“You have to diversify against the collective ignorance,”"

So says Yale's investment guru, David Swenson, in yesterday's New York Times. You can't know how the macro economy will play out, so diversification is the only answer.

No, you can't do what he does, not without access to tons of cash and staff. How should individual portfolios of ordinary investors be structured?

[Swenson] proposes a portfolio of 30 percent domestic stocks, 15 percent foreign stocks, and 5 percent emerging-market stocks, as well as 20 percent in real estate and 15 percent each in Treasury bonds and Treasury inflation-protected securities, or TIPS.

Although that approach would protect against any sort of loss, I doubt that there has ever been a year in which that asset allocation returned 28%, which is what Swenson earned for the Yale endowment last year.

Swenson is rarity not only for his outsize investment returns, but also for his lack of interest in personal wealth accumulation. It's been estimated that he would have earned hundreds of millions more had he left for the private sector—but he doesn't want to.