Andrew Craig

Revealed: Harvard University’s failsafe investment strategy

How to play the markets the Ivy League way – by investing worldwide

With the Dow Jones scaling new heights, and other markets not far behind, investors face a dilemma. Is this a time to buy? Or, for those who have suddenly found themselves sitting on a profit for the first time in a decade, is it time to sell? This is the question that faces most investors in good times and bad, but in 2013 the anxiety seems particularly acute. Many have been burned so badly in recent years that they have given up, preferring to keep their cash in bank accounts. But in the era of negative real interest rates, even this is dangerous.

In 1981 the investment analyst Harry Browne introduced the world to his ‘Permanent Portfolio’. His idea was very simple: if you own well-distributed assets, you should always have something that performs. Mr Browne’s portfolio was broken evenly four ways between stocks, cash, gold and long-term treasury bonds. Since 1972, his portfolio has returned more than 10 per cent a year, with impressively low volatility. Over the past 15 years it has produced twice the return of the S&P500 and beaten Warren Buffett — by some margin.

A number of other smart investors have embraced the same basic approach — and foremost amongst these stand the multibillion-dollar endowment funds of Harvard and Yale universities. Over the last 16 years they have produced an average return of 13 per cent and 14 per cent respectively — even including the effect of the crash, when they lost (but soon recovered) a quarter of their value. Jack Meyer, who ran the Harvard Fund from 1990 to 2005, described his approach. ‘The most powerful tool an investor has working for him is diversification,’ he said. ‘True diversification allows you to build portfolios with higher returns for the same risk.’

Already a subscriber? Log in

Keep reading with a free trial

Subscribe and get your first month of online and app access for free. After that it’s just £1 a week.

There’s no commitment, you can cancel any time.

Or

Unlock more articles

REGISTER

Comments

Don't miss out

Join the conversation with other Spectator readers. Subscribe to leave a comment.

Already a subscriber? Log in