The Larry Portfolio by Larry Swedroe balances small percentages of risky stocks with large percentages of safe bonds to maximize returns while minimizing risk.
Asset Allocation
- 15% Small Cap Value
- 7.5% Int’l Small Cap Value
- 7.5% Emerging Markets¹
- 70% Intermediate Bonds
Asset Notes
- Swedroe specifically recommends emerging market value. I don’t have data for this asset, so allocated the portion to emerging markets. I anticipate the numbers to be reasonably close, but be sure to read Swedroe’s reasoning for why he chooses the fund he does.
The Portfolio Charts tools use round numbers, so I reallocated the portfolio slightly while preserving the original design intent as closely as possible.
Other Versions
Swedroe seems to have shared a few different versions of the same basic idea over the years. For example, the Swedroe Min Fat Tails Portfolio documented by Meb Faber contains 15% small cap blend, 15% emerging markets, 35% T-Bills, and 35% TIPS.
Local Interpretations
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Author
Overview
Larry Swedroe is one of the more prolific financial authors out there today, and if I had to pick the two topics where he carries the most weight they would be factor investing and risk management. The Larry Portfolio combines those two specialties into a single portfolio that simultaneously increases returns and reduces risk. It accomplishes those goals with very deliberate asset choices built into an intelligent risk management framework.
The Larry Portfolio is discussed in Swedroe’s book Reducing The Risk of Black Swans, which is an educational treatise on how to avoid unexpected catastrophic losses. The basic idea is to mix small percentages of assets with the highest expected returns (but also the highest uncertainty) with large percentages of stable bonds to protect yourself even if the risky assets totally tank. That idea of adjusting asset percentages inversely proportional to their volatility is called “risk parity”. And the Larry Portfolio is a prime example of that sophisticated financial concept distilled into a simple portfolio that anyone can build for themselves.
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Alternatives
Portfolios with a similar structure or design intent
All Seasons Portfolio — Similar portfolio structure to balance volatility risk between assets
Merriman Ultimate — Shares a strong belief in the small and value factors
Permanent Portfolio — Also balances a smaller percentage of stocks with other assets
Performance
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