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.

 

7twelve-portfolio

Asset Allocation

Stocks

Domestic

  • 8.3% Large Cap Blend
  • 8.3% Mid Cap Blend ¹
  • 8.3% Small Cap Blend ¹

International

  • 8.3% World Total Stock Market ²
  • 8.3% Emerging Markets

Bonds

  • 25% Intermediate Term Bonds 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.