![]() Sources: Schwab Asset Management Bloomberg. The 60/40 portfolio has generated an attractive risk-adjusted total return over time compared to all-stock or all-bond portfolios.Īrithmetic average monthly total return (annualized) Exhibit 2 helps to illustrate these results.Įxhibit 2: The 60/40 balanced portfolio has delivered Yet fixed income bolstered portfolio performance during volatile stock market drawdowns, such as the start of the global pandemic and ensuing 2020 recession. Bonds may have taken a back seat during a macro environment that favored equities. Surprisingly, despite low bond yields in the era following the Great Recession, 60/40 and similarly balanced portfolio performance has been remarkably resilient, primarily due to a prolonged equity bull market. Indexes are unmanaged, do not incur management fees, costs, and expenses, and cannot be invested in directly. Past performance is no guarantee of future results. For definitions and additional terms, please see. Stock dividends were competitive with fixed income yields following the Great Recession. Have bonds and the merits of a balanced portfolio lost their luster? Exhibit 1 provides context to help answer this question.Įxhibit 1: There is no alternative (TINA) to stocks Equity dividends were often competitive with fixed income yields, and stock and bond prices often moved in conjunction, sometimes sharply lower. However, the conventional wisdom of employing a balanced portfolio of stocks and bonds has fallen under microscopic scrutiny over the past decade. Questions arise regarding conventional wisdom Empirically, industry participants often cite observed low or negative correlations between stocks and bonds as justification for a balanced portfolio. History teaches us that bonds often rally when equities sell off, as shifting underlying risk factors tend to fuel so-called flight to safety capital flows into bonds. Within a diversified portfolio, bonds offer relatively predictable coupon payments and a potential counterbalance and stability to equities and other risk assets. ![]() This investment approach promotes the promise of attractive risk-adjusted returns by including a mix of 60% stocks and 40% bonds, offering diversification and risk factors thought to be uncorrelated. Is the 60/40 portfolio dead, as many pundits have declared? The near-zero global interest rates in the decade following the Great Recession, and, more recently, the dreadful performance of both stocks and bonds in 2022, have been cited by some as the death knell of the 60/40 portfolio. From our perspective, the 60/40 portfolio-and diversification in general-is alive and well. And in spite of the ongoing global challenges, our empirical research suggests that bonds should continue to play a supporting role in well-balanced portfolios. The 60/40 portfolio promotes the potential for attractive risk-adjusted returns by investing in a mix of stocks and bonds. Many pundits have declared the death of the 60/40 portfolio 1 in recent years, reflecting the microscopic scrutiny of multi-asset strategies amid jarring global events.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |