Portfolio Overview
Comprehensive Overview of the Israelsen 7Twelve Portfolio
1. Background and Philosophy
The Israelsen 7Twelve Portfolio was created by Craig Israelsen, a financial expert and professor at Utah State University. Israelsen designed this portfolio to emphasize broad diversification across multiple asset classes, reducing reliance on any single market segment. The name "7Twelve" refers to the portfolio's original structure of 7 asset classes and 12 sub-asset classes, though the version analyzed here includes 11 asset classes.
The philosophy behind this lazy portfolio is rooted in modern portfolio theory, aiming to balance risk and return by spreading investments across uncorrelated assets. Israelsen advocates for equal-weight allocation (approximately 8.33% per asset class) to avoid overexposure to any single area, which can enhance long-term stability.
2. Asset Allocation Analysis
The portfolio is divided into 11 equally weighted asset classes, each represented by a low-cost ETF:
- U.S. Equities (25% total): Split into large-cap (VV), mid-cap (IJH), and small-cap (VIOO) stocks for domestic market coverage.
- Real Estate (8.33%): REITs (VNQ) provide income and inflation hedging.
- International Stocks (16.66%): Developed markets (VEA) and emerging markets (VWO) for global diversification.
- Commodities & Gold (16.66%): Broad commodities (DBC) and gold (GLD) act as inflation hedges and crisis buffers.
- Fixed Income (16.66%): Total U.S. bonds (BND), inflation-protected bonds (VTIP), and cash (CASH) for stability.
Key Aspects:
- Diversification: The portfolio spans equities, real estate, commodities, and bonds, reducing concentration risk.
- Risk Level: Moderate to aggressive due to significant equity and commodity exposure, but tempered by bonds and cash.
- Pros:
- Resilience across market cycles due to uncorrelated assets.
- Simple, rules-based rebalancing (annually or semi-annually).
- Low-cost ETFs minimize fees.
- Cons:
- Commodities and gold can underperform for extended periods.
- Equal weighting may lag during strong bull markets in a single asset class (e.g., U.S. large caps).
- Higher complexity than simpler 3-fund portfolios.
3. Practical Application for Retirement Accounts
For 401(k) Accounts:
Investors can replicate the 7Twelve Portfolio by mapping available funds to the ETF categories:
- U.S. Stocks: Use S&P 500 index funds for large-cap (VV), mid-cap index funds for IJH, and small-cap index funds for VIOO.
- International Stocks: Choose a developed markets fund (VEA equivalent) and an emerging markets fund (VWO equivalent).
- Bonds: Select a total bond market fund (BND) and a TIPS fund (VTIP). For cash, use a stable value fund or money market option.
- REITs: If unavailable, allocate to a broader U.S. equity fund.
- Commodities/Gold: Rare in 401(k)s; substitute with additional equities or leave as cash.
For IRA Accounts:
Investors have more flexibility to purchase the exact ETFs listed. They can:
- Buy each ETF directly at a brokerage (e.g., Vanguard, Fidelity).
- Rebalance annually to maintain 8.33% allocations.
- Use fractional shares if needed for smaller accounts.
Note: If a 401(k) lacks specific options, prioritize broad asset class coverage (e.g., combine mid/small caps into a single "U.S. extended market" fund). The goal is to approximate the portfolio's diversification, even if exact holdings aren't available.
Asset Allocation
| Symbol | Category/Sector | Target Weight |
|---|---|---|
|
VV Vanguard Large-Cap ETF |
US Equity | 8.37% |
|
IJH iShares Core S&P Mid-Cap ETF |
US Equity | 8.33% |
|
VIOO Vanguard S&P Small-Cap 600 ETF |
US Equity | 8.33% |
|
VNQ Vanguard Real Estate ETF |
Real Estate | 8.33% |
|
VEA Vanguard FTSE Developed Markets ETF |
International Equity | 8.33% |
|
VWO Vanguard FTSE Emerging Markets ETF |
International Equity | 8.33% |
|
DBC Invesco DB Commodity Index Tracking Fund |
Commodities | 8.33% |
|
GLD SPDR Gold Shares |
Commodities | 8.33% |
|
BND Vanguard Total Bond Market ETF |
Fixed Income | 8.33% |
|
CASH CASH |
CASH | 8.33% |
|
VTIP Vanguard Short-Term Inflation-Protected Securities ETF |
Fixed Income | 8.33% |
|
BNDX Vanguard Total International Bond ETF |
Fixed Income | 8.33% |
Historical Performance
AR inception is since 06/04/2013.
| Name | YTD Return | 1Yr AR | 3Yr AR | 5Yr AR | 10Yr AR | 15Yr AR | 20Yr AR | Inception |
|---|---|---|---|---|---|---|---|---|
| Israelsen 7Twelve Portfolio | -0.63% | 7.20% | 3.40% | 9.18% | 5.45% | NA | NA | 5.87% |
| VFINX (VANGUARD 500 INDEX FUND INVESTOR SHARES) | -9.99% | 5.71% | 7.80% | 15.21% | 11.50% | 12.41% | 9.94% | 13.36% |
| VSMGX (VANGUARD LIFESTRATEGY MODERATE GROWTH FUND INVESTOR SHARES) | -2.46% | 6.56% | 4.41% | 7.52% | 5.36% | 6.37% | 5.86% | 6.54% |
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Calculators
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Rolling Returns
From 06/04/2013 to 04/16/2025, the worst annualized return of 3-year rolling returns for Israelsen 7Twelve Portfolio is 0.41%.
From 06/04/2013 to 04/16/2025, the worst annualized return of 5-year rolling returns for Israelsen 7Twelve Portfolio is 1.44%.
From 06/04/2013 to 04/16/2025, the worst annualized return of 10-year rolling returns for Israelsen 7Twelve Portfolio is 4.3%.
Maximum Drawdown
Israelsen 7Twelve Portfolio Maximum Drawdown