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.