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Implementing the Ivy Portfolio With Commission Free ETFs


I’m a big fan of Meb Faber and his investment research. So when my brother asked me how he should go about investing his recently set up Schwab account. I guided him towards using the concepts outlined in Meb’s book The Ivy Portfolio.

I’ve used the strategy to manage my 401(k) investments for years. With the recent expansion of free ETF trading on the major retail brokerage platforms like Schwab, TD Ameritrade, and E-trade. Implementing the ideas outlined in the book has become even easier and more cost efficient.

The basic Ivy portfolio includes 5 asset classes US Equity, International Equity, Fixed Income, Real Estate, and Commodities. With equal weightings of 20% each. The book details how individual investors can use this approach to model the investment strategies of the world’s top endowments at places like Yale and Harvard.

Now individual investors can’t fully replicate these strategies for a variety of reasons the book gets into. Investing this way allows them to at least leverage some of the concepts these institutions employ to manage their assets though. The appendix of the book includes additional, more detailed, approaches to implementing the concepts of the book. Up to 20 assets at a 5% allocation.

Using the appendix I came up with the following allocation for my brother using the commission free ETFs available on Schwab’s Onesource platform. Given he is just starting to invest in the account. I view the commission free component to be a critical aspect for investing with this approach.

Because he doesn’t need to worry about allocating small amounts to each asset class initially. Since there are no transaction costs for purchasing these particular ETFs via Schwab.

Along with Schwab I also compiled a model Ivy Portfolios using ETFs that trade commission free at TD Ameritrade. Click on the images below if you’d like to copy either model for personal use.

 

 

If you decide to try using the Ivy Portfolio concepts to manage your retirement portfolio let me know what you think.

Questions and suggestions for improvements welcome as well!

Steve Miller
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Steve Miller

Is a CFA® Charterholder and founder of DebtMD.com. A site devoted to helping people discern insights into their finances. The CFA designation is globally recognized and attests to a charterholder’s success in a rigorous and comprehensive study program in the field of investment management and research analysis.

Steve recently authored Escaping Student Loan Debt to assist student loan holders with developing and implementing strategies to minimize their repayments.

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Steve Miller
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