The Experts

The System has been revealed in studies and recommendations from some of the world's most prominent finance professors, authors and investors. See more expert quotes here.

David Swensen, Chief Investment Officer, Yale University

Since 1985, Mr. Swensen has been responsible for managing and investing Yale's endowment assets and investment funds, which total about $22 billion. Realizing an annual return of more than 17.2 percent on his investments over the last ten years, Swensen has added more than $16 billion to Yale's coffers. According to an analysis by investment fund research firm Morningstar, Mr. Swensen's performance tops 99% of U.S.-based mutual funds. Mr. Swensen's book "Unconventional Success: A Fundamental Approach to Personal Investment," promotes the core basis of The System.

How Swensen's advice relates to The System Investors should hold six asset classes: U.S. stocks, foreign developed-market stocks, emerging market stocks, U.S. government bonds, inflation-indexed bonds, and real estate. Once investors have set their target asset allocations, they should rebalance their portfolios regularly to stay close to the targets. Rebalancing forces investors to act against the crowd by selling asset classes that are doing well and buying those that are doing poorly. Few individual investors have the time or resources to pick stocks. "Individuals who attempt to compete with resource-rich money management organizations simply provide fodder for large institutional cannon," he writes. Well-constructed indexes from non-profit fund companies like Vanguard are the best way for most investors to own index funds.