Tags: Arends | traditional | portfolio | allocation

WSJ's Arends: Traditional 60-40 Portfolio Allocation Doesn't Always Work

By    |   Tuesday, 31 December 2013 06:39 AM

The rule of thumb for investors seeking a buy-and-hold portfolio is to put 60 percent of their assets into stocks and 40 percent into bonds.

But that allocation doesn't always perform so well, writes Brett Arends of The Wall Street Journal.

Such a formula lost value in the periods of 1928 to 1932, 1936 to 1947 and 1968 to 1982.
As for now, stocks look like they may be overvalued, Arends says.

Editor’s Note:
See Sean Hyman Explain His Biblical Money Code for Investing


Money managers at GMO say a portfolio of 60 percent stocks and 40 percent bonds will likely produce meager returns over the next seven years or so, he writes.

Rob Arnott, chairman of Research Affiliates, tells Arends that the best universal, passive portfolio — one that could flourish in all investment environments — would be equally weighted between real estate, commodities, stocks and bonds.

And the assets, Arnott notes, should be global, including emerging market stocks and bonds.

Alex Shahidi, a financial adviser at Bank of America, advocates a portfolio equally divided into stocks, commodities, long-term government bonds and inflation-protected government bonds. The commodities and real estate could act as hedges against inflation.

Mark Hulbert, editor of the Hulbert Financial Digest, took a look at the portfolio allocations for the top performing investment advisers monitored by his publication.

The group consists of advisers who have beaten the stock market over the last 15 years. And then he narrowed it down to the 15 members of that group who produced the best performances over the last year.

Their average allocation, as of earlier this month, was 88 percent to U.S. stocks, 2 percent to U.S. bonds, 4 percent to international stocks and 2 percent to gold, Hulbert writes in his MarketWatch column.

Editor’s Note: See Sean Hyman Explain His Biblical Money Code for Investing

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The rule of thumb for investors seeking a buy-and-hold portfolio is to put 60 percent of their assets into stocks and 40 percent into bonds.
Arends,traditional,portfolio,allocation
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2013-39-31
Tuesday, 31 December 2013 06:39 AM
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