WORTH KNOWING FACTS
Struggling Returns in 60/40 Portfolio: Tips from a Financial Advisor on Enhancing Your Investment Blend
The traditional 60/40 investment portfolio, commonly known for its split between stocks and bonds, might not deliver as expected in the current market scenario. Here's how you can boost its performance:
- Global Diversification:
- International Equities: Invest in a mix of both domestic and international equities to better distribute risks across various geographical regions, enhancing the portfolio's resilience [1].
- Asset Class Variety:
- Commodities: Introducing commodities as a growth asset class can offer a unique risk profile that is distinct from traditional equities, potentially boosting portfolio performance through improved diversification [1].
- Private Equity, Infrastructure, and Real Estate: Incorporating these alternative growth asset classes can provide diversification benefits beyond traditional stocks and bonds, ultimately increasing the portfolio's overall performance and robustness [1].
- Correlation Assessment:
- Correlation Analysis: Keep track of how different asset classes correlate. When stocks and bonds move in sync - as in 2022 - this correlation can erode the protective benefits provided by the fixed-income component [1].
By implementing these strategies, you'll be better equipped to manage risks, navigate market volatility, and secure enhanced performance for your 60/40 portfolio.
- Find more investment insights at Investopedia
[1] Pham, N. (Interviewer). (2022, March 15). Why Experts Say the 60/40 Portfolio Might Need a Rethink. Investopedia. Retrieved August 2, 2023, from https://www.investopedia.com/articles/pf/10/6040-portfolio-investing.asp
- In the current bear market, reconsidering the traditional 60/40 portfolio might be necessary for better performance.
- Investing in Decentralized Finance (Defi) could be a useful addition to personal-finance portfolios, offering alternatives to traditional bond investments.
- A thorough correlation analysis is vital for assessing the risks in your portfolio during periods of high market volatility, such as the one we're currently experiencing.
- To boost your portfolio's resilience, consider expanding your asset classes to include commodities, which can offer distinctive risk profiles and improve diversification during a bear market.
- Businesses and individuals interested in finance should stay informed about the latest trends in personal-finance and investing, like the shift away from traditional 60/40 portfolios.
- During this bear market, diversifying beyond just stocks and bonds could help increase the average returns on your 60/40 portfolio, thanks to the addition of alternative growth asset classes like private equity, infrastructure, and real estate.
