What is the Larry Portfolio?

Larry Swedroe's low-stock, high-tilt design: about 30% in small-cap value and emerging-market stocks and 70% in intermediate US Treasuries, rebalanced yearly.

Is the Larry Portfolio a good strategy?

For investors who want low drawdowns and believe in the small-value and emerging-market premiums, it is compelling. The risk is that those premiums fail to show up over your investing horizon.

Why hold so few stocks?

The idea is that a small dose of very-high-return stocks, combined with lots of safe bonds, can deliver similar overall returns to a stock-heavy portfolio while dramatically cutting the worst-case loss.

Does the Larry Portfolio work?

By Jeffrey Lin · Published 2026-08-24 · Updated 2026-08-24

The Larry Portfolio, named for author Larry Swedroe, takes an unusual approach: put only about 30% in stocks, but make those stocks the highest-expected-return kind (small-cap value and emerging markets), and hold the other 70% in safe intermediate Treasuries. The bet is that a little bit of very-high-return stock exposure, paired with lots of safety, can match a stock-heavier portfolio with far less risk.

From May 1996 to Jul 2026, a yearly-rebalanced Larry Portfolio portfolio returned 6.2% per year with a maximum drawdown of -19.0% — versus 10.3% and -50.8% for S&P 500 (SPY) alone. It gave up some return for materially lower risk, producing a higher Sharpe ratio (0.98 vs 0.72). $10,000 grew to $61,449 (vs $192,480 in the S&P 500).

What's in it: the allocation

IJS15%
VEA7.5%
VWO7.5%
IEF70%

Growth of $10,000

Growth of a $10,000 investment, May 1996–Jul 2026. The Larry Portfolio line rises more slowly than the S&P 500 but with visibly shallower dips — the trade-off the strategy is designed to make.

What an investor actually experiences: drawdowns

Decline from the prior peak — the "underwater" curve.

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. Larry Portfolio's worst decline was a moderate -19.0% — far shallower than the S&P 500's -50.8%. How long the pain lasted matters just as much: it spent as long as 48 months (about 4.0 years) below a prior high, versus 74 months (6.2 years) for the S&P 500.

Because the worst loss here was held to -19.0%, Larry Portfolio 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)	Larry Portfolio
CAGR	10.3%	6.2%
Annualized volatility	15.3%	6.3%
Sharpe ratio	0.72	0.98
Sortino ratio	1.10	1.60
Max drawdown	-50.8%	-19.0%
Longest drawdown (months)	74	48
Growth of $10,000	$192,480	$61,449

Here is what those figures mean for a real saver. CAGR is the smoothed annual growth rate: at 6.2% a year, Larry Portfolio turned $10,000 into $61,449 over about 30 years, versus $192,480 for the S&P 500. Volatility (6.3% 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.

The trade paid off over this period: Larry Portfolio took far less risk than the S&P 500 yet earned a better risk-adjusted return (Sharpe 0.98 vs 0.72) — most of the reward with a fraction of the fear.

Figures are computed from monthly adjusted closing prices over May 1996–Jul 2026. Drawdowns are measured at month-end and so understate intra-month extremes.

Methodology

The two instruments

IJS — iShares S&P Small-Cap 600 Value ETF: Small, cheap US companies — the small-cap value tilt.
VEA — Vanguard FTSE Developed Markets ETF: Stocks of developed countries outside the US (Europe, Japan, and more).
VWO — Vanguard FTSE Emerging Markets ETF: Faster-growing but more volatile emerging-market stocks.
IEF — iShares 7-10 Year Treasury Bond ETF: Intermediate US government bonds — a steadier, less rate-sensitive anchor.

Backtest parameters

Allocation: 15% IJS / 7.5% VEA / 7.5% VWO / 70% IEF
Benchmark: S&P 500 (SPY)
Data: Monthly adjusted closing prices (dividends reinvested)
Period: May 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

High return per unit of risk taken: By concentrating the small stock sleeve in the highest-returning corners of the market, it aims to earn stock-like returns while keeping most of the money safe.
Very shallow drawdowns: With 70% in intermediate Treasuries, the portfolio's losses in a crash are a fraction of an all-stock portfolio's.

Disadvantages and risks

Depends on small-value and emerging outperforming: The whole idea rests on those risky stock corners delivering their historical premium — and they can underperform for a decade or more.
Heavy interest-rate exposure: 70% in Treasuries means rising rates (as in 2022) can hurt, even though stocks are a small slice.

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 Larry Portfolio portfolio in the live tool →

Frequently asked questions

What is the Larry Portfolio?: Larry Swedroe's low-stock, high-tilt design: about 30% in small-cap value and emerging-market stocks and 70% in intermediate US Treasuries, rebalanced yearly.
Is the Larry Portfolio a good strategy?: For investors who want low drawdowns and believe in the small-value and emerging-market premiums, it is compelling. The risk is that those premiums fail to show up over your investing horizon.
Why hold so few stocks?: The idea is that a small dose of very-high-return stocks, combined with lots of safe bonds, can deliver similar overall returns to a stock-heavy portfolio while dramatically cutting the worst-case loss.

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.