The 60/40 portfolio is dead. Or is it?

 

Monday Morning Millionaire Program members appreciate the importance of asset allocation for sound investing. Many use the 60/40 ratio personally.

Recently, the influential Bank of America declared the end of the 60/40 portfolio. As a result, an Internet search for “end of the 60/40 portfolio” generates nearly half a million hits.

Forbes, U.S.News, CNBC,  Business Insider,  A Wealth of Common Sense and many others weighed in on the subject.

Should Monday Morning Millionaire Program members be concerned?

Let us look at the 60, first.

In most of the articles published, the 60% represents stocks. Picked stocks.

Monday Morning Millionaire Program members know that 1/2 of stock pickers are correct and the other half are wrong. It cannot be any other way. Members don’t pick stocks but invest in the American economy as a whole by using an exchange-traded fund (ETF) that represents that economy. They do so by using an

Next, let us look at the 40.

In most of the articles published, the 40% represents bonds.

Monday Morning Millionaire Program members know that after taxation and inflation, most bonds yield negative returns. Members do not invest in bonds. They keep their powder dry by keeping their cash in U.S. money market funds. This allows them to buy bargains whenever the market drops.

So, for Monday Morning Millionaire Program members, 60/40 represents 60% index ETF/40% U.S. Money Market and not 60% picked stocks/40% bonds. Members have enjoyed a 15.5% annual return since 2012. Their investment results are virtually guaranteed to equal the market. Based on history, over 90% of portfolios, including professionally managed ones, will fail to do that.

Please note that the Monday Morning Millionaire Program contains opinions only. It does not provide any investment advice or endorsements.

 

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Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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