Books by author: David F. Swensen

As my retirement nest egg has increased in size, I've grown more concerned about the way that the money is invested. I've been drawn to the Bogle-esque and "Random Walk" focus on index funds, but I've been looking for guidance about which indices to pick and what constitutes appropriate diversification. Swensen's book holds the best answers I've seen to date.

Over the next couple of months, I am going to restructure my retirement investments to be fully invested in index funds and ETFs in six core asset classes: domestic equity, foreign equity, emerging market equity, real estate, T-bonds, and TIPs. I will pick target percentages that are close to the example portfolio given by Swensen, and I will rebalance at least quarterly to adapt to changes in the market. I'll primarily invest in funds offered by Vanguard (except in my 401k, where I have horrible mutual funds to choose from...there, I'll find the least evil and make up for it in my Roth IRAs).

And for the first time, I'll know what to do when bad things like market crashes happen. And I'll have confidence that I can meet my retirement goals.

Unconventional Success is a terrific book, but it's not an easy read. I suspect that many readers would be overwhelmed by Swensen's dense prose and the complexity of the financial discussions. I understood enough to find myself agreeing with the basic points. Five stars for content, three for the writing.

Update:

As of January, 2011, I have been following the strategies in this book for nearly four years, and all of my investments now follow Swensen's asset-allocation plan. I find that I need to rebalance roughly twice a year (I only make trades greater than $2000 in value), so my trading costs have been very low, and on average my portfolio has outperformed the S&P 500 by 3.5% per year (almost 15% total over the four years), through some of the worst market volatility in my lifetime. And the best part is that it only takes about 10 minutes a week to keep up with it.