Book Summary – The Ivy Portfolio – How To Invest Like The Best Endowments – By Mebane Faber

Endowments have a forever investment perspective. They know how to avoid bear markets and bubble bursts. These environments use sophisticated investment strategies to limit risk and maximize your returns.

Why is this important to me? There are two main points that make this book important to you.

1. We need to emulate the best. Finding out what these crews have done on our own would result in wasted time, money, and opportunity. Why not emulate the best? This is what the Yale Endowment has done. If you had invested $100,000 in 1985, your investment would be worth $4 million today compared to the S&P at $1.5 million, 10-year government bonds at $950,000. The same amount invested in Harvard’s endowment would have netted him $3 million. These places know what they are doing.

2. Getting rich quick in stocks is not a smart way to do it. In the long run, you will probably lose money. This doesn’t mean you won’t make money in stocks, but it does mean you need to be educated. Think about it: we would be competing with guys like this, who are the best of the best. When you see get-rich-quick scams on TV, just think of these endowments. These guys are the best of the best and they know who to invest in. They outperformed the S&P by an additional 4% per year with 33% less volatility. Competing with these guys would be like advising your son to drop out of school to play basketball with the goal of becoming the next Michael Jordan.

The Ivy Portfolio is packed with a ton of information. This book is not for the faint of heart. They get into pretty deep stuff like mathematical algorithms, portfolio rebalancing, momentum, hedge funds, private equity, active management, and passive management.

Rule one is critical. Don’t waste money. Think about it if you invest $1000 dollars and lose 50% then you have to make a 100% profit just to get back. This is the biggest destroyer of wealth.

The Ivy Portfolio – This book walks you through some ETFs and mutual funds, as well as creating basic asset allocations that emulate endowments. They backtest with historical data to show you what you would have earned. This is powerful stuff. Keep in mind that these endowments have investment opportunities that small ones don’t, given their size. The Ivy Portfolio uses rebalancing and passive management to achieve results. This is possible for the little one.

13F’s: This is powerful stuff. I had never heard of this until I picked up this book. These are powerful tools if you are a value investor with a long-term view. You can go to the SEC.GOV website and search for 13F. This will show what the best dogs are invested in. Therefore, you can simply see what Warren Buffet owns and buy the same. You can search once a quarter and adjust your portfolio accordingly. This is an excellent strategy. Note: You must find a good price to buy because you make your money by buying and not by selling.

The Ivy Portfolio is a pretty intense book on investing, but it does describe the two best endowments and how they do it. The good news is that there are a couple of things the little investor can learn from the book. They are asset allocation, rebalancing, and 13F.

I hope you have found this brief summary useful. The key to any new idea is to work it into your daily routine until it becomes a habit. Habits are formed in as little as 21 days. One thing you can take away from this book is to emulate the best. If you want to save time and explode your results, emulate the people who have already done it. You can start by researching 13F and see what Warren Buffet, Carl Icahn and George Soros invest in.

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