156 of 163 people found the following review helpful
on March 30, 2009
Format: Kindle Edition
Most investment books are disappointments because of one or more of these characteristics: inflated (would have been a good magazine or journal article, but doesn't deserve a book); obscure because information is withheld (in order to sell a newsletter, software, or service); obscure because it is poorly written; subjective (not data driven); or just plain wrong.
The Ivy Portfolio has none of those problems. "Not bad" isn't the same as good, but this book is good. It is full of ideas and useful information; the disclosure is extensive, allowing reproducible results; it is well written; it is data driven; it is right based on the historical evidence, and I think the recommendations will prove to be robust.
Under the theme of learning best practices from the most successful investors, Ivy has not one but three big ideas: do what the "super endowments" do (diversify into additional asset classes); employ systematic timing to reduce risk; follow the best investment managers. A non-professional (but responsible) investor will understand how to do these things after reading Ivy, and I believe will do much better than buy-and-hold management (or in practice, "winging it"). It won't take much time or special resources to manage an Ivy Portfolio. The companion website, [...] should be a good adjunct.
Any concerns? I suggest that more discussion about pitfalls in choosing ETFs to implement the less familiar asset classes would be good. More importantly, the underlying idea is patterned after endowments and hedge funds. The typical individual investor has a time horizon and risk profile driven by the life cycle: accumulation, transition, decumulation (systematic withdrawal to provide retirement income). Individuals benefit from investment volatility early in their savings career, yet volatility is treacherous for retirees, particularly in the early years of retirement. Endowments don't die. Addressing possible mismatches between management based on institutional models and the individual's situation would be helpful. Academics and quants might look for discussion of the statistical significance of the findings here, but I am satisfied with the case the authors make for the economic significance of their ideas.
Bottom line: a curious or thoughtful investor will find this book well worthwhile.
66 of 70 people found the following review helpful
on March 30, 2009
Format: HardcoverVerified Purchase
I have been utilizing the author's Simple Ivy Portfolio Timing Model since early 2007 in several investment accounts and have been very happy with the results during this bear market.
Don't be misled by the title. There have been a number of books written in the past few years on the subject of successful endowment fund managers and the use of alternative asset classes (most not available to the small investor). While there is a very good discussion of the Harvard and Yale Endowment Funds, the heart of this book is a well laid out step by step explanation of several methods for improving returns and managing risk that are easy to follow and implement with a discount brokerage account. While some of the information is available on the "World Beta" web site, the book is a much easier and complete way to set about using the models and strategies.
Among other useful features I appreciate in a "how to" book that this book contains is a bullet point summary at the end of each chapter.
109 of 120 people found the following review helpful
on May 20, 2009
Format: HardcoverVerified Purchase
An excellent book overall. It encourages investor to look beyond the general stock and bond portfolios and to consider real estate and commodity as assets classes in their portfolios. The recommended approaches are highly actionable. The methods worked well so far into 2009.
Here are lists of minor complaints:
* It assumes that investors have a good knowledge about various ETF's, which may not be the case. It does not shows the holdings in VEU (FTSE All Word ex US ETF), which contain Nestle, BP PLC, Total SA, HSBC and Novartis etc. It does not show the composition of DBC (PowerShares DB Commodity Track) which contains 34% WTI crude oil, 17% gold, 17% heating oil, 14% wheat, 13% corn and 11% aluminium.
* Some of the recommended ETF's are very thinly traded. There are better alternative vehicles. For example, it recommends EWX (SPDR S&P Emerging Markets Small Cap) for emerging market small cap. EWX is trading about 7,000 shares a day and only has $7 million of assets. A better alternative is DGS (WisdomTree Emerging Markets Small Cap Div) which is trading around 22,000 shares a day and has $52 million in assets.
* 10 month moving average is not easy for average investor to obtain. A readily available alternative is 200 day moving average. 200 trading days equate to 9 months and 1 week. The information is available on Yahoo Finance Chart.
