7Twelve Portfolio

The 7Twelve Portfolio was developed by Craig Israelsen, a finance professor at Utah Valley University, and introduced in his book 7Twelve: A Diversified Investment Portfolio with a Plan, published in 2010. The name refers to the portfolio's structure: 7 core asset categories divided into 12 equally weighted sub-components. The twelve funds span US equities, non-US equities, real estate, resources, commodities, and bonds — providing one of the broadest buy-and-hold diversification frameworks among commonly cited model portfolios.

Investment Philosophy

Israelsen's philosophy holds that genuine diversification requires exposure not just to stocks and bonds but to a wide range of asset categories that behave differently across economic cycles. By equally weighting twelve sub-components across seven broad categories, the portfolio avoids concentration in any single return driver and ensures that the assets with the best future performance — whatever they turn out to be — will have meaningful representation in the portfolio. The equal weighting is intentional: it removes the need to forecast which asset class will outperform.

Who It's For

The 7Twelve is appropriate for investors who want comprehensive multi-asset class diversification in a simple, rules-based buy-and-hold framework. It suits those who are comfortable holding assets like commodities and natural resources that are absent from most conventional stock-and-bond portfolios, and who are willing to accept underperformance relative to pure equity portfolios during strong equity bull markets.

Pros

• Exceptional breadth: twelve distinct funds spanning seven asset categories
• Equal weighting provides automatic rebalancing toward underperforming assets and away from outperforming ones
• Designed to participate meaningfully in a wide range of economic environments

Cons

• Equal weighting of twelve funds includes historically lower-returning assets such as commodities, which can drag on long-run returns
• Requires rebalancing across twelve funds, which adds complexity and potential transaction costs
• In strong equity bull markets, the diversification into non-equity asset classes will cause the portfolio to lag plain stock indices significantly

Technical Notes

Israelsen recommends annual rebalancing. The portfolio can be adjusted for different risk tolerances by increasing or decreasing the bond allocation relative to the equity and real asset components.