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
Stocks
- 8.3% Domestic Large Cap Blend
- 8.3% Domestic Mid Cap Blend ¹
- 8.3% Domestic Small Cap Blend ¹
- 8.3% World Total Stock Market ²
- 8.3% Emerging Market TSM
Bonds
- 25% Intermediate Term ³
- 8.3% Tbills/Cash
Real Assets
- 16.6% Commodities ⁴
- 8.3% REITs ⁵
Notes
1) Countries other than the United States are modeled with local regional data instead of pure domestic data for these assets. CAN uses USA funds, while GER & UK use EUR funds.
2) The calculations assume that US investors use a World Ex-US fund while investors living in other countries use a World fund including the US.
3) Israelsen specifically recommends equal parts Domestic Bonds, International Bonds, and TIPS. Since I don’t have specific data for every asset, 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.
4) 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.
5) The data is based on USA REITs, but a broad global REIT fund is also a reasonably close alternative if no US fund is available.
Performance
Change the domestic market to translate the portfolio to different home countries
