Tag Archives: New York times

The 50-50 Portfolio Solution?

The New York Times had a piece this weekend that proposes a simple portfolio solution for worried investors. 

Are you ready for this? 

The portfolio is a 50% allocation to stocks and 50% to bonds.  The conclusion that the 50/50 portfolio makes sense is based on a study by Vanguard published in October 2011 that finds that this allocation seems to generate consistent returns, regardless of whether the economy is in recession or expansion.  The study is based on portfolio performance from 1926 through June 2009. 

The 50/50 portfolio generated an average annual return of 7.75% per year during recessions and 9.9% per year during expansions.  Continue reading

Answering David Swensen’s Call to Arms

David Swensen has been called Yale’s “Money Guru”—and rightly so. As the head of Yale University’s highly successful $16 billion endowment, he has created an amazing performance record.  Over the last 10-years (through Yale’s 2010 fiscal year), for example, the endowment had an annualized return of 8.9% vs. 1.5% for a portfolio allocated 70% to U.S. equities and 30% to U.S. bonds.

Mr. Swensen is also the author of two highly influential books—Pioneering Portoflio Management: An Unconventional Approach to Institutional Investment (for Institutional Investors) and Unconventional Success: A Fundamental Approach to Personal Investment (geared toward individual investors)

By anyone’s standard, Mr. Swensen is one of the most credible voices on investing and portfolio management, which is why when he lambasted the mutual fund industry in a recent New York Times op-ed called, “The Mutual Fund Merry-Go Round,” I thought that his “call to arms” needed further discussion. Continue reading