Reevaluating the 60/40 Portfolio: Is There a Better Option?
The 60:40 portfolio, consisting of 60% stocks and 40% bonds, has rebounded this year after a significant loss in 2022. Historical data suggests that its performance in the coming years is likely to be closer to its long-term average. The portfolio's trailing 20-year return aligns with its long-term average, countering arguments of lower future returns. The 60:40 portfolio serves as an insurance policy, cushioning losses in an equity bear market. With interest rates at 16-year highs, the bond portion of the portfolio provides potential to mitigate equity losses. Giving up on the 60:40 portfolio now would mean discarding this valuable insurance.