The Ivy Portfolio
Mebane Faber's endowment-style portfolio — five asset classes in equal 20% weight, modelled on how the Yale and Harvard endowments spread their risk.
The allocation
Five equal slices, no forecasting required. The point isn't to pick winners — it's to own a genuinely diversified spread of stocks, bonds, property and real assets so that whatever leads the next decade, you already hold it.
What is the Ivy Portfolio?
The Ivy Portfolio comes from Mebane Faber's 2009 book The Ivy Portfolio, which studied how the big US university endowments — above all Yale under David Swensen — earned strong, steady returns. Their edge was broad diversification across asset classes plus disciplined rebalancing. Faber distilled that into something an ordinary investor can run with five cheap ETFs, held in equal weight.
The five asset classes
Each 20% sleeve pulls a different lever:
Example ETFs
The classic Ivy uses these US-listed ETFs, all held at 20%. Examples, not recommendations.
| Asset class | Weight | ETF |
|---|---|---|
| US equity (total market) | 20% | VTI |
| World ex-US equity | 20% | VEU |
| US Treasuries (7–10yr) | 20% | IEF |
| Real estate (US REITs) | 20% | VNQ |
| Broad commodities | 20% | DBC |
European investors: these are US-domiciled ETFs that EU retail investors generally can't buy directly (PRIIPs/MiFID rules) and which carry USD/EUR currency risk. Use UCITS equivalents that track the same asset classes.
The timing rule (the original twist)
Faber's book didn't stop at buy-and-hold. Its signature is a simple trend-following overlay: once a month, hold each sleeve only while it's trading above its 10-month moving average (roughly the 200-day average); if it's below, move that sleeve to cash until it recovers. Historically this kept the portfolio out of the worst of major bear markets and cut drawdowns sharply — at the cost of more trades and the occasional whipsaw.
The simpler version most people run — and what st-ox loads — is the static equal-weight mix, rebalanced periodically, without the timing signal.
What to expect
The Ivy Portfolio is more growth-tilted than the defensive all-in-one portfolios. With 60% in stocks, real estate and commodities and only 20% in bonds, st-ox models it at roughly a 6% nominal annual return with about 11% volatility — a rough estimate, not a forecast. Expect higher long-run returns than a bond-heavy mix, and correspondingly bigger swings along the way (which is exactly what the optional timing rule is designed to tame).
Ivy vs the defensive portfolios
If you're comparing all-in-one strategies:
- Ivy — growth-tilted and globally diversified; mostly stocks, property and commodities. Higher expected return, bigger drawdowns.
- All-Weather — risk-balanced with a big long-bond sleeve; smoother, lower return.
- Permanent Portfolio — the most defensive, with a quarter each in cash and gold.
Limitations
- Equal weight is arbitrary. Simple, but not risk-optimised — the commodity sleeve carries very different risk from the bond sleeve.
- Commodity drag. The commodities sleeve can underperform for years and only earns its keep in inflation.
- Buy-and-hold gives up the overlay. Without the 10-month timing rule you take the full drawdowns.
- US-listed. European investors need UCITS equivalents and carry currency risk.
Frequently asked questions
What is the Ivy Portfolio allocation?
What is the Ivy Portfolio timing rule?
How is it different from All-Weather or the Permanent Portfolio?
What are the downsides?
Build the Ivy Portfolio in st-ox
Load the equal-weight five-sleeve allocation into the Rebalance tool, track it with live prices across markets, and project outcomes over any horizon. Free, no ads.
Open st-ox free →For information and educational purposes only. Not investment advice, and not a recommendation to buy or sell any security or to adopt any strategy. Tickers are examples of funds that track each asset class, not endorsements.