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Guidelines for Achieving Broad Portfolio Diversification

The 7Twelve® Portfolio

7Twelve is a multi-asset balanced portfolio developed by Craig L. Israelsen, Ph.D. in 2008. Unlike a traditional two-asset 60/40 balanced fund, the 7Twelve balanced strategy utilizes multiple asset classes to enhance performance and reduce risk.

The 7 of 7Twelve represents the suggested number of asset classes to include in your portfolio. The Twelve represents the 12 separate mutual funds or exchange traded products to fully represent the 7 asset classes in your 7Twelve portfolio. Our portfolio has approximately a 65/35 allocation: approximately 65% of the portfolio is invested in equity and diversifying assets and about 35% invested in bonds and cash.

Building a Better Balanced Fund

Each mutual fund (or "sub-asset") in the 7Twelve strategy is equally weighted, meaning that each fund represents 1/12th of the portfolio. This allocation is maintained by rebalancing the portfolio back to equal portions annually, quarterly or monthly.

7Twelve can represent the "core" of any portfolio. A financial advisor should not be spending time designing a portfolio core for every client. Rather, the advisor should be determining how much of the pre-designed core to utilize for each client and what type of individualized "explore" assets to add around the "core" to best meet the client’s unique needs and circumstances. Using 7Twelve as the core portfolio ingredient can enhance the efficiency of a financial advisor and the portfolio performance for the investor.

The 7Twelve portfolio is a strategic model – meaning that it does not rely on tactical changes. The "core" 7Twelve portfolio is a broadly diversified portfolio with equal allocations to all 12 asset classes all of the time. Additionally, there are "age-based" versions of the 7Twelve model where all 12-asset classes are utilized, but not in equal allocations.

Three suggested articles:

  1. Click here to download "An Introduction to 7Twelve."
  2. Click here to download “Asset Allocation Risk & Return Spectrum.”
  3. Click here to download an article about sensible performance benchmarking.
   
What Is 7Twelve?
7Twelve Model
7Twelve Performance
The Rationale
Historical Performance

Popular Documents
Purchase 7Twelve Report
The 7Twelve Portfolio: An Introduction
7Twelve Performance Update
Join 7Twelve Partners
7Twelve Portfolio Available at Motif Investing
Survival Test," Financial Planning, February 2013
7Twelve Presentation at the University of Missouri
Allocation Changes in Age-Based 7Twelve Models
Go, Portfolio. Go!
7Twelve 2014 Conference, October 9-10, 2014
Three Essential Points for Young Investors
Building a Better Balanced Fund
7Twelve: The Core of “Core and Explore”
Asset Allocation Risk and Return Spectrum
7Twelve vs. Balanced Funds
"Building a Better Nest Egg" by Christopher M. Wright, Real Estate Investment Today, May/June 2011.