38 of 39 people found the following review helpful
on July 8, 2009
Mebane Faber has published an eminently readable book with two sections, one dated and weak, one so useful as to make the first irrelevant.
The first section, which is really the discussion of University Endowment success, feels dated. We've been hearing about Harvard, Stanford and Yale suffering losses, budget cuts, and Harvard even went through a cash crunch. I feel the section doesn't sufficiently address liquidity problems and the risks of lost capital.
The second section is fantastic. It puts forward a portfolio that is mechanically trivial to replicate for an individual investor. His website has a detailed FAQ section, and he is even responsive via e-mail. The thing that struck me is that this section puts forward a model that's excellent at protecting against downside risk (which is often what makes investors leave markets at bottoms). The model is also extremely liquid, with very easy entry and exit. Its interesting that this should be called the "Ivy Portfolio" given significant drawdowns and liquidity problems within the actual "Ivys".
21 of 21 people found the following review helpful
on August 7, 2009
Format: HardcoverVerified Purchase
The subtitle to The Ivy Portfolio is "How to Invest Like the Top Endowments and Avoid Bear Markets." In my opinion this book delivers on that promise. That is saying a lot.
I have read many investment books that present great strategies that have been exhaustively researched, outlined in detailed, academically vetted, but are totally useless because they are too complicated, too expensive, or impractical for the ordinary investor to follow. This book is not one of those. For example, in the first part of this book the authors detail how top endowments, like Harvard and Yale's endowments invest their billions. I have read about those strategies before, but other authors conclude that those endowments have access to managers or investment opportunities that the ordinary investor doesn't. So don't waste your time, you can't duplicate it. It leaves you hanging -- in awe of their great investment returns, but assured that they are out of reach. Faber and Richardson don't do that. While acknowledging the special circumstances multi-billion dollar endowments enjoy, they do suggest ways that an investor without billions can emulate the strategies the top endowments employ. They even name the specific Exchange Traded Funds that can be used to follow the endowments strategies. That is very convenient, practical and helpful.
The second part of the book deals with a Tactical Asset Allocation strategy. Again I have read about many timing strategies that have a high failure rate, or require you to be glued to your computer's display to make them work. I don't want to be a day trader. The authors outline a timing strategy that only requires once a month observations -- practical for the investor who already has a full time job, or an otherwise busy life. It is a strategy that they have thoroughly backtested to show that it has improved historical portfolio returns. But more importantly, their strategy significantly reduces a portfolio's volatility. It is summed up in the book's chapter on "Winning by Not Losing." For the critics who may claim that the author's strategy was just data mining -- remember that Faber's original white paper was written in 2006 before the 2007-2009 bear market. If you had been following the timing strategy, you would have avoided a significant part of the market decline over the last two years.
I highly recommend this book, not only for what you can learn, but for presenting a roadmap you can actually follow.
22 of 23 people found the following review helpful
on July 1, 2009
Unfortunately The Ivy Method was published shortly before Yale, Harvard, et al, announced that their endowment returns for the 12 months ending June 30, 2009 will be down 30-35%, causing drastic financial cutbacks in those hallowed ivy covered halls of knowledge. That's about the same decline as the overall S&P 500 fell in the same period. Hardly bear-proof results.
Nevertheless the concepts in this book make a lot of sense.
Based on articles on this topic that came out before this book was published as well as a careful perusal of several years of Harvard Corporation annual reports, I became an acolyte of what is commonly called (unfortunately in my opinion) the Ivy League investment method. The core of this method is a broader definition of asset classes that expands beyond basic stocks and bonds to include other asset categories such as timberlands, commodities, etc. And - very importantly - it invests a more equal weighting among the categories instead of being so heavily concentrated in common stocks as most conventional sources recommend. Personally I've developed seven categories/subcategories and am moving toward a relatively equal division of funds among them.
