UVU Woodbury School of Business professor makes sense of investments with ‘7Twelve Portfolio’

Media contact: Patricia Monsoor | email:pmonsoor@uvu.edu | landline:801-863-5483 | cell: 650-454-6441


Dr. Craig Israelsen loves a challenge– from running the Boston Marathon to figuring out how much money we all need in our investment portfolios.

This determined financial wizard is one of UVU’s most published faculty in the Woodbury School of Business, and a world-renowned expert on investing and personal financial planning.

Instead of flinching at the letter you receive from Social Security telling you how long you’ll have to work to take advantage of government benefits, Israelsen challenges you to take charge. Make smart financial decisions now that will pay you later and, more importantly, remember that government benefits should not be your only source of retirement income.

In the span of his 30+ year career, Israelsen finds the most popular retirement questions are:

• How much money do I need in my investment portfolio at the start of retirement?

• How much can I safely withdraw from my investment portfolio during the retirement years?

While he reminds us it’s not possible to provide a precise answer that will apply to everyone’s unique financial situation, it is possible to provide general guidance that can assist financial advisors and individual investors.
He recently published an article that offers solutions to guide you and/or your financial planner entitled:

Retirement Portfolio Realities: The Mathematics of Survival

The 2008 financial crisis and the losses clients suffered, convinced Israelsen to come up with his own diversification formula solution – the 7Twelve Portfolio. The solution is so user-friendly, that more than 1000 personal financial planners have ordered the package to implement for their clients calling it “simple and easy to get a handle on.”

Israelsen, dubbed it the 7Twelve Portfolio, because it consists of 12 equal slices of mutual funds drawn from seven asset classes (U.S. equity, non-U.S. equity, real estate, natural resources, U.S. bonds, non-U.S. bonds and cash). The 12 include seven fund types whose performance he could track back to 1970, and which he felt had earned a place (U.S. large cap, U.S. small cap, non-U.S. stocks, bonds, cash, real estate and commodities).

What does owning 12 funds achieve that owning one balanced fund doesn’t? The main difference, is that the 7Twelve Portfolio sustained smaller losses in “bad” years, as a well-diversified portfolio theoretically should.

He negates the sometimes tiny asset allocation recommendations some robo-advisors produce–for instance to keep 1.0% of a portfolio in a particular asset class. “What’s that going to do? It’s window dressing.”

What about the varying risk preferences of different investors? Israelsen argues that the popular risk tolerance questionnaires are poor predictors of how investors will really react if their investments take a nosedive. Still, he endorses the “core and explore” approach: Use 7Twelve as the diversified core of your portfolio and then make personalized picks outside the core.

Says syndicated columnist Scott Burns about 7Twelve:

“Craig Israelsen has an interesting idea: Let’s leave 1950 behind. He thinks it’s time to include the world outside the United States, among other things, in our investments rather than just talk about it. This is accomplished with what Israelsen dubs the ‘7Twelve Portfolio.’ Rather than just domestic stocks and bonds, the new benchmark has seven asset classes. Those asset classes, in turn, are subdivided into a dozen subsets, all held in equal amounts. The payoff is huge. Over the last 10 years, his better balanced index provided a return of 7.52 percent annualized. The Vanguard Balanced Index fund did better than nearly 60 percent of its managed competitors but returned only 2.64 percent over the same period. That 7.52 percent return would have ranked Israelsen’s passive index in the top 2 percent of all moderate allocation funds. Indeed, it would have ranked in the top 30 percent of all world allocation funds – funds that do invest in a broader menu of assets. This is no guarantee of investment nirvana, but it’s a good start for a new millennium.”

Israelsen shares his personal financial planning wisdom with students studying in Woodbury’s Top- 5, nationally-ranked Personal Financial Planning Program (PFP) teaching FIN 1060 (Personal Finance) and FIN 457R (Investments) as Woodbury’s Executive-in-Residence.

“The great thing about Dr. Israelsen is that you can ask a million questions, request all kinds of data, get great tips on research papers to read on different topics AND learn about making salsa! I think my favorite part of the class I took from Dr. Israelsen (FIN 475R) was the survey he asked us to do asking people things like “What is an asset class?” and “What is a diverse portfolio?” I asked people in airports, moms on field trips and relatives. I learned so much about what the general public knows, or does not know, plus some things I would have never expected like how to run a live stock ranch. Dr. I is great at making it fun to learn about investing for the long-term. He has some practical advice for people on all different subjects that he delivers in a folksy way that is funny and endearing. You are missing out if you have never heard him lecture. — Student, Celeste Kennard

Primary among his research interests is the analysis of mutual funds and the design of investment portfolios. He writes monthly for Financial Planning Magazine and is a regular contributor to Horsesmouth.com. His research has also been published in the Journal of Financial Planning, Journal of Asset Management (U.K.), Journal of Performance Measurement, Asia Financial Planning Journal (Singapore), Journal of Family and Economic Issues, and Financial Counseling and Planning.
His research has been cited in the Christian Science Monitor, Wall Street Journal, Newsweek, Forbes, Smart Money Magazine, Kiplinger Retirement Report, Advisor Perspectives, Dow Jones Market Watch, Family Circle Magazine, and Bottom Line Personal.

Israelsen believes that everyone can reach the finish line as a winner, if there’s serious thought and planning put into their retirement portfolio– before it’s too late.

For information on the 7TwelvePortfolio visit www.7TwelvePortfolio.com.
For more information Woodbury’s Top 5 nationally-ranked PFP program, visit www.uvu.edu/pfp

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