Does Meb Faber's Global Asset Allocation (GAA) work?
The Global Asset Allocation (GAA), from Meb Faber's book of the same name, tries to hold the world's investable assets roughly in the proportions the world actually owns them — a ten-piece mix of US and foreign stocks, government and corporate bonds, real estate, and commodities. It is diversification taken to its logical, global extreme.
What's in it: the allocation
- VV18%
- VEA13.5%
- EEM4.5%
- VNQ4.5%
- LQD19.8%
- BNDX14.4%
- TLT13.5%
- TIP1.8%
- GLD5%
- GSG5%
Growth of $10,000
What an investor actually experiences: drawdowns
A drawdown is the stretch of time when your account is worth less than it was, with no way to know when it will recover. Global Asset Allocation's worst decline was a moderate -24.9% — far shallower than the S&P 500's -50.8%. How long the pain lasted matters just as much: it spent as long as 31 months (about 2.6 years) below a prior high, versus 52 months (4.3 years) for the S&P 500.
Because the worst loss here was held to -24.9%, Global Asset Allocation is far better suited to money with a deadline — a house down payment, a tuition bill, a near-term retirement — where a deep, multi-year slump could otherwise force a sale at the bottom.
Results
| Statistic | S&P 500 (SPY) | Global Asset Allocation |
|---|---|---|
| CAGR | 8.8% | 6.6% |
| Annualized volatility | 15.0% | 8.4% |
| Sharpe ratio | 0.64 | 0.81 |
| Sortino ratio | 0.96 | 1.23 |
| Max drawdown | -50.8% | -24.9% |
| Longest drawdown (months) | 52 | 31 |
| Growth of $10,000 | $83,976 | $50,099 |
Here is what those figures mean for a real saver. CAGR is the smoothed annual growth rate: at 6.6% a year, Global Asset Allocation turned $10,000 into $50,099 over about 25 years, versus $83,976 for the S&P 500. Volatility (8.4% vs 15.0%) is how much the ride bounces from year to year. The Sharpe and Sortino ratios measure return earned per unit of risk (higher is better). And the maximum drawdown — the deepest peak-to-trough fall — is the number that decides whether you can actually stay invested.
The trade paid off over this period: Global Asset Allocation took far less risk than the S&P 500 yet earned a better risk-adjusted return (Sharpe 0.81 vs 0.64) — most of the reward with a fraction of the fear.
Figures are computed from monthly adjusted closing prices over Sep 2000–Jul 2026. Drawdowns are measured at month-end and so understate intra-month extremes.
Methodology
The two instruments
- VV — Vanguard Large-Cap ETF
- Large, established US companies.
- VEA — Vanguard FTSE Developed Markets ETF
- Stocks of developed countries outside the US (Europe, Japan, and more).
- EEM — iShares MSCI Emerging Markets ETF
- Emerging-market stocks — higher growth potential, higher volatility.
- VNQ — Vanguard Real Estate ETF
- US real-estate investment trusts (REITs) — property income that behaves a bit differently from stocks.
- LQD — iShares Investment Grade Corporate Bond ETF
- Bonds issued by financially sound companies — a bit more yield and risk than Treasuries.
- BNDX — Vanguard Total International Bond ETF
- Non-US bonds, currency-hedged, for extra diversification.
- TLT — iShares 20+ Year Treasury Bond ETF
- Long-term US government bonds — strong protection when growth or inflation falls, but very rate-sensitive.
- TIP — iShares TIPS Bond ETF
- US inflation-protected Treasuries — they rise with inflation and defend purchasing power.
- GLD — SPDR Gold Shares
- Physical gold — a hedge against inflation and currency stress.
- GSG — iShares S&P GSCI Commodity ETF
- Broad commodities exposure — an inflation diversifier.
Backtest parameters
- Allocation
- 18% VV / 13.5% VEA / 4.5% EEM / 4.5% VNQ / 19.8% LQD / 14.4% BNDX / 13.5% TLT / 1.8% TIP / 5% GLD / 5% GSG
- Benchmark
- S&P 500 (SPY)
- Data
- Monthly adjusted closing prices (dividends reinvested)
- Period
- Sep 2000 – Jul 2026 (history before an ETF's inception is extended with its older index/mutual-fund equivalent)
- Rebalance
- Yearly, at month-end
- Transaction costs
- None modelled
Advantages
- Maximum diversification
- By holding a slice of nearly every major asset class worldwide, no single market, country, or shock can sink the whole portfolio.
- A neutral, opinion-free starting point
- It doesn't bet on any one asset — it simply owns the global market, which is a defensible default for a long-term investor.
Disadvantages and risks
- Ten holdings is a lot to manage
- More funds means more rebalancing, more trades, and more chances to tinker at the wrong moment.
- Heavy bond and foreign tilt lagged US stocks
- Its large allocation to bonds and non-US assets caused it to trail a plain S&P 500 fund badly during the recent US-led bull market.
Try it yourself
Every number on this page is reproduced by MarketHeist's free portfolio tool — change the weights, tickers, or rebalancing and watch the result update.
Open the Global Asset Allocation portfolio in the live tool →Frequently asked questions
- What is the Global Asset Allocation portfolio?
- A ten-asset mix of US and international stocks, government/corporate/international/inflation-protected bonds, real estate, gold, and commodities, weighted roughly as the global market holds them, rebalanced yearly.
- Is the GAA portfolio good?
- It is one of the most diversified simple portfolios available and holds up across many environments. The cost is complexity and lagging in US-stock-led markets.
- Why hold so many asset classes?
- The premise is that no one can reliably predict which asset wins, so owning them all in market proportions avoids a catastrophic bet on the wrong one.
References
Educational analysis of historical data, not investment advice. Past performance does not guarantee future results. Backtested results are hypothetical and computed from the MarketHeist portfolio engine on the parameters above.