Does Meb Faber's Ivy Portfolio work?
The Ivy Portfolio, from Meb Faber, is the buy-and-hold version of the endowment approach used by Yale and Harvard: an equal, five-way split across US stocks, foreign stocks, bonds, commodities, and real estate. The idea is that spreading across very different asset classes smooths the ride and adds protection stocks and bonds alone don't have.
What's in it: the allocation
- VTI20%
- VEU20%
- IEF20%
- DBC20%
- VNQ20%
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. Ivy Portfolio's worst decline was a severe -43.1% — almost as deep as the S&P 500's own -50.8%. How long the pain lasted matters just as much: it spent as long as 32 months (about 2.7 years) below a prior high, versus 74 months (6.2 years) for the S&P 500.
A fall of -43.1% is the kind that tests conviction. If you needed this money for a house, a child's tuition, or retirement during such a slump, you could be forced to sell near the bottom — which is why money you will need within a few years usually belongs somewhere less exposed than this.
Results
| Statistic | S&P 500 (SPY) | Ivy Portfolio |
|---|---|---|
| CAGR | 10.2% | 7.8% |
| Annualized volatility | 15.3% | 11.1% |
| Sharpe ratio | 0.71 | 0.73 |
| Sortino ratio | 1.09 | 1.07 |
| Max drawdown | -50.8% | -43.1% |
| Longest drawdown (months) | 74 | 32 |
| Growth of $10,000 | $188,208 | $95,419 |
Here is what those figures mean for a real saver. CAGR is the smoothed annual growth rate: at 7.8% a year, Ivy Portfolio turned $10,000 into $95,419 over about 30 years, versus $188,208 for the S&P 500. Volatility (11.1% vs 15.3%) 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.
Over this particular window the diversification roughly broke even: Ivy Portfolio earned about the same risk-adjusted return as the S&P 500 (Sharpe 0.73 vs 0.71) while trailing on raw growth. Its case rests on protecting against risks — a prolonged US-stock slump, an inflation shock — that this stretch did not deliver.
Figures are computed from monthly adjusted closing prices over Jun 1996–Jul 2026. Drawdowns are measured at month-end and so understate intra-month extremes.
Methodology
The two instruments
- VTI — Vanguard Total Stock Market ETF
- Every US stock, large and small — the core growth holding.
- VEU — Vanguard FTSE All-World ex-US ETF
- Every non-US stock — developed and emerging markets in one fund.
- IEF — iShares 7-10 Year Treasury Bond ETF
- Intermediate US government bonds — a steadier, less rate-sensitive anchor.
- DBC — Invesco DB Commodity Index ETF
- A basket of commodities (energy, metals, agriculture) that tends to rise with inflation.
- VNQ — Vanguard Real Estate ETF
- US real-estate investment trusts (REITs) — property income that behaves a bit differently from stocks.
Backtest parameters
- Allocation
- 20% VTI / 20% VEU / 20% IEF / 20% DBC / 20% VNQ
- Benchmark
- S&P 500 (SPY)
- Data
- Monthly adjusted closing prices (dividends reinvested)
- Period
- Jun 1996 – 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
- Broad, true diversification
- Five distinct asset classes — including commodities and real estate — mean the whole portfolio rarely falls at once, and it carries inflation defenses a stocks-and-bonds mix lacks.
- Endowment logic, retail cost
- It captures the spirit of how large endowments invest, using cheap, liquid ETFs any investor can hold.
Disadvantages and risks
- Commodities have been a persistent drag
- Broad commodities can lose value for years between inflation spikes, weighing on returns during calm, low-inflation periods.
- Five equal slices is a blunt rule
- Equal-weighting ignores that some assets are far riskier than others, so the stock and commodity slices dominate the ups and downs.
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 Ivy Portfolio portfolio in the live tool →Frequently asked questions
- What is the Ivy Portfolio?
- An equal 20% split across US stocks, foreign stocks, intermediate bonds, commodities, and real estate (REITs), rebalanced yearly — Meb Faber's simple take on the endowment model.
- Is the Ivy Portfolio a good strategy?
- It offers genuine multi-asset diversification and inflation protection, which shines in turbulent decades. Its weak spot is long calm stretches, when the commodity slice can drag on returns.
- How is the Ivy Portfolio different from a 60/40?
- It adds foreign stocks, commodities, and real estate that a 60/40 leaves out — trading some simplicity for protection against inflation and US-only risk.
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.