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

  • 8.3% Large Cap Blend
  • 8.3% Mid Cap Blend
  • 8.3% Small Cap Blend
  • 8.3% International
  • 8.3% Emerging Markets
  • 25% Intermediate Bonds¹
  • 8.3% Cash
  • 16.6% Commodities²
  • 8.3% REITs

Notes

1) 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.

2) 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.

Performance

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