Institutional Investing Goes Mainstream

"If you look at the 10 largest university endowments, they all outperform the typical portfolio," says Fragasso, who adds that "typical university endowments look nothing at all like a traditional retail investor's portfolio."

Endowments, he adds, tend to focus on risk and a longer-term horizon, while only a "tiny minority of retail investors think about risk."

That point can be illustrated by looking at what happened during the market bubble of 2000. Investors were getting 25% returns annually, but they weren't focused on the volatility of their portfolio and on the fact that the stocks they were investing in were highly risky, says Fragasso.

"People think about returns [first]and risk as a distant second, if they think about it at all," he adds.

That's where the Rydex Essential Portfolios come in.

There are three funds to choose from: conservative, moderate and aggressive. The expectation is that more risk-tolerant investors will start out with the aggressive portfolio, and as their tolerance for risk declines, move to the moderate mix and, finally, the conservative portfolio.

In the aggressive portfolio, more than 68% of the asset allocation goes toward the following funds: ( RYQMX Quote)Multi-Cap Core Equity, ( RYJPX Quote)Japan Advantage, ( RYEUX Quote)Europe Advantage, ( RYMBX Quote)Commodities and ( RYMSX Quote)Absolute Return Strategies (the latter of which seeks to achieve positive returns in both up and down markets). (All tickers are for H-Class shares.)

The rest of the aggressive mix is split between the (RYVYX Quote)Dynamic OTC, (RYTNX Quote)Dynamic S&P 500, (RYGBX Quote)Government Long Bond Advantage, (RYMKX Quote)Russell 2000® Advantage, (RYSRX Quote)Sector Rotation and (RYSTX Quote)Hedged Equity funds.