top of page
  • Jonathan Poyer

What To Do With a Problem Like 60/40 Investing

The battle over the efficiency and adaptability of the famous 60/40 portfolio continues and will probably forever continue. There is probably always a place for such a balanced portfolio. Having a balanced and diversified portfolio is something that many investors seem to get behind.

But let's take a look at a few viewpoints:

FA Magazine recently posted an article asking whether the 60/40 portfolio is dead. Stocks are down and 2022 has been THE WORST market for bonds EVER. The article lists 5 points to offer perspective as to whether the 60/40 portfolio is something to abandon or consider:

  1. What we've seen in 2022 so far is unusual

  2. The picture is a little more complicated when looking at quarterly data

  3. Bonds can go down too, even when stocks do

  4. Stock valuations have improved dramatically

  5. Dislocations create opportunities for strategic investors

I like point 5 the best. Opportunities are always abound.

Overall, a 60/40 portfolio is on pace for its worst year since 1937. In fact, here are the top 5 annual declines for the 60/40:

  1. 1931: -27.3%

  2. 1937: -20.7%

  3. 1974: -14.7%

  4. 2008: -13.9%

  5. 1930: -13.3%

Here is a graphic that helps to show annual total returns (using a 10-year treasury for the "40" side) since 1928:

The year following those worst years ever are actually pretty good. Unless "everything has changed", perhaps there is still a place for a 60/40 portfolio.

We tend to think that it is a good place to start and that it is wise to make additions and satellite investments. Savvy investing might be to buy when things are cheap and sell when they are expensive. And...don't panic!

17 views0 comments


bottom of page