SPY - 60/40 Investing: A Forward-Looking Analysis

2024-03-11 11:45:19 ET

Summary

• The 60/40 approach to investing, which involves maintaining a static mix of 60% stocks and 40% bonds, may not perform the same way in the future as it has in the past.
• Asset allocation should be viewed as a floating mix and a tactical discipline, rather than a fixed mix of stocks and bonds.
• The bond side of a 60/40 portfolio is experiencing a new era with higher inflation and changing interest rates, which may require a reevaluation of bond allocation and types of bonds used.

I have my pizza with a certain combination of ingredients, but I don't tell everyone else they have to do what I do. Investment allocation for self-directed investors is no different. The 60/40 approach to investing involves maintaining a static mix of 60% in "stocks" and 40% in "bonds," and the main activity is simply rebalancing back to that mix periodically.

To be clear, I do not dislike 60/40. I think it was a great effort by Wall Street to bring new investors along the continuous learning curve we should all have. It gets the message through about not being an all-equity investor, unless you are willing to take the 40% down years with the 40% up years....

For further details see: