Larry Portfolio: backtest, returns and drawdowns
Thirty percent in small-cap value stocks around the world and seventy percent in intermediate Treasuries.
Data updated October 2026
Created by: Larry Swedroe (2014)
Allocation
| Asset class | ETF used in the backtest | Weight |
|---|---|---|
| US small-cap value | IJS | 15% |
| International small caps | SCZ | 7.5% |
| Emerging-market stocks | EEM | 7.5% |
| Intermediate US Treasuries | IEF | 70% |
- Stocks 30%
- Bonds 70%
From October 2011 to October 2026 the Larry Portfolio returned 3.9% a year on average, with annual volatility of 6.4%. Its deepest fall was 21.3%, from November 2021 to October 2023, recovered in about 50 months.
Its best year was 2019 (+12.3%) and its worst 2022 (−15.4%).
Over the same period 100% US stocks returned 14.3% a year with a maximum fall of 35.0%.
Key figures
- Annual return (CAGR)
- +3.9%
- Annual volatility
- 6.4%
- Maximum drawdown
- −21.3%
- Recovery time
- 50 months
- Sharpe
- 0.39
- Sortino
- 0.54
- Worst year
- 2022: −15.4%
- Positive years
- 11/14
Growth of $10,000
Drawdowns
Returns by calendar year
| Year | Larry Portfolio | 60/40 Portfolio | 100% Stocks |
|---|---|---|---|
| 2026(partial) | +1.5% | +6.9% | +12.7% |
| 2025 | +11.6% | +13.0% | +17.0% |
| 2024 | +1.3% | +14.8% | +23.8% |
| 2023 | +6.6% | +17.9% | +26.1% |
| 2022 | −15.4% | −16.9% | −19.5% |
| 2021 | +2.7% | +14.6% | +25.7% |
| 2020 | +9.4% | +15.4% | +20.7% |
| 2019 | +12.3% | +21.9% | +30.7% |
| 2018 | −3.8% | −3.1% | −5.3% |
| 2017 | +8.6% | +14.2% | +21.4% |
| 2016 | +6.3% | +8.3% | +12.1% |
| 2015 | −0.6% | +0.2% | −0.1% |
| 2014 | +6.6% | +9.7% | +12.2% |
| 2013 | +3.4% | +18.2% | +31.8% |
| 2012 | +8.2% | +10.4% | +14.7% |
| 2011(partial) | +3.4% | +3.1% | +4.1% |
History
- Created by
- Larry Swedroe
- Who
- Author of many books on evidence-based investing
- Year
- 2014
- Source
- Reducing the Risk of Black Swans (2014, with Kevin Grogan)
- Funds in the backtest
- 4
Larry Swedroe argued that investors can get a reasonable return with much less in stocks if the equity they hold is concentrated in the parts of the market that academic research links to higher expected returns – small and value companies – and the rest sits in safe government bonds. He described the approach in Reducing the Risk of Black Swans (2014), written with Kevin Grogan, and it became known as the Larry Portfolio.
About 30% goes to small-cap value stocks in the US, developed and emerging markets, and 70% to intermediate Treasuries. The aim is to cut the risk of large losses – the “black swans” of the title – rather than to maximise return.
Strengths and weaknesses
Strengths
- Only 30% in stocks: falls are usually far smaller than a 60/40’s
- Treasuries have usually risen in stock market crashes
- Concentrated in small and value stocks, linked to higher long-run returns in academic studies
Weaknesses
- Relies on the small and value premiums, which can disappear for a decade or more
- 70% in bonds: returns depend heavily on interest rates
- Hard to replicate exactly with long-history ETFs
The backtest uses broad international small-cap and emerging-market ETFs in place of the value-only funds the strategy calls for, which have a short history.
How it works
Take equity risk only where expected returns are highest, small and value companies, and keep the rest in safe bonds to cut the risk of large losses.
Backtest with total-return ETF prices (dividends reinvested), rebalanced to target weights on the first trading day of each year. Where a Vanguard fund has a short price history in our data, an iShares fund on the same market is used (for example ITOT for VTI, IVV for VOO). No fees, taxes or currency effects; first and last years are partial. Past results do not predict future returns.
Questions
Who created the Larry Portfolio?
Larry Swedroe (author of many books on evidence-based investing), 2014. Source: Reducing the Risk of Black Swans (2014, with Kevin Grogan).
What is the Larry Portfolio?
Thirty percent in small-cap value stocks around the world and seventy percent in intermediate Treasuries. Allocation: 15% us small-cap value, 7.5% international small caps, 7.5% emerging-market stocks, 70% intermediate us treasuries. Created by: Larry Swedroe (2014).
What is the Larry Portfolio return?
In the backtest from October 2011 to October 2026 it returned 3.9% a year on average, with a maximum drawdown of 21.3%. US dollars, before fees and taxes.
How often should it be rebalanced?
The backtest rebalances once a year back to the target weights. Rebalancing more often changes little and adds costs; some investors rebalance only when a weight drifts beyond a threshold.
What was the worst drawdown of the Larry Portfolio?
21.3%, from November 2021 to October 2023; it took about 50 months to get back to the previous high.
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Source: MarketStack end-of-day prices. Historical and educational content: not a forecast and not investment advice. MEDGE Capital does not recommend buying or selling any instrument. Risk disclaimer.