7Twelve Portfolio

The 7Twelve Portfolio is recommended by Craig Israelsen in his book 7Twelve: A Diversified Investment Portfolio with a Plan.  The name is derived from equally dividing your portfolio between 12 funds in 7 asset categories: domestic stocks, international stocks, real estate, resources, domestic bonds, international bonds, and cash.

Asset Allocation

  • 12.5% Large Cap Blend¹
  • 12.5% Small Cap Blend¹
  • 8.3% International Stocks
  • 8.3% Emerging Markets
  • 17% Intermediate Bonds²
  • 8.3% International Bonds
  • 8.3% Cash
  • 16.6% Commodities³
  • 8.3% REITs

Notes

1. Israelsen specifically recommends equal parts large cap blend, mid cap blend, and small cap blend. The data here simplifies that to half large caps and half small caps. Because most large cap index funds include mid caps and many small cap funds also have more mid caps than you might expect, the results should be very similar. But if you want to follow his recommendation to the letter, you might consider looking for a separate mid-cap fund.

2. Israelsen specifically recommends equal parts nominal bonds and TIPS.  Since I don’t have specific data for TIPS, I allocated this portion to intermediate term bonds.  While this is a pretty good proxy that should model the design intent reasonably well, be sure to read Israelsen’s justifications for why he chooses the bonds he does.

3. He specifically recommends 8.3% commodities and 8.3% natural resources, but good data for natural resources is not available.  Keeping with his theme of having two equal segments in the “resources” category, I allocated the natural resources to the commodities portion.  There’s a decent amount of overlap in commodities and natural resources ETFs, so I anticipate this will not change the results all that much.

4. The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.

Performance

Change the home country to translate the portfolio to local assets, currency, and inflation