The Swensen Model of Asset Allocation
Diversified Investing
The Swensen Model of Asset Allocation is a diversified investment strategy that allocates assets across different classes to minimize risk and maximize returns. The model suggests allocating 30% to domestic equities, 15% to developed-world international equities, 5% to emerging-market equities, 20% to real estate investment trusts, 15% to government bonds, and 15% to treasury inflation-protected securities.
- Diversification is key to minimizing risk and maximizing returns.
- Asset allocation should be based on a long-term perspective.
- A mix of different asset classes can provide a balanced portfolio.
- Determine Asset AllocationDetermine the asset allocation based on the Swensen Model. Allocate 30% to domestic equities, 15% to developed-world international equities, 5% to emerging-market equities, 20% to real estate investment trusts, 15% to government bonds, and 15% to treasury inflation-protected securities.Pro tipConsider your risk tolerance and investment goals when determining the asset allocation.WarningThe Swensen Model is a general guideline and may not be suitable for all investors.
- Select Low-Cost FundsSelect low-cost funds that match the asset allocation. Look for funds with low expense ratios and minimal fees.Pro tipConsider index funds or ETFs, which tend to have lower fees than actively managed funds.WarningHigh fees can eat into your returns over time.
An investor with a moderate risk tolerance and a long-term perspective may allocate 30% to domestic equities, 15% to developed-world international equities, 5% to emerging-market equities, 20% to real estate investment trusts, 15% to government bonds, and 15% to treasury inflation-protected securities.
The Swensen Model was developed by David Swensen, the chief investment officer of Yale University's endowment. The model has been successful in generating high returns for the endowment over the years.