Where the Wizards of Smart at Harvard, Yale, etc., went afoul, in my view, is they 1) used their Ivy League connections and to get into illiquid investment vehicles - private equity, hedge funds and direct ownership of timberlands - that they couldn't unwind last year without locking in large losses, 2) leveraged some of their investments to enhance returns (what could possibly go wrong with that?) and 3) kept a relatively tiny portion of their assets in dull old bonds (too common for the Ivy League wizards I guess) despite their institutions' need for large annual draws. The result when the big bad bear came wandering through Harvard Square? Not pretty. And by the way, Yale's and Harvard's stellar track records in prior years are somewhat questionable since their returns in those privately held (i.e., not publicly traded) assets are self reported.
But none of this negates the need for investors to become more creative in asset allocation strategies as The Ivy Method recommends. My results the past year from applying concepts this book suggests while using easily bought and sold mutual funds, ETFs, etc. similar to the ones The Ivy Portfolio recommends have been quite favorable.
The Ivy Portfolio is a good starting point for serious self-managing long term investors to learn to think beyond the conventional 60/40 stock/bond buy-and-hold investment method that was crushed the past 18 months.
I agree with another 4-star reviewer's criticism that some of the investment vehicles (e.g. specific ETFs) recommended by the authors are questionable. Therefore read this book for concepts and strategy but do your own - careful - research using more comprehensive fund and ETF data from a resource like Morningstar to decide which specific assets to purchase.
13 of 13 people found the following review helpful
on August 3, 2009
Format: HardcoverVerified Purchase
I live off my investment returns - no W-2 income for > 5 years. I've bought several dozen books on various types of investing.
This is a REALLY GOOD and PRACTICAL book on how to construct a portfolio of low cost securities that appears to really work both in good times and bad. Mr. Faber backs up his assertions with 40 years of back-tested returns. Many of the books I've read contain no useful information for an individual retail investor.
There are many portfolios constructed of ETF's that re-balance periodically(see Paul Farrell at MarketWatch for example), taking money from the winning investments and putting it into the losers. The problem with this method is if all of the supposedly non-correlated sectors sudenly become correlated - like in the last year or two - what then???
Well you take $$ out of a losing investment and put it into another losing investment !
Author Faber successfully addresses this problem by BOTH rebalancing AND switching declining investments to cash under control of a simple technical indicator.
This is a VERY GOOD book with lots of practical information an individual retail investor can use.
10 of 10 people found the following review helpful
on March 29, 2011
Format: HardcoverVerified Purchase
Can a small-time, independent, retail trader, such as yours truly, invest like the renowned Harvard and Yale endowments? The answer, according to Faber and Richardson, is a resounding "Yes." Can I really avoid Bear Markets? Again, the answer, still echoing from the previous question, is "Yes." Momentum works.
Rather than simply read the book and write a review, I decided to back-test the Ivy Portfolio and report my findings. I was so pleased with the results of my back-tests, that I adopted the strategy for use with my own savings funds.
What is momentum investing? "Buy high, sell higher." Momentum investing flies in the face of the old Wall Street adage, "Buy low, sell high." Momentum trading works because inefficiencies persist in the market and can be exploited.
What does the Ivy Portfolio consist of? At a minimum, the Ivy Portfolio invests in five asset classes: domestic stocks, foreign stocks, bonds, real estate, and commodities. It is possible to create the Ivy Portfolio with Exchange Traded Funds (ETFs), using but one ETF per asset class: Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), Vanguard Total Bond Market ETF (BND), Vanguard REIT Index ETF (VNQ), and PowerShares DB Commodity Index Tracking (DBC).
Incidentally, in addition to the five asset classes mentioned above, the big endowments invest in two relatively illiquid asset classes that small-time traders like me cannot touch: private equity (venture capital and buyouts) and hedge funds. Not to worry. Small-time traders like me have access to great performing funds that big endowments can't touch. I'm reminded of Warren Buffett's lament, something to the effect, that he could make more money percentage-wise with $100,000 than he could with $1 million or $1 billion.
