should be correct now!