Commandment 6: Know The Anatomy Of Investment Performance

This summer I’ve begun pursuing a passion I’ve been curious about for long time now — rock climbing. Specifically, outdoor rock climbing. To me climbing always looked exhilarating and challenging, not to mention visually appealing, and something I’ve had a natural hunger to try. So I joined a club, signed up for every event I could find. I’ve essentially gone all in.

When speaking with peers about my new climbing pursuits, I’m generally met with a curious excitement, as if it’s something they’d like to try — but most tend to think they just aren’t strong enough, especially in the upper body. If you look at me it wouldn’t take long to conclude that I’ve never spent anytime in a gym, it’s just not my thing. That got me thinking about all the misconceptions about rock climbing. 

Alex Honnold, if you haven’t heart, is probably the most celebrated climber in the world. He free solo’s (climbing without any ropes, yes, no ropes… make it to the top or fall) and is the star of the documentary “Free Solo” (10/10 must watch), which won best documentary at this year’s Oscar's. Google tells me he’s around 5'11" and 155 lbs so he’s fairly scrawny. He looks awkward and goofy in photos. He lives out of a van. He’s a vegetarian. Honestly nothing about him at all screams world’s best rock climber. There’s so much more to rock climbing than purely upper body strength, it’s very technical, systematic, using everything available to you.

I couldn’t help but draw parallels to my work in finance. In the investing world, the common perception is you have to find the “next big thing”, the next Amazon or Apple, one company to invest it all and get rich. But just like upper body strength in rock climbing, is that everything there is about it? 


Dr David Swensen has run the most successful endowment fund in the USA, since 1985 — Yale University. Swensen lead the team that averaged a return of 13.5% annualized, consistently outperforming the market and is considered one of the most legendary investors of our time. 

So how does he do it? Although we don’t know all of Swensen’s secrets, he did publish a report about the importance of asset allocation, and how he believes that when judging what investments to buy, when to buy them and how to mix them together, getting the right “mix” accounted for about 90% of your lifetime portfolio performance, whereas “timing” and “selection” accounted for a measly 5% each. 

So what is asset allocation? 

Asset allocation is the breakdown of your portfolio, how much money is allocated towards stocks, real estate, and bonds. This is important because not everyone should have the same asset allocation, and there are factors to consider that determine your designed asset allocation. Those factors include: risk tolerance, goals, and timeline. 

Generally, the longer you have to save towards your goals, the more aggressively you should be investing. I know a lot of people don’t like risk, and trust me, no one wants to lose money. But the truth is down years do happen and when the investment marketplace declines across the board. You’d have to be a very talented portfolio manager to avoid a negative return when everyone else has one, but they are out there (and yes, clients of Haven have access to some of them).

When you have a long time to invest towards your goals, your portfolio should be mostly stocks and real estate, and less so bonds. As you move closer to your goals we want to more your portfolio into more conservative options (less stocks, more bonds), this way we are protecting your portfolio and can have a bond accurate idea of what your portfolio will look like when the assets are needed. 

The reason why this is important is because if you’re investing for a long term goal, but only 10% of your portfolio is allocated to stocks, even if the stocks roar upwards by 20%, you’re overall portfolio is only receiving a 2% return from them. 

If we go back to our food idea (talked about a couple posts back), making sure that we have the right recipe (asset allocation) will make sure we end up with a tasty (suitable) creation in the end. 

At Haven we have a number of portfolio options, through a number of portfolio managers. What this means is we have a lot of options because assessing a situation shouldn’t be an easy as options A, B or C. And don’t worry, it’s not an overwhelming process. We will show and prove to you which of our options is best for you.

If you have any questions about Swensen research, investing in general or learning about how Haven can help you, don’t hesitate to contact us.

Derek Condon 
Financial Advisor 

Josh Olfert