Media reports show that people may have regained their confidence in the traditional 60/40 investment strategy since the 2022 fiasco when both asset classes tanked and left investors high and dry. The 60/40 investment approach is a portfolio where 60% is invested in stocks and 40% in bonds, which serves as a security net.
60/40 Investment Portfolio Poised To Regain Its Popularity
After the 2022 dilemma, many analysts believed that this was the last they would see of this so-called mom-and-pop strategy. However, both stocks and bonds made a comeback and resuscitated this approach.
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Yahoo Finance cited Todd Schlanger, a Vanguard senior investment strategist, who stated that the 60/40 portfolio reflected a 22.15% gain between January 2023 and June 2024. Stocks rallied along the crest of the AI wave and US bonds held on to strong positions in the hope of interest rate cuts. Schlanger added:
It’s been that kind of consistent performer in the past because of its diversification. You’re never going to see it at the top in terms of performance and it’s never going to be at the bottom either. It’s a very diversified strategy and we think it’s poise to do very well in future.
He also indicated that investors can further diversify their portfolios by spreading their equity investments between US and global markets. Schlanger said that a typical breakdown would focus 60% on US equities and 40% on international ones. As for bonds, 70% should be allocated to US fixed-income options and 30% to the international sphere.
According to data, this strategy has yielded 6.7% since 1997 and 6.2% over the past 10 years, which includes the 2022 hiccup, when the 60/40 portfolio lost close to 16%.
