Reddit reviews The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets

Much of the below text is based on personal opinion and reading many articles and books such as "Ivy League Portfolio" (http://www.amazon.com/The-Ivy-Portfolio-Endowments-Markets/dp/1118008855). I lack sources for majority of the comments below, so feel free to call my bluff just know that I know I have read everything below in multiple locations.

Stocks are more risky than bonds over a short duration, however they have a higher expected return over a long duration. A "balanced" portfolio will include both stocks and bonds to be able to both decrease volatility (ups and downs) but also so that you can rebalance between the 2 and sell stocks to buy bonds when stocks are high and bonds are low or the opposite.

Within stocks there are different things you can hold. One example if REIT, another (this is maybe not actually within stocks but it is not within bonds) is commodities. Or, you can focus on the size, small cap versus large cap. So you can hold all of the equity or you can hold (domestic: small cap, large cap, REIT, commodity, bonds), (international: small cap, large cap, REIT, bonds). You can also add in actively managed mutual funds as those also can act as diversification.

Now, most people will simply suggest a 3-fund portfolio (domestic equity, domestic bonds, international stock). Some research such as displayed within "Ivy League Portfolio" suggests a 5-fund portfolio (domestic equity, domestic REIT, domestic bonds, commodities, international stocks) and holding those 5 gives better volatility control as well as better gains from re-balancing. Other people are quite lazy and simply invest 100% U.S.A. equity such as S&P 500 index. To make matters worse, there have been studies which suggest that re-balancing actually provides no benefits other than decreased volatility.

So, let me try a different track. https://personal.vanguard.com/us/insights/saving-investing/model-portfolio-allocations According to Vanguard, historically speaking, having the ability to re-balance between stocks and bonds has provided worse return than 100% stock. The only historic benefit of being able to re-balance between domestic stock and domestic bonds is significantly reduced volatility. Now, you are asking whether or not you should add more complexity to your portfolio. More complexity means that you need to pay slightly more attention to your asset allocations, more work involved with re-balancing, if this is a taxable account more paperwork due to dividends even without re-balancing, and potentially slightly worse return. Worse return specifically is due to historically speaking real estate has had slightly lower return than the U.S. stock market as a whole.

If you are most concerned with trying to decrease volatility and the actual return is secondary then fine, add a REIT fund. If you are more concerned about long-term growth and prefer to be more hands-off and passive then just go with the U.S. equity fund.

I agree you should diversify into foreign ETFs. I think you should also consider other asset classes (commodities and real estate). I wouldn't worry about dividend yield either with your timetable, you want price appreciation more than dividends (plus dividend stocks are overvalued now since people have been piling into those in lieu of bonds). I'd keep VTI or SPY for your US holdings.

Some ETFs for other asset classes (not necessarily these in particular, may be substitutes with better fees, etc.):

GCC for commodity exposure

VEU for broad global equity exposure

RWO - broad diversified global real estate (both US and international)

I wouldn't touch bonds now for anything (way overpriced), but on your 15 yr+ timetable you probably wouldn't want to weight them too heavily anyway.

For your extra ETF I'd vote for ARGT (Argentina) - they're just starting a new bull market.

This is a good read for building a relatively low-maintenance portfolio: http://www.amazon.com/The-Ivy-Portfolio-Endowments-Markets/dp/1118008855

Do your own due diligence of course too. I'm just some guy on reddit. Good luck!

This was a pretty good book on the subject. Similar conclusion to OPs.

https://www.amazon.com/Ivy-Portfolio-Invest-Endowments-Markets/dp/1118008855

Princeton has a ton of alumni donations, and there is a side-company (Princeton's is called PRINCO) dedicated to managing their endowment through various investments (few of which, from my knowledge, are related to the university at all). It's been very successful for them, and the strategies have given rise to books such as The Ivy Portfolio.

Their endowment is now so huge and their returns consistent enough that they only dip into a small percentage of it and reinvest the rest for payouts larger than what they take out.

The university wouldn't really have a hard time charging $0 to all students while maintaining the quality of instruction, but with colleges trying to outspend each other to lure students and increase their US News ranking that probably won't happen anytime soon. (Granted, their financial aid policy is generous enough that nobody really complains.)

Edit: and yeah, it does count as non-profit for donation purposes.

You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits By Joel Greenblatt There are a lot of great suggestions on this board. This book gives a lot of great common sense advice for special situations investing. Also, The Ivy Portfolio by Mebane Faber is a good read.

Also if you want some great investment strategy for your accounts read this: The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets
http://amzn.com/1118008855

And also go here ... http://www.advisorperspectives.com/dshort/updates/Monthly-Moving-Averages.php