7Twelve: A Diversified Investment Portfolio with a Plan

by Craig L. Israelsen

Overview

A proven way to put together a portfolio that enhances performance and reduces risk

Professor Craig Israelsen of Brigham Young University is an important voice in the area of asset allocation. The reason? He keeps things simple. Now, in 7Twelve, he shows you how to do the same, and demonstrates how his approach to investing can help you grow your money as well as protect it.

7Twelve outlines a multi-asset balanced portfolio that is a logical starting point when assembling a portfolio-either as the blueprint for the entire portfolio or as a significant building block. Page by page, he will show you how to create a balanced portfolio utilizing multiple asset classes to enhance performance and reduce risk.

• Discusses how the 7Twelve portfolio includes seven core asset classes and utilizes twelve specific mutual funds or exchange traded funds
• Details the tax efficiency of this specific investment approach
• Shows you how to use the 7Twelve portfolio as a pre-retirement accumulation portfolio or a post-retirement distribution portfolio

If you want to build a well-balanced, multi-asset portfolio, 7Twelve is the book for you.

Product Details

ISBN-13:	9780470605271
Publisher:	Wiley
Publication date:	08/09/2010
Pages:	226
Product dimensions:	6.20(w) x 9.10(h) x 0.80(d)

About the Author

CRAIG L. ISRAELSEN, PhD, is an Associate Professor at Brigham Young University (BYU) in Provo, Utah, where he teaches personal and family finance to over 1,200 students each year. He holds a PhD in family resource management from BYU and received a BS in agribusiness and an MS in agricultural economics from Utah State University. Prior to teaching at BYU, Israelsen was on the faculty of the University of Missouri–Columbia for fourteen years where he taught personal and family finance in the Department of Personal Financial Planning.

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Table of Contents

Foreword xi

Preface xiii

Acknowledgments xvii

Chapter 1 A Recipe for Success 1

The 7Twelve Recipe 2

Salsa Anyone? 4

U.S. Stock 7

Non-U.S. Stock 12

Real Estate 15

Resources 16

U.S. Bonds 19

Non-U.S. Bonds 21

Cash 22

The Complete Recipe 23

Chapter 2 Lining up the Ingredients 29

A Recipe that goes Waaay Back 32

Getting Better and Better 34

Chapter 3 The More Ingredients, the Better 37

Measuring Volatility and Risk 38

Diversification by Design 40

Diversification Requires Depth and Breadth 48

Chapter 4 Growth of Money 53

Why Measure Growth of Money? 54

Expect ups and Downs 56

Chapter 5 Combining Ingredients that Zig and Zag 63

Getting Close to Zero 64

Finding Assets that Play Nicely Together 65

Don't Forget Broad Diversification 68

Quantifying Correlation 73

Chapter 6 Stirring the Mix 79

Rebalancing versus Buy-and -Hold 80

Choosing a Schedule 86

Chapter 7 Adjusting the Secret Sauce 89

The Saving Years and the Spending Years 91

How Portfolio Mechanics Change in the Golden Years 94

Allocation Age versus Chronological Age 96

Life Stage Portfolios 98

Chapter 8 How Long will My Nest Egg Last? 105

Survival of the Fittest 106

Reviewing the Nest Egg Guidelines 113

Chapter 9 Should I Tilt toward Value or Growth? 117

Does it make a Difference? 118

The 7Twelve's Value Bias 125

Chapter 10 Should I Jump in or Let the Pot Simmer? 129

To Stir or not to Stir? 130

The 7Twelve Works Both Ways 133

But if you Still can't Decide . . . 135

Chapter 11 A Better 401(K) 137

Switching the Default 137

Introducing Target Date Funds and Balanced Funds 138

The 7Twelve Portfolio Approach 139

Determining your Lifecycle Phase 144

Mismatch 101 147

Chapter 12 The Problem of Undersaving 151

Chasing Returns is a Loser's Game 152

Add Plenty of Patience, Perspective, and Persistence 156

Chapter 13 Of Stocks, Bonds, and Risk 159

A Tale of Two Time Frames 159

The "Diversification" Premium 166

Chapter 14 Assembling your Portfolio 171

Chapter 15 3 Secrets + 4 Principles = 7Twelve Perfection 181

About the Author 187

Index 189

Editorial Reviews

Craig Israelsen has an interesting idea: Let's leave 1950 behind. The associate professor at Brigham Young University in Utah thinks it's time to include the world outside the United States, among other things, in our investments rather than just talk about it . . . . This is accomplished with what Israelsen dubs the ‘7Twelve Balanced Fund.’ Rather than just domestic stocks and bonds, the new benchmark has seven asset classes. Those asset classes, in turn, are subdivided into a dozen subsets, all held in equal amounts. The payoff is huge. Over the last 10 years, his better balanced index provided a return of 7.52 percent annualized. The Vanguard Balanced Index fund did better than nearly 60 percent of its managed competitors but returned only 2.64 percent over the same period. That 7.52 percent return would have ranked Israelsen's passive index in the top 2 percent of all moderate allocation funds. Indeed, it would have ranked in the top 30 percent of all world allocation funds - funds that do invest in a broader menu of assets . . . . This is no guarantee of investment nirvana, but it's a good start for a new millennium.”—Scott Burns, Syndicated Columnist, Dallas Morning News (March 27, 2010)

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