I’ve had Unconventional Success by David F. Swensen on my shelf for five years, but it took me a while to finish. The book is somewhat dense and challenging, yet it offers valuable insights, particularly about the effects of drawdown on a portfolio. Swensen, Yale’s CIO for 36 years, managed to achieve an impressive 12% annual return during his tenure.
One key takeaway is that while the S&P 500 generally outperforms many strategies, certain portfolios can do better overall by minimizing drawdowns. Swensen emphasizes several principles that are common in investment literature:
Equities Should Dominate: Despite being riskier, equities offer higher long-term returns.
Passive Investing Over Active Management: Costs significantly impact your portfolio, so minimize them.
Diversification Is Essential: A portfolio solely composed of equities will suffer from severe drawdowns, which can take years to recover from. A well-balanced portfolio mitigates this risk.
Avoid Market Timing: Base your strategy on long-term thinking.
Rebalancing Is Crucial: Regularly sell overperforming assets and buy underperforming ones.
Consider Tax Implications: Be aware of the tax consequences when buying or selling assets.
Stay Disciplined: Don’t let emotions dictate your investment decisions.
Swensen’s Model Portfolio
Swensen’s recommended allocation includes:
U.S. Equities: 30%
International Developed Market Equities: 15%
Emerging Market Equities: 5%
REITs: 20%
U.S. Treasury Bonds: 15%
TIPS: 15%
Hypothetical Portfolios
I compiled and backtested several hypothetical portfolios based on Swensen’s principles. While most failed to outperform the S&P 500 over a 20-year period, one aggressive portfolio did manage to do so, primarily due to its better handling of drawdowns during the 2008-2009 recession.
Conservative Portfolio: $45,293 Conservative B Portfolio: $38,916
Moderate Portfolio: $54,785 Moderate B Portfolio: $60,839
Aggressive Portfolio: $64,137 Aggressive B Portfolio: $93,856
S&P 500 (SPY): $80,315
Portfolio Allocations
Original Portfolios
Conservative Portfolio:
25% VTI, 10% EFA, 5% VWO, 15% VNQ, 25% IEF, 20% TIP
Moderate Portfolio:
30% VTI, 15% EFA, 10% VWO, 15% VNQ, 15% IEF, 15% TIP
Aggressive Portfolio:
40% VTI, 20% EFA, 15% VWO, 10% VNQ, 10% IEF, 5% TIP
B-Series Portfolios
Conservative B Portfolio:
20% VTSAX, 10% VEA, 5% VWO, 15% VNQ, 25% VBTLX, 25% VIPSX
Moderate B Portfolio:
25% VTSAX, 15% VEA, 10% VWO, 20% VNQ, 15% VBTLX, 15% VIPSX
Aggressive B Portfolio:
35% VTSAX, 20% VEA, 10% VWO, 20% VNQ, 10% VBTLX, 5% VIPSX
Benchmark
S&P 500 (SPY)
While beating the S&P 500 over the long term is challenging, Swensen’s strategies offer a solid foundation for those looking to manage risk and optimize returns. For most investors, simply investing in the S&P 500 might be the best approach, but Swensen shows there are ways to potentially outperform through strategic portfolio management.
Annual Returns (2003 – 2023)
2003
Portfolio Return
Conservative Portfolio 18.34%
Moderate Portfolio 19.90%
Aggressive Portfolio 21.45%
Conservative B 13.39%
Moderate B 18.30%
Aggressive B 23.95%
S&P 500 (SPY) 28.18%
2004
Portfolio Return
Conservative Portfolio 11.55%
Moderate Portfolio 12.49%
Aggressive Portfolio 14.08%
Conservative B 7.42%
Moderate B 19.80%
Aggressive B 21.28%
S&P 500 (SPY) 10.70%
2005
Portfolio Return
Conservative Portfolio 8.62%
Moderate Portfolio 10.46%
Aggressive Portfolio 12.24%
Conservative B 7.57%
Moderate B 10.68%
Aggressive B 11.77%
S&P 500 (SPY) 4.83%
2006
Portfolio Return
Conservative Portfolio 18.71%
Moderate Portfolio 21.07%
Aggressive Portfolio 23.19%
Conservative B 19.47%
Moderate B 22.66%
Aggressive B 26.71%
S&P 500 (SPY) 15.85%
2007
Portfolio Return
Conservative Portfolio 6.92%
Moderate Portfolio 7.64%
Aggressive Portfolio 9.07%
Conservative B 5.04%
Moderate B 6.09%
Aggressive B 7.82%
S&P 500 (SPY) 5.14%
2008
Portfolio Return
Conservative Portfolio -24.53%
Moderate Portfolio -27.55%
Aggressive Portfolio -31.46%
Conservative B -24.30%
Moderate B -27.57%
Aggressive B -33.20%
S&P 500 (SPY) -36.81%
2009
Portfolio Return
Conservative Portfolio 22.78%
Moderate Portfolio 25.46%
Aggressive Portfolio 27.59%
Conservative B 26.79%
Moderate B 33.32%
Aggressive B 39.89%
S&P 500 (SPY) 26.37%
2010
Portfolio Return
Conservative Portfolio 14.65%
Moderate Portfolio 15.73%
Aggressive Portfolio 16.57%
Conservative B 12.81%
Moderate B 18.72%
Aggressive B 23.66%
S&P 500 (SPY) 15.06%
