Harry Markowitz’ Portfolio
By Roger Nusbaum, AdvisorShares ETF Strategist
Harry Markowitz was interviewed in Barron’s over the weekend and although it was short, a couple of things stood out. First was this quote;
“Markowitz put one third of his liquid assets into large-cap stocks, one third into an iShares fund tracking small-caps, and one third into an iShares fund tracking emerging markets.”
He had three funds, nice and simple. Then he changed the allocation by replacing the large cap ETF with a half a dozen industrial companies that he believes will benefit from the rebuilding efforts after last year’s hurricane season.
Given that he is known for Modern Portfolio Theory, it’s an oddly narrow bet. He has no fixed income either, he owns two houses and thinks of those as fixed assets and proxies for fixed income.
Markowitz is 90 and not retired, he doesn’t think it would be “fun” to be retired. He has a few different gigs including teaching at UC San Diego, consulting for a few clients and he just started doing some work with hedge fund LongTail Alpha.
First, with regard to a portfolio (formerly) consisting of just three ETFs, isn’t necessarily ideal for everyone, it can of course work, but I don’t think it is ideal, but there is plenty to gain from trying to simplify, even if just a little, your portfolio and maybe more than a little in life.
Simplification can mean different things to different people and while just a couple of funds as a portfolio certainly fits the bill, I think of it more in terms of not trading a lot (this pointed at people who consider themselves investors as opposed to traders).
The portfolio I maintain for clients has several stocks that I have held since I first hung my shingle in 2003 and quite a few more that I have held for most of this decade. Of course, things change for companies and industries but they don’t change as quickly in many instances as stock market television would have you believe when they guess about whether to buy or sell some stock before or after an earnings report.
Once example where change might actually be occurring, I mean serious change, is auto parts retailers. Cars are increasingly becoming computer systems making do-it-yourself repairs increasingly difficult to do. Maybe it is not a death blow but it seems like an obvious threat. Again, just as an example.
As for his not retiring, it’s a good guess that someone so engaged in markets and investing and portfolio theory that they win a Nobel Prize might love the work in a way most of us can’t relate to without a similar level of achievement.
Supporting the idea, here is a link to a Bloomberg article about the financial benefits of delaying retirement. There are also benefits related to emotional and mental wellbeing to not retiring in the traditional sense. This would be contingent on enjoying what you do or figuring a way to transition to something you would like better. Retirement in the traditional sense is giving way, more and more to financial independence and a combo of some portfolio income and some post-retirement active income is a simple path to the outcome.
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