Bio: David Swensen

David Swensen

Chief Investment Officer, Yale University

David Swensen has made an average of 13.9% a year return over the last 20 years for Yale, that’s $20.6 billion for the university's fund. That’s one of the best track records of any large investor. "Low costs and diversification serve investors well," he says.

  1. Diversification is key

Rather than investing in U.S. stocks and bonds, Swensen looks at a wider range of asset classes. He looks at stocks from developed and emerging markets around the world, as well as real estate through a fund. In addition to U.S. Treasury bonds, he advises investors to own Treasury inflation-protected securities. Swensen expects some of these to rise and fall and rise again at different times and at different rates. Therefore, he suggests to rebalance at least once a year to maintain your target allocation. Something Folio can help with. 

David Swensen's Asset Allocation Mix

  1. Use index funds to save money

Fees can do terrible damage to your investment returns. So, if you end up paying 1% to a financial adviser, and then 1% to 2% on top of that in mutual fund fees and then adjust for inflation (2% - 3% a year), you're losing half of your returns or more, Swensen says.

Instead use very-low-fee index funds to save money. If you compare performance of actively managed mutual funds to lower-cost index funds, "when you look at the results on an after-fee, after-tax basis over reasonably long periods of time," the comparison is overwhelmingly in favor of index funds.

  1. Tweak your portfolio as you get older 

With investing, "there is no such thing as one size fits all." Swensen’s model portfolio is "well-diversified, equity-oriented for long-term investors and efficient in the sense that it is as good or better than other alternatives…so my model portfolio should serve most investors well."

Essentially, when you're investing over the long-term (20 or 30 years) you are likely to increase the value of your portfolio holding a larger percentage of your portfolio in stocks or higher yield assets. Historically, stocks offer greater returns than "safer" low yield alternatives such as U.S. Treasury bonds. Although be careful in the short term, stocks tend to be much more volatile. So as you near retirement age, think about shifting into assets that are "safer”. You don’t want to be caught out by a stock market crash as you are drawing down on your portfolio as income. If you are younger and stocks crash, you can just hang tight and wait for the market to recover.

Age aside it’s also about your individual appetite for risk. "Risk tolerance is specific to each individual. Risk-averse investors may want to hold a combination of the model portfolio and cash, which will reduce overall risk…as wealth increases, tolerance for risk may increase. As investors grow older, tolerance for risk may decrease. Each individual needs to find a portfolio that matches their risk preferences."

Check out the Swensen portfolio in Folio to benchmark your own assets to the correct mix.


How can FOLIO do the heavy lifting?

You can use a tool like FOLIO to help you with asset allocation and portfolio management. FOLIO saves you time, with live pricing and benchmarks to track how your asset allocation changes over time. You can easily use this reporting to then rebalance your portfolio the way you want, while also understanding the net worth and your financial situation. All of this is shown on our comprehensive dashboards.

If you’re looking to take control over your investments while also monitoring your net worth, then you need to give FOLIO a try. 


Sources: Chris Arnold on