- 30% US Equities
- 20% REITs
- 15% US Treasuries
- 15% TIPS
- 15% Foreign Developed Equities
- 5% Emerging Market Equities
I've never had anywhere near that much faith in REITs, the first post if mine I can find questioning Swensen's 20% allocation to REITs was a little over a year ago. I also disagree with no commodities.
As I mentioned once before Swensen clearly had something in mind with this and I would expect that the vast majority of the time it works well, I would note it did outperform the S&P 500 in the period studied but that is not the best benchmark for that portfolio. To the extent someone would be disappointed with a 32% decline in a down 39% world I think this contributes to the case for a defensive strategy and not just relying on a diversified portfolio.
There was an article in Vanity Fair (so it was very long) called Rethinking The American Dream that might make someone who is over-extended feel rather glum and validate someone who lives below his means. I don't know how many people reading this blog have been or will be directly impacted by this Great Recession (not sure who coined it but this name might stick) but life is much easier if you don't have to worry about covering a $5000 mortgage and two $700 car payments. If you had no mortgage payment and no car payments how long would $6400 last? Those numbers are probably a tad high for most folks but you get the point.
Hopefully you know this first hand but your financial life will be much easier if your expenses are low.
After a pronounced move higher for the last few days the market took a breather yesterday with financials dropping the most. This does not mean the rally is over but I think it was a good reminder that it is unlikely the problems in the financials are over. The iShares Financial ETF (IYF) rallied 43% from its March 6 close through Wednesday. When something moves that much people get excited and project forward and it becomes easy to get caught up in the excitement. If you find yourself saying "yeah, he's right" and the next thing you know your logged in and clicking you're probably reacting to emotion rather than executing on logic. If the rally continues higher we will all be confronting more of this.