Is the Yale/Swenson Asset Allocation Too Conservative for a 20 Something?
You can look the Vanguard funds up on their website and view a risk factor provided by Vanguard on a scale of 1 to 5.  Short term bond funds tend to get their lowest risk factor, long term bond funds and blended investments go up to about 3, some stock mutual funds are 4 and some are 5. Note that in 2008 Swenson himself had slightly different target percentages out here that break out the international stocks into emerging versus developed markets. So the average risk of this portfolio is 3.65 out of 5.  My guess would be that a typical twenty-something who expects to retire no earlier than 60 could take more risk, but I don't know your personal goals or circumstances. If you are looking to maximize return for a level of risk, look into Modern Portfolio Theory and the work of economist Harry Markowitz, who did extensive work on the topic of maximizing the return given a set risk tolerance.  More info on my question here.  This question provides some great book resources for learning as well. You can also check out a great comparison and contrast of different portfolio allocations here. "I don't think the advice to take lots more risk when young makes so much sense. The additional returns from loading up on stocks are overblown; and the rocky road from owning 75-100% stocks will almost certainly mess you up and make you lose money. Everyone thinks they're different, but none of us are. One big advantage of stocks over bonds is tax efficiency only if you buy index funds and don't ever sell them. But this does not matter in a retirement account, and outside a retirement account you can use tax-exempt bonds. Stocks have higher returns in theory but to have a reasonable guarantee of higher returns from them, you need around a 30-year horizon. That is a long, long time. Psychologically, a 60/40 stocks/bonds portfolio, or something with similar risk mixing in a few more alternative assets like Swenson's, is SO MUCH better. With 100% stocks you can spend 10 or 15 years saving money and your investment returns may get you nowhere. Think what that does to your motivation to save. (And how much you save is way more important than what you invest in.) The same doesn't happen with a balanced portfolio. With a balanced portfolio you get reasonably steady progress. You can still have a down year, but you're a lot less likely to have a down decade or even a down few years. You save steadily and your balance goes up fairly steadily. The way humans really work, this is so important. For the same kind of reason, I think it's great to buy one fund that has both stocks and bonds in there. This forces you to view the thing as a whole instead of wrongly looking at the individual asset class ""buckets."" And it also means rebalancing will happen automatically, without having to remember to do it, which you won't. Or if you remember you won't do it when you should, because stocks are doing so well, or some other rationalization. Speaking of rebalancing, that's where a lot of the steady, predictable returns come from if you have a nice balanced portfolio. You can make money over time even if both asset classes end up going nowhere, as long as they bounce around somewhat independently, so you'll buy low and sell high when you rebalance. To me the ideal is an all-in-one fund that aims for about 60/40 stocks/bonds level of risk, somewhat more diversified than stocks/bonds is great (international stock, commodities, high yield, REIT, etc.). You can just buy that at age 20 and keep it until you retire. In beautiful ideal-world economic theory, buy 90% stocks when young. Real world with human brain involved: I love balanced funds. The steady gains are such a mental win. The ""target retirement"" funds are not a bad option, but if you buy the matching year for your age, I personally wish they had less in stocks. If you want to read more on the ""equity premium"" (how much more you make from owning stocks) here are a couple of posts on it from a blog I like: Update: I wrote this up more comprehensively on my blog," That looks like a portfolio designed to protect against inflation, given the big international presence, the REIT presence and TIPS bonds. Not a bad strategy, but there are a few things that I'd want to look at closely before pulling the trigger. "I think Swenson's insight was that the traditional recommendation of 60% stocks plus 40% bonds has two serious flaws: 1) You are exposed to way too much risk by having a portfolio that is so strongly tied to US equities (especially in the way it has historically been recommend). 2) You have too little reward by investing so much of your portfolio in bonds. If you can mix a decent number of asset classes that all have equity-like returns, and those asset classes have a low correlation with each other, then you can achieve equity-like returns without the equity-like risk. This improvement can be explicitly measured in the Sharpe ratio of you portfolio. (The Vanguard Risk Factor looks pretty squishy and lame to me.) The book the ""The Ivy Portfolio"" does a great job at covering the Swenson model and explains how to reasonably replicate it yourself using low fee ETFs."
