The death of 60/40:Diversifiers to Help Navigate the Decade Ahead
Build a high-performing, fortress portfolio to combat low future expected returns.
Recent outsized returns
For the past 13 years, our clients have been the beneficiaries of an incredible run for U.S. equities. The S&P 500 Total Return index finished 10 of the past 13 years above 11%! In fact, in an arguably tough economic environment over the last 3 years, the index has averaged over 26% per year.
Header | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|---|---|---|---|---|
S&P 500 Total Return | 16% | 32.39% | 13.69% | 1.38% | 11.96% | 21.83% | -4.38% | 31.49% | 18.40% | 28.71% |
The traditional 60% stock and a 40% bond (60/40) portfolio has helped clients meet or exceed their financial goals over the past decade. While fixed income has not been a large driver of returns, it has served an important purpose. Using bonds as a diversifier helped to de-risk the portfolio and, in a falling rate environment, was additive to a portfolio returns. This has been the best of all worlds!
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It's hard to believe but you could have done better...
Most advisors tweak the standard 60/40 portfolio to make it their own. This may include adjusting the asset class weighting, adding international, stocks, real estate, or commodities, or tilting factor exposures. Advisors use an endless number of combinations in the hopes of driving better performance; the same or better returns with less risk...
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