XLE - The 5% Income Portfolio For The 2020s -- Retirement Investors' Answer To The 60-40 Portfolio

2024-05-02 17:56:50 ET

Summary

• The investment environment of the 2020s will be defined by higher inflation and interest rates.
• A diversified portfolio with a 5% annual yield can provide a steady income for older investors.
• The conventional 60-40 portfolio (60% equity, 40% bond) is overpriced and obsolete, and a 25-25-25-25 portfolio is a more prudent strategy.

The investment environment of the 2020s will be the flipside of the last 15 years’ negative interest rates and quite the opposite of the broad domestic investment experience since 1981 when 10-year US Treasury yields peaked at 15.32%. Since 1981, stocks, bonds and real estate all benefited from the rising tide of valuation expansion with nearly 40 years of declining inflation and interest rates. Because both higher inflation and interest rates will define the 2020s investment landscape, this letter will outline a diversified portfolio that will yield about 5% annually. A 5% yielding portfolio should provide $50,000 per year of income on a $1 million portfolio....

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