Endowments have an investment outlook of forever. They know how to avoid bear markets and bubble crashes. These endowments use sophisticated investment strategies to limit the risk and maximize their gains.
Why is this important to me? There are two main points that make this book important to you.
1. We need to emulate the best. To figure out what these endowments have done on our own would result in lost time, money and opportunity. Why not emulate the best. Here is what the Yale Endowment has done. If you would have invested $100,000 in 1985, your investment would be worth $4 million today compared to the S&P at $1.5 million, 10-year Government bonds at $950,000. The same amount invested in Harvard’s endowment would have gotten you $3 million. These endowments know what they are doing.
2. Get Rich Quick in stocks is not a smart way to go. Over the long haul you will probably lose money. This does not mean that you will not make money in stocks but it means you need to be educated. Think about it – we would be competing with guys like this who are the best of the best. When you see get rich quick scams on TV just think about these endowments. These guys are the best of the best and they know who how to invest. They beat the S&P by an additional 4% per year with 33% less volatility. Competing with these guys would be like advising your son to drop out of school to play basketball with the goal of becoming the next Michael Jordon.
The Ivy Portfolio is packed with a ton of information. This book is not for the faint of heart. They get into some pretty in depth stuff like mathematical algorithms, portfolio rebalancing, momentum, hedge funds, private equity, active management and passive management.
Rule one is critical. Don’t lose money. Think about this if you invest $1000 dollars and lose 50% of it then you have to make a 100% gain just to get even. This is the biggest destroyer of wealth.
The Ivy Portfolio – This book gives you some ETF’s and mutual funds as well as building core asset allocations that emulate the endowments. They back test with historical data to show you what you would have earned. This is powerful stuff. Please note that these endowments have investment opportunities that the little guys don’t have, given their size. The Ivy Portfolio uses rebalancing and passive management to achieve results. This is doable for the little guy.
13F’s – This is powerful stuff. I never heard of this until I picked up this book. These are powerful tools if you are a value investor with a long term view. You can go to SEC.GOV website and search for 13F’s. This will show what the top dogs are invested in. Thus you can simple see what Warren Buffet owns and buy the same thing. You can search once per quarter and tweak your portfolio accordingly. This is an excellent strategy. Note: You need to figure out a good price to buy in at because you make your money on the buy and not the sell.
The Ivy Portfolio is a pretty intense book on investing but it profiles the two best endowments and how they do it. The good news is there are a couple of things the small investor can learn from the book. They are asset allocation, rebalancing and 13F’s.
I hope you have found this short summary useful. The key to any new idea is to work it into your daily routine until it becomes habit. Habits form in as little as 21 days. One thing you can take away from this book is emulate the best. If you want to save time and explode your results then emulate the people who have already done it. You can start by researching 13F’s and seeing what Warren Buffet, Carl Icahn and George Soros invest in.