2011
Portfolio Return
Conservative Portfolio 5.33%
Moderate Portfolio 3.66%
Aggressive Portfolio 3.92%
Conservative B 3.07%
Moderate B 4.50%
Aggressive B 0.33%
S&P 500 (SPY) 1.89%
2012
Portfolio Return
Conservative Portfolio 14.20%
Moderate Portfolio 14.95%
Aggressive Portfolio 16.05%
Conservative B 11.49%
Moderate B 13.46%
Aggressive B 19.45%
S&P 500 (SPY) 15.99%
2013
Portfolio Return
Conservative Portfolio 10.62%
Moderate Portfolio 14.34%
Aggressive Portfolio 16.07%
Conservative B 10.61%
Moderate B 12.44%
Aggressive B 22.27%
S&P 500 (SPY) 32.31%
2014
Portfolio Return
Conservative Portfolio 8.49%
Moderate Portfolio 10.03%
Aggressive Portfolio 11.11%
Conservative B 7.99%
Moderate B 11.00%
Aggressive B 13.04%
S&P 500 (SPY) 13.46%
2015
Portfolio Return
Conservative Portfolio -1.37%
Moderate Portfolio -2.23%
Aggressive Portfolio -3.02%
Conservative B -1.60%
Moderate B -1.42%
Aggressive B -2.27%
S&P 500 (SPY) 1.25%
2016
Portfolio Return
Conservative Portfolio 7.71%
Moderate Portfolio 9.56%
Aggressive Portfolio 10.96%
Conservative B 7.62%
Moderate B 8.03%
Aggressive B 12.17%
S&P 500 (SPY) 12.00%
2017
Portfolio Return
Conservative Portfolio 13.75%
Moderate Portfolio 18.11%
Aggressive Portfolio 21.11%
Conservative B 12.78%
Moderate B 17.42%
Aggressive B 24.71%
S&P 500 (SPY) 21.70%
2018
Portfolio Return
Conservative Portfolio -6.43%
Moderate Portfolio -8.74%
Aggressive Portfolio -11.04%
Conservative B -6.69%
Moderate B -7.04%
Aggressive B -10.27%
S&P 500 (SPY) -4.56%
2019
Portfolio Return
Conservative Portfolio 21.73%
Moderate Portfolio 23.58%
Aggressive Portfolio 26.23%
Conservative B 19.53%
Moderate B 21.70%
Aggressive B 29.21%
S&P 500 (SPY) 31.22%
2020
Portfolio Return
Conservative Portfolio 10.83%
Moderate Portfolio 13.58%
Aggressive Portfolio 15.56%
Conservative B 10.56%
Moderate B 11.04%
Aggressive B 14.82%
S&P 500 (SPY) 18.37%
2021
Portfolio Return
Conservative Portfolio 12.71%
Moderate Portfolio 16.57%
Aggressive Portfolio 20.73%
Conservative B 14.87%
Moderate B 17.24%
Aggressive B 23.33%
S&P 500 (SPY) 28.75%
2022
Portfolio Return
Conservative Portfolio -17.25%
Moderate Portfolio -18.32%
Aggressive Portfolio -19.45%
Conservative B -17.07%
Moderate B -17.58%
Aggressive B -19.11%
S&P 500 (SPY) -18.17%
2023
Portfolio Return
Conservative Portfolio 14.22%
Moderate Portfolio 15.87%
Aggressive Portfolio 17.73%
Conservative B 13.49%
Moderate B 15.92%
Aggressive B 17.73%
S&P 500 (SPY) 26.19%
Add Prime
to get Fast, Free delivery
Download the free Kindle app and start reading Kindle books instantly on your smartphone, tablet, or computer - no Kindle device required.
Read instantly on your browser with Kindle for Web.
Using your mobile phone camera - scan the code below and download the Kindle app.
Book recommendations, author interviews, editors' picks, and more. Read it now.
Frequently bought together
This item: Unconventional Success: A Fundamental Approach to Personal Investment
$15.56
Get it as soon as Friday, Jun 6
Only 1 left in stock - order soon.
+
$17.87
Get it as soon as Friday, Jun 6
In Stock
+
$12.52
Get it as soon as Friday, Jun 6
In Stock
Total price: $00
To see our price, add these items to your cart.
Choose items to buy together.
Customers who viewed this item also viewed
Page 1 of 1 Start overPage 1 of 1
Popular Highlights in this book
Capital markets provide three tools for investors to employ in generating investment returns: asset allocation, market timing, and security selection.Highlighted by 781 Kindle readers- Sensible investors pursue diversification as a policy to reduce risk, not as a tactic to chase performance.Highlighted by 691 Kindle readers
- Market timing refers to deviations from the long-term asset-allocation targets. Active market timing represents a purposeful attempt to generate short-term, superior returns based on insights regarding relative asset class valuations.Highlighted by 496 Kindle readers
About the author
The book came with a paper label glued over the ISBN
I didn't even read the book yet, but I don't recommend buying it here. It does not woth to send it back, but it's a lack of respect to do that and will give me much more work, because I cannot scan the correct bar code. Why to damage the book cover?
Top reviews from the United States
There was a problem filtering reviews. Please reload the page.
- Reviewed in the United States on August 12, 2024
- Reviewed in the United States on January 9, 2006
