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The traditional retirement portfolio (60/40) is down 20% for only the fourth time since WWII

MarkMark
in Other Investing
° The traditional balanced portfolio of 60% stocks and 40% bonds lost 20% from its peak value.

° This is only the fourth time in 75 years it has suffered such a decline with the other moments coming in August 1974, September 2002 and January 2009, according to Michael Batnick of Ritholtz Wealth Management.

° An investor who rebalanced holdings back to the 60/40 asset split at the end of the month when a 20% decline was first registered would have been positioned for attractive returns in subsequent years.

° But some believe there are reasons to be skeptical that holding fast to the 60/40 stance this time will fare as well as in past decades.

Read Article from CNBC

Comments

  • Sven
    Even at -20% loss, the 60/40 stocks/bonds allocation is still a lot better than 30+ % loss of S&P500.

    The massive QE seem to stabilize the bond market and the liquidity. One data point on commercial (corporate) bonds was released today.
    Friday’s data represents the most consistent fall in those rates across the quality spectrum since March 4. It suggests that there has finally been a return of some liquidity to the market since the Fed on March 17 said that it would reinstate the Commercial Paper Funding Facility (CPFF), an operation used during the 2008 financial crisis, in which the central bank acts as a lender of last resort for companies otherwise unable to borrow in the short-term market.
    https://reuters.com/article/us-usa-corporate-debt-commerical-paper/commercial-paper-rates-fall-signaling-feds-program-working-idUSKBN21H2FD

    If the bond market returns and functioning, there is no reason the 60/40 porfolio will not fare well going forward. The psychological element of losing less allow one to maintain their perspective and stay invested until recovery. Going to all cash is only a temporary solution since it pays little in today's low interest rate environment.
  • Old_Skeet
    edited March 2020
    Hi guys. If one is down 20% then they have to go back up 25% to get even. This is why Old_Skeet bought the downdraft because when the rebound comes I will not have to travel as far to get back to even.
  • Sven
    Totally agree. Many investors do not have large cash position to take advantage to buy low. You are a great example of running a low risk portfolio. Watching CNBC is for fun and cannot take them seriously.
  • johnNjohnN
    edited March 2020
    It may go up very slowly once have another bull market
  • catch22catch22
    Hi @Sven
    You have access to CNBC, but you don't have access to Bloomberg?
    Regards,
    Catch
  • Sven
    I don't subscribe to Bloomberg (expensive). I get CNBC on cable TV. Can I assess Bloomberg via CNBC online?
  • CrashCrash
    edited March 2020
    ...I'm just a bit surprised that the local cable where you are doesn't include both in whatever package they sold you. I'm just following along, here. CNBC AND Bloomberg. I don't think the regulators have decided to actually do their jobs yet, to enforce the option to let us buy tv channels a la carte. You CAN, of course, turn to Bloomberg.com
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