"The 60/40 portfolio allocation has burned investors in the past"

[njhowie]

The ‘sleep easy’ portfolio recommended by your adviser may be riskier than you think

Conventional wisdom says that a “balanced” portfolio of stocks and bonds will cushion you from shocks and make sure your savings keep growing in all markets. It’s the philosophy behind nearly all financial advice offered in America today, and one that’s taught in most finance courses.

It’s also the theory behind those “balanced” index funds, “target date” funds and “glide path” funds that try to offer you a one-stop portfolio. It’s also the theory behind the portfolios offered by most “robo advisers.”

There’s just one problem: History says it may be wrong.

https://www.marketwatch.com/story/your-portfolio-may-be-riskier-than-you-think-2018-10-11

 

[MichaelB]

How about a snippet or highlight of the article?

 

[USGrant1962]

So, they are just giving anecdotes that back the data on 4% rule - yawn.

 

[easysurfer]

Funny how times when the market is up, an article may say a 60/40 allocation is not aggressive enough .

 

[Dtail]

It appears the article is somewhat against owning bond (funds) in a rising interest rate environment and the push for including gold as part of the portfolio.
So it remains will we see a 1966 retiree scenario again with very high inflation?
I am more curious if we see another bear market within a few years, how does the 2000 year retiree measure up?

 

[ERD50]

IMO, no reason to read past this line:

Conventional wisdom says that a “balanced” portfolio of stocks and bonds will cushion you from shocks and make sure your savings keep growing in all markets.

That's a straw man. Who the heck says that a 60/40 will "make sure your savings keep growing in all markets"? No one who knows what they are talking about.

-ERD50

 

[TwoByFour]

You have to remember that financial web sites and magazines make money by writing articles, and the more audacious the claims they make, the more people click on them, and they get more ad revenue. So take anything written as just one person's opinion, which may or may not be a good one.

 

[Oz investor]

the question avoided in most of these discussions is the quality of the bonds
everybody knows stocks can do anything at anytime , sometimes good and sometimes bad , it is the price you pay for taking on extra risk in the pursuit of extra returns

but bonds ... Greece and Cyprus were the canaries for sovereign debt , Japan and the EU could both easily have big moments of panic ( as could the US if it were to lose benchmark status )

most ( relatively safe ones ) are low yield ( interest rates ) and the trend is to offer long maturity dates on those low yields

would you really buy a 30 year or 100 year bond hoping future inflation doesn't your spending power ??

all fun and games for bond traders ( and those using Treasury bonds for foreign exchange speculation ) but what about the investors ( the ones vary likely to suffer a hair-cut or default )

 

[COcheesehead]

the question avoided in most of these discussions is the quality of the bonds
everybody knows stocks can do anything at anytime , sometimes good and sometimes bad , it is the price you pay for taking on extra risk in the pursuit of extra returns

but bonds ... Greece and Cyprus were the canaries for sovereign debt , Japan and the EU could both easily have big moments of panic ( as could the US if it were to lose benchmark status )

most ( relatively safe ones ) are low yield ( interest rates ) and the trend is to offer long maturity dates on those low yields

would you really buy a 30 year or 100 year bond hoping future inflation doesn't your spending power ??

all fun and games for bond traders ( and those using Treasury bonds for foreign exchange speculation ) but what about the investors ( the ones vary likely to suffer a hair-cut or default )

There are a lot of different kinds of bonds. Sovereigns are only some. I find most people don’t “get” bonds and that leaves an opportunity for the rest of us. You can beat inflation with quality bonds, you just need to know where to look and how to buy.

 

[Rianne]

So FIREcalc and VG Nestegg basing their information on historical trends are full of it?

 

[REWahoo]

So FIREcalc and VG Nestegg basing their information on historical trends are full of it?

Right.

 

[Oz investor]

There are a lot of different kinds of bonds. Sovereigns are only some. I find most people don’t “get” bonds and that leaves an opportunity for the rest of us. You can beat inflation with quality bonds, you just need to know where to look and how to buy.

i prefer ( carefully ) selected corporate bonds

i know what to look for ( especially in the security area ) and am currently NOT choosing to buy ( and maturity dates and redemptions have virtually eliminated my exposure in this area )

i have resorted to buying into property trusts ( with all their extra dangers in a declining market ). chasing reliable income

i think inflation ( globally ) is due for a sudden rise , and that might cause real stress to many .

i don't buy my nations Treasuries because i don't trust the government ( or the major opposition party ) to be financially responsible in the near or mid-term

 

[COcheesehead]

i prefer ( carefully ) selected corporate bonds

i know what to look for ( especially in the security area ) and am currently NOT choosing to buy ( and maturity dates and redemptions have virtually eliminated my exposure in this area )

i have resorted to buying into property trusts ( with all their extra dangers in a declining market ). chasing reliable income

i think inflation ( globally ) is due for a sudden rise , and that might cause real stress to many .

i don't buy my nations Treasuries because i don't trust the government ( or the major opposition party ) to be financially responsible in the near or mid-term

Good luck, have fun.

