SeekerBlog

From The Crimson:

Like most of the investment community, Harvard’s vaunted economists were hit hard by the recent financial crisis and ensuing downturn.

Textbook magnate N. Gregory Mankiw’s stock portfolio dipped. Economics department chair and hedge fund adviser John Y. Campbell got out too early. Even conservative investor Claudia Goldin suffered a drop in her retirement fund.

And while investors around the world scrambled to get out of risky investments, the mega-minds at Harvard took a more reserved approach—they stuck to their strategy.

None of the three academics interviewed for this article acknowledged spending much time checking the stock listings.

But for those pursuing more active investment strategies, all three classroom superstars agreed, less is more.

PRINCIPLES OF INVESTING

“I am a long-term buy-and-hold investor, as I don’t think I am smart enough to time the market,” says the professor of the largest economics course at Harvard and author of “Principles of Economics.”

Mankiw has gained national prominence through his popular textbooks and as one of President George W. Bush’s chief economic advisers.

But outsmarting the markets, Mankiw says, requires huge quantities of time poring over listings—time that he says he prefers to devote to academic pursuits.

Mankiw’s simple investment portfolio consists of about two-thirds stocks and one-third bonds, balancing what he considers the high risk of equities with more dependable fixed income.

Even when his portfolio took a hit during the crisis, he maintained the ratio by investing more cash into stocks in order to compensate for what he had lost in the market decline. This “rebalancing” is Mankiw’s main active portfolio strategy. Otherwise, he says, he is relatively passive.

He believes in the higher risk and returns of equities, but his stock investments are widely diversified, including international holdings, and are mostly in low-cost index funds.

Mankiw practices what he preaches in his textbook. “I don’t think anyone should put all their money in a company they work for, or in the country they happen to live in,” he says. He is invested not only in the U.S. but also in Europe, Asia, and emerging markets.

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