Author Craig Israelsen clearly explains just how easy it is to manage a successful portfolio with a plan, rather than managing your money piecemeal. His three key guidelines in the 7Twelve recipe are deceptively simple: select 12 different ingredients (such as mutual funds), allocate your investment equally among all 12 funds, and rebalance the 12 funds on a periodic basis, such as annually. Israelsen describes in straightforward and ready-to-apply terms what your portfolio should look like and outlines how to make it a reality for you. In 15 succinct chapters, he takes you step by step through the process of building and managing a portfolio that optimizes performance and minimizes risk. He begins by demonstrating how diversification is actually achieved and introduces various ways to meaningfully measure portfolio performance. He then outlines how to actually build and manage the 7Twelve portfolio—from periodic rebalancing to changes in the asset allocation over the life cycle—and specifically addresses the all-important issue of portfolio durability during the retirement years. Israelsen also presents research that sheds light on some of the most-debated topics among investors: value versus growth, active versus passive investing, and some of the perplexing problems in many target- date mutual funds.
Better risk-adjusted performance is the key benefit of building broadly diversified investment portfolios, and only by combining a wide variety of asset classes can an investment portfolio produce superior performance with lower levels of risk. The 7Twelve approach provides diversification depth within each separate mutual fund, and diversification breadth across the 7 asset classes—a recipe that provides ideal risk-controlled performance.