Review of Unconventional Success: A Fundamental Approach to Personal Investment (Hardcover)

I am a graduate of the Yale School of Management (with a focus in finance) and have been a fan of Swensen's for a long time.Unconventional Success is, in my view, a must read for anyone who has to manage their own retirement assets (which is most people today).

Swensen compellingly makes the case that (a) the vast majority of passively managed funds outperform actively managed funds (after fees), (b) the vast majority of the mutual fund industry allows profit motives to trump their fiduciary duty to investors, and (c) an individual investor's financial assets are best managed by non-profit organizations - i.e., Vanguard or TIAA-CREF.

Swensen lays out six "core" asset classes that should form the basis of an individual investor's portfolio, each of which should comprise between 5% and 30% of the portfolio.Below is the "generic" target portfolio outlined in the book:
1. Domestic Equity (30%)
2. Foreign Developed Market Equity (15%)
3. Emerging Market Equity (5%)
4. Real Estate (20%)
5. U.S. Treasury Bonds (15%)
6. U.S. Treasury Inflation-Protected Securities (15%)

Swensen also discusses "non-core" asset classes and why each should not be a part of an individual investor's portfolio.These "non-core" asset classes include:
1. Domestic Corporate Bonds, 2. High Yield (Junk) Bonds, 3. Tax Exempt (Municipal) Bonds, 4. Asset-backed securities, 5. Foreign Bonds, 6. Hedge Funds, 7. Leveraged Buyouts, and 8. Venture Capital.We spent so much time in business school glorifying these assets that I found the rationale for why they have no place in an individual's portfolio quite useful.

The most valuable lesson in the book for me was the importance of "quarterly, semi-annual, or annual" rebalancing - i.e. selling winners and buying losers to move various asset classes back to long-term targets (taking into account the tax consequences for post-tax accounts).This is a basic lesson, of course, but the reminder was still highly valuable.

The book does have a few shortcomings.The book can be a bit technical and dry at times, especially if the reader has no background in finance.I would have also appreciated more discussion of how non-financial assets (e.g., home equity) and personal liabilities (e.g., student loans, mortgage), should impact portfolio allocation.Overall, however, I think anyone with a 401k or a few thousand dollars to invest will benefit from a thorough reading of this book.




Click Here to see more reviews about: Unconventional Success: A Fundamental Approach to Personal Investment (Hardcover)