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1 7Twelve® Portfolio Craig L. Israelsen, Ph.D. January 2020 www.7TwelvePortfolio.com 20 slides
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7Twelve® Portfolio
Craig L. Israelsen, Ph.D.January 2020
www.7TwelvePortfolio.com
20 slides
Minimal DiversificationThe S&P 500 Index
Large US Stock
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Two‐Asset Diversification60/40 Portfolio
Large US Stock
US Bonds
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Good Diversification7‐Asset Portfolio
Large US Stock
Developed Non‐US Stock
Real Estate
US Bonds Cash
Commodities
Small CapUS Stock
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Superior Diversification12‐Asset Portfolio
Large US Stock
Developed Non‐US Stock
Real Estate
Natural Resources
US Bonds
Non‐US Bonds Cash
MidcapUS Stock
Emerging Non‐US Stock
CommoditiesInflation Protected Bonds
Small CapUS Stock
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Large US Stock
Developed Non‐US Stock
Real Estate
Natural Resources
US Bonds
Non‐US Bonds Cash
MidcapUS Stock
Emerging Non‐US Stock
CommoditiesInflation Protected Bonds
Small CapUS Stock
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7Twelve®
A Modern Diversified Portfolio
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Equities and Diversifiers: 8 ENGINES65%of Overall Portfolio Allocation
Fixed Income: 4 BRAKES35%of Overall Portfolio Allocation
US Stock Non‐US Stock Real Estate Resources US Bonds Non‐US Bonds Cash
7Twelve®
Large US Stock
Developed Non‐US Stock
Real Estate
Natural Resources
US Bonds
Non‐US Bonds Cash
MidcapUS Stock
Emerging Non‐US Stock
CommoditiesInflation Protected Bonds
Small CapUS Stock
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Building an investment portfolio is like making salsa…we
add different ingredients together.
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Large US Stock 8.33%
Mid Cap US Stock 8.33%
Small US Stock 8.33%
Non‐US Stock 8.33%
Emerging Markets 8.33%Real Estate
8.33%Natural Resources
8.33%
Commodities 8.33%
US Bonds 8.33%
International Bonds 8.33%
TIPS 8.33%
Cash 8.33%
7Twelve®
Equally‐weighted exposure to 12 mutual funds and/or ETFs
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20‐Year Growth of $10,000
18.1 10.9 12.0
20‐Year Standard Deviation
Vanguard 500 Index, $32,292
Vanguard Balanced Index, $32,956
Passive ETF 7Twelve Portfolio, $37,434
January 1, 2000 to December 31, 2019(assuming annual rebalancing)
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Accumulation Portfolio Analysis20‐Year Period from 2000‐2019 with annual rebalancing
Risk Level Asset Allocation Models (Using ETFs or mutual funds)
20‐Year Annualized Return (%)
20‐Year Growth of $10,000
VeryConservative
100% Cash 1.77 14,199
Conservative50% Cash 50% Bonds 3.14 18,562
Moderate60% US Stock
40% Bonds (VBIAX) 6.14 32,956
ModerateDiversified ETF‐Based 7Twelve®
Portfolio6.82 37,434
Aggressive100% US Large Stock (VFIAX) 6.04 32,292
CrazyChasing Last Year’s Best Performing ETF 2.14 15,264
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Retirement Portfolio Survival Test2000‐2019
The Withdrawal Phase During Retirement
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Assumptions5% initial withdrawal rate
3% annual cost of living (COLA) increase in withdrawalAnalysis
Ending Balance After 20 Years as of Dec 31, 2019(January 1, 2000 – December 31, 2019)
7Twelve® Portfolio cannot be evaluated prior to 1998 as someingredients do not have performance history prior to that.
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Retirement Portfolio Survival Analysis20‐Year Period from 2000‐2019
Risk Level Asset Allocation Models 20‐Year
Annualized IRR (%)
Remaining Balance After
20‐Years Starting balance of
$1,000,000Total Withdrawal of
$1,343,520
VeryConservative
100% Cash 1.77 ‐60,480
Conservative50% Cash 50% Bonds 3.47 234,110
Moderate60% US Stock40% Bonds(VBIAX)
4.27 419,708
ModerateDiversified ETF‐Based 7Twelve®
Portfolio6.83 1,299,612
Aggressive100% US Large Stock (VFIAX) ‐1.62 ‐365,099
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A non‐diversified retirement portfolio consisting of 100%
large cap U.S. stock (Vanguard 500 Index, VFIAX)
experienced 3 negative annual returns at the start of the retirement period (2000,
2001, 2002).
Portfolio losses in the early years of a retirement
portfolio are deadly—as shown by the results.
This is precisely why we diversify during retirement.
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Low‐Cost 7Twelve®Models
12‐Asset Class7Twelve® Portfolio(annual rebalancing)
12 Actively Managed
Mutual Funds (Active 7Twelve)
12 ETFs from various fund families(Passive 7Twelve)
12 VanguardMutual Funds
12 Vanguard ETFs
12 Fidelity Mutual funds
12 ETFs available at Schwab
Portfolio AggregateAnnual Expense Ratio
in 20200.70 0.14 0.15 0.09 0.22 0.11
20‐Year Average Annualized Return
(2000‐2019)7.50 6.82 7.18 7.26 7.45 6.90
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For more information about the 7Twelve® Portfolio models in the previous slide:
http://www.7twelveportfolio.com/Downloads/Web7TwelveReport.pdf
Email: [email protected]
Website: www.7TwelvePortfolio.com
Past performance is not a guarantee of future performance.
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US Large cap S&P 500 Index (TR)
US Mid Cap S&P Midcap 400 Index (TR)
US Small Cap S&P Small Cap 600 Index (TR)
Non‐US Developed MSCI EAFE Index NR USD
Emerging MSCI EM Index GR USD
Real Estate S&P Global REIT Index TR USD
Natural Resources S&P North American Natural Resources Index TR
CommoditiesDeutsche Bank Liquid Commodity Optimum Yield
Diversified Commodity Index Total ReturnUS Bonds Barclays US Aggregate Bond Index TR USD
TIPS Barclays U.S. Treasury US TIPS Index TR USD
Non‐US Bonds Barclays Global Treasury Index TR
Cash USTREAS Stat US T‐Bill 90 Day TR
DisclosuresPerformance in the past is not a guarantee of performance in the future.
Raw data source: Steele Mutual Fund ExpertCalculations: Craig Israelsen, Ph.D.
When the performance of the ETF‐based 7Twelve Portfolio is provided, it is using ETFs that generally track the indexes shown below.
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