 

[NW-Bound]

I glanced through the article. The suggestion was to include EM equities, commodities, gold, and cash. The latter means CD, T-bills, money market funds, etc...

 

[Oz investor]

Good luck, have fun.

i will try the best i can ( to have fun , and create 'lucky opportunities )

thanks

 

[Oz investor]

I glanced through the article. The suggestion was to include EM equities, commodities, gold, and cash. The latter means CD, T-bills, money market funds, etc...

the chances of me migrating now have been reduced . if i was liable to migrate i would be more heavily exposed to ( physical ) gold and platinum .

EM equities is a dangerous game but the growth potential is there ( along with FX risk ) yes i have some shares with strong international focus ( outside of the US and EU ) but not a large part of the portfolio , until i can source better research and information


i prefer to think of 'cash ' as a cash buffer currently ( until the interest-bearing securities decide to clean themselves up .. and i pointedly avoid 'sausage-debt' ETFs , relying on a fund manager to enforce my standards is too much to ask )

( in Australia the fund managers don't stop charging fees even when you are dead ... including life insurance premiums ... call me untrusting if you like , but i don't expect much and the managers they still fall below my lowered expectations )

'managed funds ' seems to be an oxymoron in Oz

 

[unclemick]

1966 to 2018. Ballpark 60/40 ala Intelligent Investor and then 'Bogle's Folly' circa 1977.



Now I have confessed here and other forums to dalliance with Harry Browne(an all weather portfolio), gold coins, patented gold mine, raw land, timberland, rental real estate,dividend stocks, guns,stocks and some low priced stocks.

I also watched the Saint's play football for thirty years. Any Red Socks fans?

ok ok.

Never sold the 60/40 re balanced and dollar cost averaged during the accumulation years and let time do it's thing.

Since 1993 first year of ER cut expenses in down years(below 4%) and went back when Mr Market smiled again.

heh heh heh - I vaguely remember picking 60/40 because I thought that was what major pension funds had in the 1960's.

I managed to make every mistake in the book except commodity contracts my way to 25 years of ER. Bless time in the market and index funds.

 

[Texas Proud]

IMO, no reason to read past this line:



That's a straw man. Who the heck says that a 60/40 will "make sure your savings keep growing in all markets"? No one who knows what they are talking about.

-ERD50

+1.... that was the stmt that changed my thinking...


Also think it is someone pushing gold... I am not interested in owning gold at all, so not for me...

 

[Oz investor]

time was never on my side , i decided to start investing too late in life.

so i always knew i was going to have to be aggressive ( but not risk-take excessively )

and to make it worse i made this choice in ( late ) 2010 not in 2007 or 2008

for me bonds look like a bad option now ( not 5 years ago for those who went for long dated bonds , and may start to look good in the future , next year , or the year after .

had i started investing over a decade ago , or been younger than i currently am my choices would have been different ( and i encourage others to think about what is the best for THEM )

do i have an 'all weather portfolio ' ?? i will tell you after the storm passes , i have planned for a storm , but nothing tests out your plan like the real thing .

 

[Telly]

.....Now I have confessed here and other forums to dalliance with Harry Browne(an all weather portfolio), gold coins, patented gold mine, raw land, timberland, rental real estate,dividend stocks, guns,stocks and some low priced stocks.

I also watched the Saint's play football for thirty years. Any Red Socks fans?

ok ok.

unclemick! It's good to hear from you again!

Back in the 1940's, the Three Stooges had invested in Beefeater Gold Mine stocks, that looked like a bust, but turned out very very valuable
But you would have been just a young'un back then, no cash to invest

 

[njhowie]

i prefer to think of 'cash ' as a cash buffer currently ( until the interest-bearing securities decide to clean themselves up .. and i pointedly avoid 'sausage-debt' ETFs , relying on a fund manager to enforce my standards is too much to ask )

I think as far as it pertains to the article, "cash" is as NW-Bound indicates (CD, T-bills, money market funds, etc.) - where it may be kept as an investment component in the portfolio.

As an investor during working/retired years, you may still maintain what you consider a cash buffer for living expenses aside from the investment portfolio. Interest bearing securities (in the US) such as CDs, treasuries, and money market funds are zero risk and do not require "cleaning up". An investor who opts for a "cash buffer" (above maybe a few months living expenses) as opposed to a money market account today, as interest rates continue rising, is doing a disservice to his/her portfolio and income generating ability.

 

[mrfeh]

https://www.marketwatch.com/story/your-portfolio-may-be-riskier-than-you-think-2018-10-11

Nothing more than click bait.