I agree with the other comments that you should not buy/hold your company stock even if given at a discount. If equity is provided as part of the compensation package (Options/Restrictive Stock Units RSU)then this rule does not apply. As a matter of diversification, you should not have majority equity stake of other companies in the same sector (e.g. technology) as your employer. Asset allocation and diversification if done in the right way, takes care of the returns. Buying and selling on the same day is generally not allowed for ESPP. Taxation headaches. This is from personal experience (Cisco Systems). I had options issued in Sept 2008 at 18$ which vested regularly. I exited at various points - 19$,20$,21$,23$ My friend held on to all of it hoping for 30$ is stuck. Options expire if you leave your employment. ESPP shares though remain. re life insurance Multi-purpose vehicles generally don't work as well as just going with single purpose, well except for the person/company selling them.  'whole life' plans are a great deal for the insurance company and agent, not so much for you. The easiest way to prove this to yourself is to get the difference in price between a simple 'term life' product that would be appropriate to provide for your family in the event you die.  Then get the price for a 'whole life' product with the same benefits, and what it would be worth after say 20 or 30 years. Take the difference you would have to pay, figure what it would be worth if invested conservatively over the same period, figuring in some conservative figure for compound growth such as 6 percent (what you could get from a good long term savings bond or index based mutual fund).   The last time I did this, the pure value of the money alone, without ANY interest was within something like 80 % of the value of the whole life policy.. adding in even a conservative amount of interest turned it into a no brainer. the whole life plan was terrible as in investment vehicle.  I was far far better off using term life and investing the difference. "Individual liberty and freedom are inalienable rights and that is what conservatism was built on. Conservative principles will always stand true. My time and how I choose to spend it is my natural born right. Using my time the way I want is my liberty so long as I am not obstructing another person's same  natural born rights. This is not an opinion. Again, these are what conservatives - not the Mitch McConnell, or Paul Ryan, or other slimy GOP party member types in Congress - believe in. Those crumbs want big government, too. You don't get the hypocrisy with conservative thinking that you get with the progressive (and current day democrat) thinking. Progressives and democrats believe in something called pro-choice. You probably already knew that. You know the ""my body, my choice"" slogan that baby terminators believe in? Well, tell me why that same slogan doesn't hold true when it comes to health care? ""My body, my choice"", am i right?  I think I am done here." Determine an investment strategy and that will likely answer this for you. Different people have different approaches and you need to determine for yourself what buy and sell criteria you want to have. Again, depending on the strategy there can be a wide range here as some may trade index funds though this can backfire in some cases. In others, there can be a lot of buy and hold if one finds an index fund to hold forever which depending on the strategy is possible. Returns can vary widely as an index can be everything from buying gold stocks in Russia to investing in short-term Treasuries as there are many different indices as any given market can have an index which could be stocks, bonds, a combination of the two or something else in some cases so please consider asset allocation, types of accounts, risk tolerance and time horizon in making decisions or consider using a financial planner to assist in drawing up a plan with allocations and how frequently you want to rebalance as my suggestion here. Your 5-8 year time frame is interesting because it is actually a two windows.  When people are savings for retirement, they tell us how many years or decades they have until they reach retirement age. But they also imply that they are planning on spending decades withdrawing the money.  But you wanting the money for a house in 5-8 years are needing the money more like somebody who is saving college money for a teenager. In fact your plan is similar in time frame as a 13 year old has for their college fund; start in 5 years but only have a 4 year spending window. Take the California 529 program: Beneficiary Age 13-14: Beneficiary Age 18+: The funding agreement provides a minimum guaranteed rate of return on the >amounts allocated to it by the Investment Portfolio. The minimum effective >annual interest rate will be neither less than 1% nor greater than 3% at >any time. So you plan of investing 100% in the S&P with your window is way too risky. You should only invest a portion of your down payment in equities, and be prepared to only be in that mode for a few years. Any drop in the market now hurts you, but one just before you need the funds would be devastating. As a 22 year old planning for your financial life, it is obvious to say that saving as much as you can to invest for the long run is the smartest thing to do from a financial point of view.  In general, at this point, aged 22, you can take as much risk as you'll ever will. You're investing for the very long term (+30/+40 years). The downside of risk, the level of uncertainty on returns (positive or negative), is most significant on the short term (<5years). While the upside of risk, assuming you can expect higher returns the more risk you take, are most significant on the long term.  In short: for you're financial life, it's smart to save as much as you can and invest these savings with a lot of risk.  So, what is smart to invest in? The most important rule is to keep your investment costs as low as possible. Risk and returns are strongly related, however investment costs lower the returns, while you keep the risk. Be aware of the investment industry marketing fancy investment products. Most of them leave you with higher costs and lower returns. Research strongly suggests that an lowcost etf portfolio is our best choice. Personally, i disregard this new smart beta hype as a marketing effort from the financial industry. They charge more investment costs (that's a certain) and promise better returns because they are geniuses (hmmm...). No thanks. As suggested in other comments, I would go for an low cost (you shouldn't pay more than 0.2% per year) etf portfolio with a global diversification, with at least 90% in stocks. Actually that is what I've been doing for three years now (I'm 27 years old). "No. I glanced through the article you linked to.  It's quite lengthy, but not compelling. I'd not lose any sleep over this.  Others with far better credentials are making the opposite claim, that life is good and the Dow on its way to 20,000.   Back to this guy - StansberryResearch.com Reviews – Legit or Scam? offers a look at this company. Stansberry calls his company ""one of the largest and most recognized investment research companies in the world"" but references to his firm call it a clearinghouse for other authors newsletters.  Why would you give any more credence to his ranting than any other extreme prognostications?  I suppose if I told you I never heard of him it would be pretty meaningless. I certainly haven't heard of every financial writer. But if he's one of the most recognized, you'd think I might have. Note, I've edited since seeing I was downvoted. But to the question author, you might want to summarize your questions in the future instead of linking to a video or  13,000 word rant. (when you click to shut the video, the text is available.)" "**David F. Swensen**  David F. Swensen (born 1954) is an American investor, endowment fund manager, and philanthropist. He has been the chief investment officer at Yale University since 1985.  Swensen is responsible for managing and investing Yale's endowment assets and investment funds, which total $25.4 billion as of September 2016. He invented The Yale Model with Dean Takahashi, an application of the modern portfolio theory commonly known in the investing world as the ""Endowment Model."" His investing philosophy has been dubbed the ""Swensen Approach"" and is unique in that it stresses allocation of capital in Treasury inflation protection securities, government bonds, real estate funds, emerging market stocks, domestic stocks, and developing world international equities.  ***  ^[ [^PM](https://www.reddit.com/message/compose?to=kittens_from_space) ^| [^Exclude ^me](https://reddit.com/message/compose?to=WikiTextBot&amp;message=Excludeme&amp;subject=Excludeme) ^| [^Exclude ^from ^subreddit](https://np.reddit.com/r/finance/about/banned) ^| [^FAQ ^/ ^Information](https://np.reddit.com/r/WikiTextBot/wiki/index) ^| [^Source](https://github.com/kittenswolf/WikiTextBot)   ^] ^Downvote ^to ^remove ^| ^v0.24"