Ivy Portfolio, the book, is the outgrowth of a paper ("A Quantitative Approach to Tactical Asset Allocation") published by Faber in 2007 in The Journal of Wealth Management. The book, like the paper, promotes Faber's favorite momentum strategy, namely, trend following. A second momentum strategy -- risk adjusted relative strength -- is briefly introduced but not developed in the book. This is my favorite momentum strategy. It is given expanded treatment in a subsequent research paper entitled "Relative Strength Strategies for Investing" (April 2010) by Mebane T. Faber.
How well does the Ivy Portfolio match the performance of the big endowments? This question is complicated by the fact that Faber's book was published in 2009 with historical data extending only through 2008. On the other hand, the historical databases for VTI, VEU, BND, VNQ, and DBC go back just through 2007. Therefore, I can merely compare the performance of the Harvard and Yale endowments with the Ivy Portfolio for the years 2007 and 2008. To our benefit, 2007 was a Bull Market year while 2008 was a Bear Market year. The 2007 annual returns for Harvard, Yale, and Ivy were 23.0%, 28.0%, and 29.5% respectively. The 2008 annual returns were 8.6%, 4.5%, and 36.3%. The Ivy Portfolio was the winner in both years, outstandingly so in the 2008 Bear Market year. Ivy also boasted higher Sharpe ratios and lower drawdowns than the big endowments, making for an outstanding risk to reward ratio. Note: I did the Ivy Portfolio back-tests with the relative strength, risk adjusted, momentum based application made available by ETF Replay. I rotated 100% of my funds into the top-1 asset class at the end of each month. Besides outperforming the big endowments, my Ivy Portfolio also outperformed Faber's trend following strategy that potentially bought and held all five asset classes at once, allocating 20% of the funds in the portfolio to each asset class.
About The Ivy Portfolio Authors: Mebane T. Faber is a popular speaker and writer who has worked as an equity analyst, a quantitative research analyst, and more recently as the Portfolio Manager at Cambria Investment Management. He operates several popular websites, one of which is directly involved with keeping the contents of this book up-to-date. Eric W. Richardson is the founder and CEO of Cambria Investment Management.
9 of 9 people found the following review helpful
on September 4, 2011
full discretion: I work for a major wirehouse as a financial advisor. Take my advice as you wish.
Faber makes a strong case for a trend-following strategy in order to mitigate risk (while simultaneously improving returns). I found this book particularly enlightening, perhaps in part because of my own investing bias. I am a strong believer in passive investing (I see the data firsthand and I can tell you that active managers 1) overcharge, and 2) underperform the indices over time).
What Faber presents is a system that bridges the passive investment strategy and tactical asset allocation gap. Fundamentally, it makes excellent sense to invest in a well-diversified portfolio of hundreds - if not thousands - of stocks. Technically, there are times when severe losses can cause irreparable damage to particular investors. By combining a well-diversified, passive portfolio with a proven, technical timing strategy, one that takes the subjective out of the picture and can shut off the 24 hr news cycle, investors can reap significant gains over time with bond-like risk.
If you're at all interested in the book, I would begin with his whitepaper "A quantitative approach to tactical asset allocation." Google it. If you are intrigued, buy the book.
12 of 13 people found the following review helpful
on April 24, 2009
I've read many investment books over the years, and while many are good, they often suffer from a lack of practical advice, or rely on cherry-picked situations to make a point. The Ivy Portfolio is neither; it provides useful advice that you can implement tomorrow. It is incredibly well annotated, with a detailed bibliography and footnotes and excellent quotes. Numerous charts from Ned Davis Research show the various equity curves and return figures. The accompanying website provides current updates.
The authors provide a clear, useful strategy to reduce volatility in your portfolio and earn reasonable returns. There is no black box here, everything is fully disclosed in simple to understand terms. Get the book! Even if you don't choose to implement the strategy, you will have a much better understanding of the alternatives to buy and hold. Simply reading Chapter 9, the shortest chapter, can change your investing life.