Book Summary – The Ivy Portfolio – How To Invest Like The Best Endowments – By Mebane Faber
Donations have an eternal investment perspective. They know how to avoid bear markets and bubble crashes. These gifts use sophisticated investment strategies to limit risk and maximize your returns.
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. Finding out what these donations have done on our own would be a waste of time, money and opportunity. Why not emulate the best? This is what the Yale Endowment has done. If you had 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 given him $ 3 million. These donations know what they are doing.
2. Get rich quick on stocks is not a smart way to do it. In the long run, you will probably lose money. This does not mean that you do not earn money from stocks, but it does mean that you need to get an education. Think about it: we would compete with guys like this who are the best of the best. When you see get rich quick scams on TV, just think of these endowments. These guys are the best of the best and they know who to invest in. 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.
Ivy’s portfolio is packed with a lot of information. This book is not for the faint of heart. They get into pretty deep stuff like math 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% profit just to get revenge. This is the biggest destroyer of wealth.
The Ivy Portfolio – This book gives you some ETFs and mutual funds, as well as creating top asset allocations that emulate endowments. They backtest against historical data to show you what you would have won. This is a powerful thing. Keep in mind that these donations have investment opportunities that small ones do not have, given their size. The Ivy portfolio uses rebalancing and passive management to achieve results. This is doable for the little one.
13F’s: this is a powerful thing. I never knew about this until I read this book. These are powerful tools if you are a value investor with a long-term vision. You can go to the SEC.GOV website and search for 13F. This will show what the best dogs are invested in. So you can see what Warren Buffet owns and buy the same. You can search once a quarter and adjust your portfolio accordingly. This is an excellent strategy. Note: You need to find a good price to buy because you make money from buying and not selling.
The Ivy Portfolio is a pretty intense book on investing, but it describes the two best endowments and how they do it. The good news is that there are a couple of things the small investor can learn from the book. They are asset allocation, rebalancing, and 13F.
I hope this short summary has been helpful to you. The key to any new idea is to incorporate it into your daily routine until it becomes a habit. Habits are formed in just 21 days. One thing you can take away from this book is to emulate the best. If you want to save time and explode your results, emulate the people who have already done it. You can start by researching 13F and see what Warren Buffet, Carl Icahn, and George Soros are investing in.