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David Swensen Portfolio (Yale Model) Review and ETFs To Use - YouTube
Channel: Optimized Portfolio
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the david swenson portfolio as the name
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implies is based on the late david
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swenson's management of the yale
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endowment fund here we'll take a look at
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its components performance and the best
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etfs to use in its construction
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the david swinson portfolio also called
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the david swenson lazy portfolio comes
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from portfolio manager david swinson who
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was the chief investment officer at yale
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university from 1985 until his death in
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may 2021 his book unconventional success
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details how retail investors can use the
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portfolio outlined in this video to
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mirror the yale model though note that
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the specific portfolio swinson used for
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the yale endowment is not exactly the
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same as the swenson portfolio discussed
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here because he was able to use somewhat
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exotic products only available to
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institutional investors like private
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equity hedge funds venture capital
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etcetera the david swensen portfolio
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asset allocation looks like this 30
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total u.s stock market 15
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international stock market 5 emerging
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markets 15 intermediate treasury bonds
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15 tips and 20 reits similar to the iv
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portfolio we see a heavy 20 allocation
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to reits unlike that one though the
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swenson portfolio doesn't include
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commodities and i like that i also like
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that the portfolio does not use gold
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swinson had a particular affinity for
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tips or treasury inflation protected
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securities a relatively new type of
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treasury bond indexed to the cpi or
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consumer price index the common measure
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of inflation this is interesting as most
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lazy portfolios ignore tips altogether
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or give them a smaller allocation rick
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ferry is fond of tips as well suggesting
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that retirees should probably have them
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as half of their fixed income allocation
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i agree in this sense the swenson
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portfolio is not unlike the famous
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all-weather portfolio attempting to sail
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through different economic environments
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unscathed though dalio uses gold and
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broad commodities as an attempt at
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inflation protection instead of tips in
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fairness tips weren't even around yet
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when dalio first proposed the
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all-weather portfolio's components i
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also agree with swenson's use of
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treasury bonds and exclusion of
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corporate bonds he maintained like i do
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that treasury bonds offer superior
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downside protection alongside stocks and
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corporate bonds don't sufficiently
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compensate the investor for their extra
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risk that said 15 percent in
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intermediate treasury bonds is not
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really going to provide much protection
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i think it would probably be more
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sensible to make them long bonds instead
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of intermediate furthermore tips and
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intermediate bonds are likely unsuitable
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unnecessary and almost certainly
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sub-optimal for the young investor with
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a long-time horizon and high tolerance
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for risk in my opinion this portfolio is
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better suited for retirees and those
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approaching retirement but at that point
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i'd also want to increase the bond
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allocation the swenson portfolio relies
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heavily on reits having them comprise 20
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of the portfolio this seems a bit odd to
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me as we now know reits are not a
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distinct asset class are not a reliable
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inflation hedge and don't offer much of
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a diversification benefit moreover their
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returns seem to be explained by exposure
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to the size value and credit factor
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premium thus they can be replicated with
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small cap value stocks and lower credit
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bonds i don't have a problem with 10 or
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so in reits but 20 seems like too much
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in my opinion when that valuable space
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could be given to stocks or bonds now
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let's talk about the historical
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performance of the david swensen
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portfolio for the period 1997 through
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may 2021 this portfolio and the s p 500
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have been pretty close from a pure
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returns perspective with the former
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obviously having a higher risk adjusted
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return due to its lower volatility m1
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finance is a great choice of broker to
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implement the david swinson portfolio
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because it makes regular rebalancing
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seamless and easy has zero transaction
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fees and incorporates dynamic
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rebalancing for new deposits i'll
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provide a link to my comprehensive
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review of m1 in the description
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utilizing mostly low-cost vanguard funds
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we can construct the david swenson
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portfolio pi with the following etfs vti
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at 30 percent vxus at 15 vwo at 5
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vgit at 15
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schp at 15
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and vnq at 20 i'll provide a link in the
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description below to use this pi in your
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portfolio on m1 what do you think of the
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david swensen portfolio let me know in
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the comments thanks for watching some of
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service i recommend and i recommend them
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because i genuinely believe they are
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useful
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