The ‘Easy’ Way to Intelligent Asset Allocation

NPR’s All Things Con­sidered recently pro­filed Dav­id Swensen and ana­lysed his invest­ing strategy (Swensen is Yale University’s head investor):

Yale Uni­ver­sity recently announced a 23 per­cent return on its invest­ments, swell­ing its endow­ment to a whop­ping $18 bil­lion. The man behind that invest­ment suc­cess is Dav­id Swensen, one of the most gif­ted investors in the world. He’s made an aver­age 16 per­cent annu­al return over 21 years — bet­ter than any port­fo­lio man­ager at any oth­er uni­ver­sity.

Nobody has num­bers that good. Not at Har­vard, Prin­ceton, Stan­ford, or any found­a­tion or pen­sion fund; Swensen con­sist­ently beats them all. […] Yale pays Swensen $1.3 mil­lion a year. That sounds impress­ive until you real­ize that, with his track record, if Swensen star­ted his own hedge fund, he could earn $50 mil­lion to $100 mil­lion a year.

Swensen’s invest­ment for­mula takes the pain out of asset alloc­a­tion. All you need to do is adjust the per­cent­ages and fund loc­a­tions depend­ing on your age, your assets, and your risk appet­ite. Per­fect.