About Strategy
A growth-focused portfolio inspired by Larry Swedroe's philosophy. Tilts heavily toward equities (75%) with a small-cap value emphasis, paired with 25% short-term bonds for stability.
Performance Metrics (2016-2026)
| CAGR (10-Year) | 9.1% |
| Max Drawdown | -24.5% |
| Sharpe Ratio | 0.52 |
| Volatility (StdDev) | 12.2% |
| Best Year | +28.9% |
| Worst Year | -19.8% |
| Strategy Type | Passive Portfolio |
| Risk Profile | Medium |
Asset Allocation
The Larry Portfolio allocates 75% to equities with a deliberate tilt toward small-cap value stocks, and 25% to short-term bonds for stability: 25% US Small-Cap Value (VBR), 25% International Small-Cap Value (VSS), 25% US Total Market (VTI), and 25% Short-Term Bonds (BSV).
Execution Rules
- Allocate 25% each to: US Small-Cap Value (VBR), International Small-Cap (VSS), US Total Market (VTI), and Short-Term Bonds (BSV).
- Rebalance annually to restore original weights.
- The small-cap value overweight captures the Fama-French size and value premiums — the strongest factors in asset pricing.
ETF Proxies Used in Our Backtest
- Vanguard Small-Cap Value ETF (VBR) — 25% US small-cap value factor
- Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) — 25% international small-cap
- Vanguard Total Stock Market ETF (VTI) — 25% broad US market
- Vanguard Short-Term Bond ETF (BSV) — 25% low-duration bonds
Allocation Calculator
Recommended Allocation
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History & Background of the Larry Portfolio
Larry Swedroe is one of the most influential voices in evidence-based investing. As Chief Research Officer at Buckingham Strategic Wealth and author of numerous books including "Your Complete Guide to Factor-Based Investing" (2016) and "The Only Guide to a Winning Investment Strategy You'll Ever Need," Swedroe has championed a data-driven approach that prioritizes factor exposure over market timing.
Swedroe's investment philosophy is built on the Fama-French three-factor model (later expanded to five factors), which demonstrated that small-cap stocks and value stocks systematically outperform large-cap growth stocks over long periods. Rather than trying to beat the market through stock picking or market timing, the Larry Portfolio captures these factor premiums through broad index funds.
The portfolio's 75/25 equity/bond split reflects Swedroe's view that investors should take risk where it is compensated (equities, especially small-cap value) and keep their safe assets truly safe (short-term bonds with minimal interest rate risk). This "barbell" approach — aggressive on the equity side, conservative on the bond side — is a hallmark of Swedroe's advice.
When to Use Larry Portfolio: Pros & Cons
Strengths
- Captures well-documented Fama-French size and value premiums
- Strong long-term CAGR (9.1%) from factor exposure
- International diversification through small-cap exposure
- Short-term bonds minimize interest rate risk
- Evidence-based approach backed by decades of academic research
Limitations
- High max drawdown (-24.5%) — requires strong stomach during bear markets
- Small-cap value can underperform for years (2018-2020 growth dominance)
- Higher volatility (12.2%) than defensive portfolios
- Requires annual rebalancing discipline
- International small-cap ETFs have higher expense ratios than US large-cap
Ideal for: Factor-oriented investors with long time horizons (10+ years), those who believe in the academic evidence for size and value premiums, and investors comfortable with higher short-term volatility in exchange for higher expected long-term returns.