Investing Advice

A very interesting article: Keep It Simple, Says Yale’s Top Investor provides a lot of useful advice for the personal investor. David F. Swenson manages investments for the $22.5 billion endownment at Yale. In the last fiscal year, the endownment was up 28 percent. Here is his advice for the personal investor:

What should an individual investor do?
Don’t try anything fancy. Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals.

Swenson also recommends to keep your costs low and invest in index funds or other ETFs (exchange traded funds) instead of investing in individual stocks.

For most people, he recommends a very basic approach: use index funds, exchange-traded funds and other low-cost instruments, and stick to your long-term asset allocation — even when the markets are in tumult.

He also adds that personal investors do not have the time nor resources to beat the market-managers. His final note is a hard one to follow, but I think will reduce a lot of stress and turmoil since I am in for the long term and not day-to-day.

Mr. Swensen says investors should forget market timing entirely. Once an individual sets up a program, it should be rebalanced quarterly or semiannually, he said, “but it should be disciplined.”
When the markets decline, try not to pay attention, he said.... “If you pursue the sensible long-term policy, look at it over a 5- to 10-year period. Don’t look at five months.”