Does a 60/40 Balanced Portfolio Still Work? Time to Jettison Non-U.S. Stocks?
Money For the Rest of Us
J. David Stein
4.5 • 1.4K Ratings
🗓️ 8 February 2023
⏱️ 28 minutes
🔗️ Recording | iTunes | RSS
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Summary
What are the pros and cons of a simple stock and bond portfolio consisting of two funds or ETFs? Given U.S. stocks have significantly outperformed the rest of the world over the past decade, is there even a role for non-U.S. stocks in your investment portfolio?
Topics covered include:
- How have 60/40 and similar portfolios performed over the long-term
- What are the advantages and disadvantages of a 60/40 portfolio
- What is the expected return of a 60/40 portfolio and what should be included?
- What has contributed to U.S. stocks outperforming non-U.S. stocks over the past decade
- Why have emerging markets stocks done so poorly
- What has to happen for U.S. stocks to continue to outperform non-U.S. stocks
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Show Notes
BlackRock vs. Goldman in the Fight Over 60/40 by James Mackintosh—The Wall Street Journal
Battered 60-40 portfolios face another challenging year by Adrienne Klasa—Financial Times
The case for the 60/40 portfolio in equities and bonds by Erin Browne—Financial Times
Investors wonder if the 60/40 portfolio has a future by Michael Mackenzie—Financial Times
Has the tried and tested 60/40 strategy soured? by Maya Bhandari—Financial Times
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Transcript
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| 0:00.0 | Welcome to Money for the Rest of Us. |
| 0:03.5 | This is a personal finance show on money. |
| 0:06.1 | How it works, how to invest it, and how to live without worrying about it. |
| 0:10.1 | I'm your host, David Stein, today is episode 420. |
| 0:13.6 | It's titled, Does a 6040 Balanced Portfolio Still Work? |
| 0:19.2 | Back in the 90s when I first became an institutional investment advisor, we talked a lot with clients |
| 0:27.0 | about 6040 portfolios, 5050, 7030. |
| 0:32.0 | When we talk about a 6040 portfolio, we're talking about a portfolio, a balanced portfolio, |
| 0:36.8 | that has 60% in stocks, 40% in bonds, and that was sort of a standard portfolio. |
| 0:43.3 | Back in the 1990s, as we worked with clients, we might introduce non-US stocks to them, small |
| 0:51.0 | cap stocks to them. |
| 0:53.0 | But they were fairly simple portfolios, diversified in terms of the number of holdings, oftentimes |
| 0:59.8 | we might use index funds, partnered with some active strategies. |
| 1:04.6 | But then as we got into the 2000s, we started introducing additional asset classes to |
| 1:11.6 | our clients. |
| 1:12.6 | It could be public real estate investment trust, non-investment grade bonds, private strategies |
| 1:18.3 | such as leveraged buyout funds, private real estate, even some hedge funds. |
| 1:23.9 | These additional complications may or may not necessarily have been better, particularly |
| 1:29.4 | if as investors we don't understand what we're investing in. |
| 1:34.0 | At the beginning of this year, I saw numerous articles in the financial press regarding 6040 |
| 1:41.2 | portfolios, such as In the Wall Street Journal, a piece titled BlackRock vs. Goldman in the |
| 1:47.1 | fight over 6040. |
... |
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