A Quick Thank You Note
From 100 to 150 in Less Than a Month
Dear Friends,
Less than a month ago, I thanked the first 100 paid subscribers. Today we’re at 150. What strikes me most isn’t just the growth—it’s that you’re actively sharing this with others.
To those 50 of you who’ve joined since my last note: welcome. You’re joining readers who appreciate thoughtful analysis and evidence-based thinking.
And to all of you: thank you for making this sustainable. Thank you for voting with more than your attention.
My original referral offer still stands: If you refer someone who becomes a paid subscriber, just let me know, providing their name and I’ll send you an electronic copy of any of my books. Just message me with your name, email address, and which book you’d like.
Here’s to what we’ll build together and the conversations we will have along the way
With appreciation,
Larry Swedroe
P.S. — I’m always listening. What topics would you like me to tackle? What questions keep you up at night? Hit reply and let me know.
Adam, glad you have enjoyed my work and found helpful
The problem with doing what you ask is there is no right portfolio and each portfolio should be tailored to the individual need, ability and willingness to take risk as well as each person's ability to deal with tracking variance risk and illiquidity risk.
I can suggest that the right way to address portfolio construction is to base the construction on the following principles.
An investment strategy should be based on these three core principles
First, markets are highly, though not perfectly, Efficient. That leads to the conclusion that active management is the loser’s game.
Second, if markets are efficient than you should also believe that all unique sources of risk have similar risk-adjusted returns, not similar returns, but similar risk-adjusted returns.
Third, If all unique sources of risk have similar risk-adjusted returns than Portfolios should be diversified across as many unique/independent sources of risk and return as you can identify that meet the criteria of persistence, pervasiveness, robustness to various definitions, implementability (meaning survives transactions costs) and have intuitive risk- or behavioral-based explanations that provide reasons for believing that the premium should persist in the future. We prefer risk-based explanations because risk cannot be arbitraged away, although popularity, and the resulting cash flows can reduce premiums. However, we are willing to accept behavioral explanations because there are what are called limits to arbitrage. The cost of shorting can be high and the losses are unlimited. In addition, The charters of many institutions prohibit shorting. These limits, as well as the tendency for Human Behavior to remain unchanged, allow anomalies, such as the poor performance of small growth stocks with high investment and low profitability, to persist
The problem is that most people don't understand that a 60/40 traditional portfolio has not 60% of the risk but closer to 90% and there is no logic to that if you believe in the principles I laid out, and especially if don't need liquidity, then one should load up on illiquid assets to earn the very significant illiquidity premium. IMO this is the most underutilized factor.
I hope that is helpful
Larry
Hi Larry,
Thank you for all the great content!
In recent posts, you've invited readers to suggest topics they'd like to see covered. One thing I'd find particularly valuable is a stylized taxable investment portfolio (or a few variations) constructed from the interval and other funds you've recommended. Seeing how you might combine these products in practice would be incredibly helpful.
Thanks again for everything you share!