Larry Portfolio (Larry Swedroe)
Created by Larry Swedroe
A bond-heavy portfolio that leans on the small-value factor to punch above its equity weight.
What is it?
The Larry Portfolio is named after financial author and researcher Larry Swedroe, a prominent advocate of factor-based investing. It is unusually concentrated for an equity sleeve: just 30% in small-cap value stocks, paired with a large 70% allocation to short-term bonds.
The philosophy
Swedroe's approach draws on academic research — particularly the Fama-French factor model — showing that small-cap and value stocks have historically delivered higher average returns than the broad market, at the cost of higher volatility and periods of significant underperformance. His insight was that if a factor like small-cap value carries a meaningful return premium, an investor does not need a large equity allocation to reach a given return target; a smaller allocation to a higher-expected-return factor, backed by a large, safe bond cushion, can target similar long-run outcomes with a different (and for some investors, more comfortable) risk profile.
How it works
The 30% equity sleeve is concentrated entirely in small-cap value stocks rather than spread across large-cap, international, or other equity styles, deliberately maximizing exposure to the factor premium Swedroe's research emphasizes. The 70% short-term bond allocation is unusually large and unusually short in duration compared to most portfolios on this site, minimizing interest rate risk and providing a highly stable base. The overall effect is a portfolio with a much smaller "amount" of stock market risk than its 30% headline equity weighting might suggest, concentrated in a single higher-expected-return factor.
Who is it for?
This strategy suits investors who are persuaded by the academic case for the small-cap value premium and want to take equity risk in a concentrated, factor-focused way rather than through a broad market index, while keeping their overall portfolio risk conservative. It fits investors with a lower overall risk tolerance who still want some exposure to higher-expected-return equities, rather than investors seeking maximum diversification across equity styles.
Key strengths & trade-offs
Its strength is a historically favorable risk-adjusted return profile: a small, concentrated equity allocation in a factor with a strong long-run academic track record, backed by a large, low-volatility bond base. Its trade-off is factor concentration risk — small-cap value can underperform the broad market for years at a time, as it did through much of the 2010s and early 2020s, and because the equity sleeve is not diversified across large-cap or international stocks, its outcome depends heavily on the small-value premium continuing to hold in the future the way it has in the historical record.
Risk Level
Rebalancing
annual
Number of Assets
2
Best For
Capital preservation, low tolerance for drawdowns
Current Allocation
| US Small Cap Value | 30% |
| US Short-Term Bonds | 70% |
Performance: 28-Year Backtest
Data for US Small Cap Value starts 1998. Simulation covers 28 years.
$10,000 initial investment → $39,007
Annual Returns
| Strategy | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Larry Portfolio (Larry Swedroe) | +2.1% | +0.6% | +18.5% | +7.1% | -1.8% | +14.6% | +4.2% | +6.8% | +6.9% | +2.2% | -8.6% | +11.2% | +9.9% | +1.5% | +5.6% | +8.0% | +3.7% | -1.9% | +9.4% | +3.9% | +0.2% | +4.6% | +6.5% | +6.1% | -0.7% | +3.7% | +8.5% | +6.7% | +3.4% |
Key Metrics
ETFs in This Strategy
Based on historical data. Past performance does not guarantee future results. This site is for educational purposes only and does not constitute investment advice.