Does David Swensen's Yale-model portfolio work?
This is the late David Swensen's portfolio for ordinary investors — his translation of the Yale endowment he ran for decades. It leans heavily on diversified stocks and real estate for growth, and uses only US Treasuries and inflation-protected bonds for safety, on the view that those are the only bonds worth trusting.
What's in it: the allocation
- VTI30%
- VEA15%
- VWO5%
- VNQ20%
- TLT15%
- TIP15%
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. Yale (Swensen)'s worst decline was a deep -39.5% — close to the S&P 500's -50.8%. How long the pain lasted matters just as much: it spent as long as 35 months (about 2.9 years) below a prior high, versus 74 months (6.2 years) for the S&P 500.
A fall of -39.5% 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) | Yale (Swensen) |
|---|---|---|
| CAGR | 8.4% | 7.6% |
| Annualized volatility | 15.1% | 11.3% |
| Sharpe ratio | 0.61 | 0.71 |
| Sortino ratio | 0.91 | 1.04 |
| Max drawdown | -50.8% | -39.5% |
| Longest drawdown (months) | 74 | 35 |
| Growth of $10,000 | $81,660 | $67,952 |
Here is what those figures mean for a real saver. CAGR is the smoothed annual growth rate: at 7.6% a year, Yale (Swensen) turned $10,000 into $67,952 over about 26 years, versus $81,660 for the S&P 500. Volatility (11.3% vs 15.1%) 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.
Yale (Swensen) used its risk more efficiently than the S&P 500 over this period, earning a higher risk-adjusted return (Sharpe 0.71 vs 0.61) despite a lower headline gain.
Figures are computed from monthly adjusted closing prices over Jul 2000–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.
- 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.
- VNQ — Vanguard Real Estate ETF
- US real-estate investment trusts (REITs) — property income that behaves a bit differently from stocks.
- 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.
Backtest parameters
- Allocation
- 30% VTI / 15% VEA / 5% VWO / 20% VNQ / 15% TLT / 15% TIP
- Benchmark
- S&P 500 (SPY)
- Data
- Monthly adjusted closing prices (dividends reinvested)
- Period
- Jul 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
- Growth-tilted but diversified
- Half the portfolio spreads across US, foreign, and emerging stocks plus real estate, aiming for strong long-run returns without concentrating in any one market.
- High-quality bonds only
- By using only Treasuries and inflation-protected bonds, it avoids the hidden stock-like risk that corporate and junk bonds carry in a crisis.
Disadvantages and risks
- Big real-estate bet
- A 20% real-estate stake is large and can fall hard alongside stocks in a credit crisis, as it did in 2008.
- Still stock-heavy
- With around 70% in stocks and real estate, it takes deep drawdowns in bear markets — this is a growth portfolio, not a defensive one.
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 Yale (Swensen) portfolio in the live tool →Frequently asked questions
- What is the Swensen / Yale portfolio?
- David Swensen's recommended individual-investor mix: roughly 30% US stocks, 15% developed foreign, 5% emerging, 20% real estate, 15% long Treasuries, and 15% TIPS, rebalanced yearly.
- Is the Swensen portfolio good for individuals?
- It is a well-diversified, growth-oriented portfolio from one of the most respected endowment investors. It suits long horizons that can tolerate large drawdowns from its stock and real-estate weight.
- Why does Swensen avoid corporate bonds?
- He argued that corporate and high-yield bonds behave like stocks when you need safety most, so Treasuries and TIPS are the more reliable diversifiers.
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.