Davd Swensen manages more than $20 billion in assets as the Chief Investment Officer of the Yale endowment fund. Several years ago he distilled his investment knowledge and experience into a book,Unconventional Success, for the average investor. The book is an excellent guide to low cost, passive investing. One of the many great aspects of the books is Swensen’s «Framework for Investing Success.»
The framework is a simple investment portfolio. The portfolio is well diversified and equity oriented, ideal for any investor. Here’s his recommended portfolio:
- 30%–U.S. Equities
- 15%–Foreign Developed Markets
- 5%–Emerging Markets
- 20%–U.S. REITs
- 15%–U.S. Treasuries
- 15%–TIPS
As Swensen points out, asset allocation is as much art as it is science. His framework is not intended to be the one and only investment portfolio, but rather a starting point. In my case, for example, I have less in REITs (10%), more in emerging markets (10%), and less in bonds (25%).
Using Swensen’s framework, however, I put together a portfolio with specific mutual funds and ETFs from a variety of mutual fund companies and even the TSP (Thrift Savings Plan).
Vanguard
| ASSET CLASS | ALLOCATION | VANGUARD FUND | INVESTOR SHARES | ER | ADMIRAL SHARES | ER |
| U.S. Equities | 30% | Vanguard Total Stock Market Index Fund Investor Shares | VTSMX | 0.17 | VTSAX | 0.05 |
| Foreign Developed Equity | 15% | Vanguard Developed Markets Index Fund Investor Shares | VDVIX | 0.20 | VTMGX | 0.09 |
| Emerging Markets | 5% | Vanguard Emerging Markets Stock Index Fund Investor Shares | VEIEX | 0.33 | VEMAX | 0.15 |
| U.S. REITs | 20% | Vanguard REIT Index Fund Investor Shares | VGSIX | 0.24 | VGSLX | 0.10 |
| U.S. Treasuries | 15% | Vanguard Intermediate-Term Treasury Fund Investor Shares | VFITX | 0.20 | VFIUX | 0.10 |
| TIPS | 15% | Vanguard Inflation-Protected Securities Fund Investor Shares | VIPSX | 0.20 | VAIPX | 0.10 |
| Weighted Average Expense Ratio | 0.21 | 0.09 |
Fidelity
| ASSET CLASS | ALLOCATION | FIDELITY FUND | INVESTOR CLASS | ER | ADVANTAGE CLASS | ER |
| U.S. Equities | 30% | Fidelity Spartan® Total Market Index Fund Investor Class | FSTMX | 0.10 | FSTVX | 0.05 |
| Foreign Developed Equity | 15% | Fidelity Spartan® International Index Fund Investor Class | FSIIX | 0.20 | FSIVX | 0.12 |
| Emerging Markets | 5% | Fidelity Spartan® Emerging Markets Index Fund Investor Class | FPEMX | 0.31 | FPMAX | 0.20 |
| U.S. REITs | 20% | Fidelity Spartan® Real Estate Index Fund Investor Class | FRXIX | 0.23 | FSRVX | 0.09 |
| U.S. Treasuries | 15% | Fidelity Spartan® Intermediate Treasury Bond Index Fund Investor Class | FIBIX | 0.20 | FIBAX | 0.10 |
| TIPS | 15% | Fidelity Spartan® Inflation-Protected Bond Index Fund Investor Class | FSIQX | 0.20 | FSIYX | 0.10 |
| Weighted Average Expense Ratio | 0.18 | 0.09 |
iShares
| ASSET CLASS | ALLOCATION | ISHARES | TICKER | ER |
| U.S. Equities | 30% | iShares Russell 3000 Index (ETF) | IWV | 0.20 |
| Foreign Developed Equity | 15% | iShares MSCI EAFE ETF | EFA | 0.33 |
| Emerging Markets | 5% | iShares Core MSCI Emerging Markets ETF | IEMG | 0.18 |
| U.S. REITs | 20% | iShares Dow Jones US Real Estate (ETF) | IYR | 0.45 |
| U.S. Treasuries | 15% | iShares Barclays 7-10 Year Trasry Bnd Fd | IEF | 0.15 |
| TIPS | 15% | iShares Barclays TIPS Bond Fund (ETF) | TIP | 0.20 |
| Weighted Average Expense Ratio | 0.26 |
T. Rowe Price
| ASSET CLASS | ALLOCATION | T. ROWE PRICE | TICKER | ER |
| U.S. Equities | 30% | T. Rowe Price Total Equity Market Index Fund | POMIX | 0.35 |
| Foreign Developed Equity | 15% | T. Rowe Price International Equity Index Fund | PIEQX | 0.50 |
| Emerging Markets | 5% | T. Rowe Price Emerging Markets Stock Fund | PRMSX | 1.25 |
| U.S. REITs | 20% | T. Rowe Price Real Estate Fund | TRREX | 0.79 |
| U.S. Treasuries | 15% | T. Rowe Price U.S. Treasury Intermediate Fund | PRTIX | 0.51 |
| TIPS | 15% | T. Rowe Price Inflation Protected Bond Fund | PRIPX | 0.50 |
| Weighted Average Expense Ratio | 0.55 |
Charles Schwab
| ASSET CLASS | ALLOCATION | SCHWAB | INVESTOR CLASS | ER |
| U.S. Equities | 30% | Schwab Total Stock Market Index Fund® | SWTSX | 0.09 |
| Foreign Developed Equity | 15% | Schwab International Index Fund® | SWISX | 0.19 |
| Emerging Markets | 5% | Schwab Emerging Markets Equity ETF | SCHE | 0.14 |
| U.S. REITs | 20% | Schwab Fundamental Global Real Estate Index Fund | SFREX | 0.49 |
| U.S. Treasuries | 15% | Schwab Intermediate-Term Bond Fund™ | SWIIX | 0.45 |
| TIPS | 15% | Schwab® Treasury Inflation Protected Securities Index Fund | SWRSX | 0.19 |
| Weighted Average Expense Ratio | 0.26 |
Thrift Savings Plan
The TSP is one of the best retirement plans available. Its fees approach zero. Yet it doesn’t offer exposure to certain asset classes, such as REITs and emerging markets. For that reason, I had to get a bit creative with this portfolio.
| ASSET CLASS | ALLOCATION | TSP | ER | |
| U.S. Equities | 30% | C Fund | .029 | |
| Foreign Developed Equity | 15% | I Fund | .029 | |
| Emerging Markets | 5% | I Fund | .029 | |
| U.S. REITs | 20% | S Fund | .026 | |
| U.S. Treasuries | 15% | F Fund | .039 | |
| TIPS | 15% | F Fund | .039 | |
| Weighted Average Expense Ratio | .031 |