The Ivy Portfolio is based on the endowment funds of Ivy League schools. Here we’ll take a look at its components 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
What is the Ivy Portfolio?
The Ivy Portfolio is the product of the famous Meb Faber researching the highly-successful endowment funds of Harvard and Yale. He presents a simple, equally weighted portfolio that any investor can use to replicate the same asset allocations with low-cost ETF’s. You can get the book here. I’d also highly recommend his book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.
The Ivy Portfolio looks like this:
- 20% Total Stock Market
- 20% International Stock Market
- 20% Intermediate Bonds
- 20% Commodities
- 20% REITs
I’d be hesitant with the high allocations to commodities and REITs, considering the idiosyncratic risk of the real estate market and commodities’ very poor historical performance.
Ivy Portfolio Performance
Unsurprisingly, going back to 2007, the Ivy Portfolio has not done very well with its heavy allocations to commodities and REITs. It’s had volatility and drawdowns similar to those of an S&P 500 index fund, with much lower returns and risk-adjusted return (Sharpe):
Ivy Portfolio ETF Pie for M1 Finance
M1 Finance is a great choice of broker to implement the Ivy 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 Ivy Portfolio pie with the following ETF’s:
- VTI – 20%
- VXUS – 20%
- VGIT – 20%
- PDBC – 20%
- VNQ – 20%
You can add the Ivy 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.
When you give CAGRs, please specify the actual date of start and the actual date of stopping. Other than that, this is very helpful
Hey Thomas,
The performance backtest above from Portfolio Visualizer is using annual returns from Jan. 1, 2007 through Dec. 31, 2019.