Book Summary – The Ivy Portfolio – How to Invest Like the Top Foundations – By Mebane Faber

Foundations have an eternal investment perspective. They know how to avoid bear markets and bubble crashes. These foundations use sophisticated investment strategies to limit risk and maximize their returns.

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

1. We must emulate the best. Just finding out what these foundations have done would result in lost time, money and opportunity. Why not emulate the best. Here’s what the Yale Foundation did. If you had invested $100,000 in 1985, your investment would be worth $4 million today, compared to the S&P’s $1.5 million and 10-year Treasuries’ $950,000. The same amount invested in Harvard’s endowment would have brought you $3 million. These foundations know what they are doing.

2. Getting rich quick from stocks isn’t a smart way to go. You will likely lose money in the long run. That doesn’t mean you won’t make money from stocks, but it does mean you need to get educated. Think about it – we’d be competing with those guys who are the cream of the crop. When you see get-rich-quick schemes on TV, just think of these foundations. These guys are the best of the best and they know how to invest. They beat the S&P by another 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 aim of becoming the next Michael Jordon.

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

Rule one is critical. Don’t lose money. Think about it, if you invest $1000 and lose 50% of it, you need to make a 100% profit just to break even. This is the biggest wealth destroyer.

The Ivy Portfolio – This book gives you some ETFs and mutual funds and how to build core asset allocations that mimic the endowments. They test with historical data to show you what you would have earned. This is powerful stuff. Please note that these foundations offer investment opportunities that the little guys don’t have due to their size. The Ivy portfolio uses rebalancing and passive management to deliver results. This is doable for the little man.

13F’s – This is strong stuff. I had never heard of this until I picked up this book. These are powerful tools if you’re a long-term value investor. You can go to the SEC.GOV website and search for 13Fs. This shows what the top dogs are invested in. So you can easily see what Warren Buffet owns and buy the same thing. You can search once per quarter and optimize your portfolio accordingly. This is an excellent strategy. Note: You need to find a good price to get you started as you make your money by buying, not selling.

The Ivy Portfolio is a pretty intense book on investing, but it does cover the two best foundations and how they do it. The good news is that there are a few things the retail investor can learn from the book. They are Asset Allocation, Rebalancing and 13F’s.

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