David Swensen, the late manager of Yale University’s $27 billion endowment fund, is regarded as one of the greatest investment minds in history for good reason. The fund has averaged a 13.6% per annum return for thirty years. His strategy for the esteemed university’s fund was predicated around simple, common-sense investing. He detailed the plan in the 2005 book “Unconventional Success,” which translates his theory of building an investment portfolio for an Ivy League University into something everyone can understand.
Throughout the book, Swensen stresses two points that he believes are essential for successful investing:
Maintain a 20% portfolio allocation to real estate
Choose to invest only in low fee opportunities
Why real estate?
Swensen strongly supported the concept of portfolio diversification. His reasoning was based on the simple saying “don’t put all your eggs in one basket.” Spreading a portfolio across an array of asset classes reduces risk while allowing for increased returns.
Swensen recommended investors allocate anywhere between 15 and 20% of their portfolio into real estate. Low correlation offers a buffer against the volatility of the stock market. In “Uncommon Success,” Swensen states that real estate risks and returns fall somewhere between those of bonds and equities.
But his book was written in 2005, years before crowdfunding platforms like DiversyFund made it easy for everyone to explore real estate investment options. Thankfully, an amendment to the Jobs Act in 2015 simplifies access for even non-accredited investors.
These days, DiversyFund is making it easy to invest like Swensen through our online platform. It’s never been easier to add real estate and diversification to your portfolio. And — just like Swensen — our real estate projects are all vetted by our professional team of in-house experts. We bring top-quality real estate investments to your portfolio, and you don’t need millions of dollars to get started.
Alongside sharing his allocation strategies, Swensen stressed the damages he claimed actively managed mutual funds have caused average investors. These funds typically charge high fees in exchange for management expertise that allows an investment to “beat the market.” However, these funds frequently fail to do just that.
DiversyFund tailors the investment fee structure and splits it between platform management and real estate fees. By doing this, we’re able to remain competitive when sourcing and landing multifamily property acquisitions for the portfolio. This differs from the actively managed mutual funds that Swensen criticized.
David Swensen became a legend in investing circles with his simple strategy. You now have your own chance to invest like a legend. Visit our investments page and learn more about our latest offerings.
———————————————————————————————————————————– Updated post originally published 3/16/2018
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