David F. Swensen Quotes

“From a portfolio perspective, liabilities act like negative assets. In other words, borrowing by an individual offsets lending (ownership of bond or money-market funds) by that individual.”

“If an individual owns a small business, the equity-oriented nature of the private holding argues for a lower equity position in the investor’s financial holdings. Investors benefit from taking the broadest view of their financial circumstances.”

“In fact, wealth-maximizing individuals compare the after-tax costs of debt with the after-tax returns from bonds, liquidating bond positions to pay off loans when the costs of debt exceed the returns from bonds. Rational investors consider liability positions when making asset allocations.”

“Six asset classes provide exposure to well-defined investment attributes. Investors expect equity-like returns from domestic equities, foreign developed market equities, and emerging market equities. Conventional domestic fixed-income and inflation-indexed securities provide diversification, albeit at the cost of expected returns that fall below those anticipated from equity investments. Exposure to real estate contributes diversification to the portfolio with lower opportunity costs than fixed-income investments.”

“Supremely rational investors take the further step of acting against consensus, rebalancing to long-term portfolio targets by buying the out-of-favor and selling the in-vogue.”

“The mutual-fund industry sits at the center of a massive market failure. The asymmetry between sophisticated institutional providers of investment management services and unsophisticated individual consumers results in a monumental transfer of wealth from individual to institution.”

“Thoughtful investors build investment programs on a fundamental understanding of the reasons for pursuing a nonconventional approach.”

“When you look at the results on an after-fee, after-tax basis, over reasonably long periods of time, there's almost no chance that you end up beating the index fund.”