The Larry Portfolio by Larry Swedroe
The Larry Portfolio is a low-equity, high-factor-tilt portfolio developed by Larry Swedroe, the former Director of Research at Buckingham Strategic Wealth and author of numerous books on evidence-based investing including The Only Guide to a Winning Investment Strategy You'll Ever Need. The portfolio was designed to challenge the conventional wisdom that investors who want strong long-run returns must accept large allocations to equities. Instead, Swedroe argues that a small allocation to the most factor-loaded equity assets — small-cap value stocks in particular — combined with a large allocation to safe bonds can deliver equity-like expected returns with substantially less total portfolio risk.
Investment Philosophy
The Larry Portfolio exploits the documented small-cap value premium: historically, small-cap value stocks have produced significantly higher returns than the broad stock market, albeit with higher volatility. By concentrating the equity sleeve in small-cap value and using a large bond allocation to dampen overall portfolio volatility, the strategy aims to maintain exposure to the highest-expected-return equity segment while keeping total portfolio drawdowns manageable. Swedroe argues this is a more efficient use of risk than holding a large allocation to a plain market-cap-weighted equity index.
Who It's For
This portfolio is suited to investors who are convinced by the evidence for the small-cap value premium and who, perhaps counterintuitively, prefer a large bond allocation as a risk management tool rather than a drag on returns. It requires strong conviction in the factor investing thesis and the patience to endure extended periods when small-cap value underperforms.
Pros
- Concentrates equity exposure in the highest-expected-return equity segment (small-cap value)
- Large bond allocation significantly reduces total portfolio volatility compared to an all-equity factor portfolio
- Grounded in peer-reviewed academic research on the small-cap value premium
Cons
- Small-cap value stocks can underperform broad indices for long periods, potentially testing investor commitment during the very periods when the bond-heavy structure also weighs on returns
- Requires access to low-cost small-cap value index funds, which may not be available in all accounts
- The strategy's logic depends on the persistence of the small-cap value premium, which remains subject to ongoing academic debate
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Target Allocation
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -17.7% | +6.5% | +27.2% |
| 3 Year | -4.4% | +6.2% | +14.0% |
| 5 Year | -0.1% | +6.4% | +11.7% |
| 10 Year | +1.6% | +6.7% | +9.9% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.