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Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

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How Did Moderate-Allocation 60-40 Do?

"'The reports of my death are greatly exaggerated,' says the asset-allocation standard.....through the end of November, the 60/40 has returned about 15%, and I'm using just a generic stock and bond 60/40 portfolio for an example here. So, about 15%. And so, real return after you adjust for inflation, even with high inflation, that's about an 8% real return, which is pretty great. I looked at the rolling 12-month real returns for the 60/40 since 2000. The median over that last 21 years is about 7.5%. So, it's actually outperformed its median real return over that time period. So, even though all this doom and gloom came true, it didn't derail the 60/40.....I think it's definitely not something for a short-term investment. With 60% stocks, you're going to have volatility. You could have drawdowns. In 2008, 2020 drawdowns were a little north of 20%. So, that's your downside risk. So, if you're investing for something six, 12, even 18 months from now, a 60/40 is probably a little too volatile for that. But I think if you have a long time horizon, it's a very good starting point, and it's proven very difficult to beat because the stocks and bonds, when it's like an investment-grade bond portfolio, really balance each other out nicely. And unless that correlation between those two really significantly changes, which it's hard to see how it would, though it could over shorter periods, I think it's a really good long-term investment, and it's definitely been a very hard benchmark to beat....."

And for those who want to venture out some more, look at evolving MULT-ASSET funds that include stocks-bonds-alternatives in the mix.


  • Performance YTD of some popular Multi-Asset Funds:

    50-70% Equity
    VWELX 18.28
    FBALX 17.74
    FMSDX 17.02
    JABAX 16.45
    ETNMX 14.81
    PAXWX 14.45
    SWOBX 14.23
    VLAAX 10.68

    30-50% Equity
    TAIFX 11.67
    VWINX 7.71
    MACFX 7.23
    BAICX 6.34
    OICAX 5.92
    MTRAX 9.06

    Much has already been discussed about the difference/similarities between "Balanced
    and Multi-Asset".
  • edited December 2021

    subbing FXAIX for VONE worsens the outcome by the thinnest of hairs; subbing FTBFX for STIP worsens things significantly

    looks like real value is added by many of the MA funds, remarkably so by the most popular
  • edited December 2021
    ... in other words, if I am doing the math right, ytd the Fidelity Balanced team (some of whom probably live only a few miles of where I am typing this) did almost 50% better (!) than a 30-70 combination of FTBFX and Fido's SP500 cheapo. That is something. I can practically hear the corks popping.
  • ytd VONE + STIP 50-50 = ½ x 25.48% + ½ x 5.38% = 15.43%.

    That would not be the best way to do the calculation since the lack of rebalancing implicit in the arithmetic would see the equity allocation drift up toward:1.2548/(1.2548 + 1.0538) = 54%.

    Still, that's well below FBALX's 72%. (M*'s analysis says that it average a 2/3 allocation to equity and that the current 72% is its high point.)

    Here's a better approximation using Portfolio Visualizer, taking a 70/30 VONE/STIP portfolio, rebalancing monthly, and comparing it to FBALX.

    The index fund blend had a comparable std dev (8.04% vs 8.06%), and a worse max drawdown (-3.21% vs. -3.07%). But it did noticeably better when it came to raw performance (16.56% vs 14.80%), Sharpe ratio (2.12 vs 1.91) and Sortino ratio (4.87 vs. 4.29).

    Based on AUM, the most popular moderate allocation fund is American Funds American Balanced, once one adds up the assets in its 19(!) different share classes. At $223B, no other fund is on the same planet. The runner up, if one wants to call it that, is Wellington (VWELX / VWENX), half the size at $123B. Then comes Vanguard's index entry, VBIAX, half again as large at $60B, and then PRWCX at $53B.


    From the M* piece Yogi quoted:
    " So, if you're investing for something six, 12, even 18 months from now, a 60/40 is probably a little too volatile for that."

    Something that IMHO is key here is that these days the bonds are almost exclusively for ballast (dead weight to temper volatility) and just a smidgen of yield above MMFs over time. The less ballast, the longer one should expect to hold the fund. Currently I'm taking a little money off the table (something I rarely do, but equities have grown to be just too large a portion of my portfolio), so I've been looking at 50/50 funds. That's consistent with the M* quote, since I'm thinking of these as a place for cash for 12 or 18 months out.

    The quote also brings to mind what I once read in literature from the former Strong Advantage fund STADX, renamed Strong Ultra Short, and then acquired by Wells Fargo. (From the frying pan into the fire?). That this fund (which was on the aggressive end of its category, with a fair amount of mid and low grade holdings) should not be used for money needed within the next year, but was better suited for money to be used in 1-2 years.
  • edited December 2021

    Performance YTD of some popular Multi-Asset Funds:

    30-50% Equity
    TAIFX 11.67
    VWINX 7.71
    MACFX 7.23
    BAICX 6.34
    OICAX 5.92
    MTRAX 9.06

    Much has already been discussed about the difference/similarities between "Balanced
    and Multi-Asset".

    By the way, WBALX, a perhaps not quite so popular balanced fund with a low AUM, but an excellent risk/reward profile, has a YTD total return of 12.50%, according to M*. That beats all of the funds listed in the above table.

    That's not meant as a criticism, but is posted strictly for informational purposes.

  • edited December 2021
    FASMX (50% notionally) outperforms WBALX by a little the last year and two, but it has done something very right this last year.
  • @fred495 good mention of WBALX ... Category average is 4-5% of CASH. WBALX? 14% in cash as of Sep!! Interesting. Also, goes to show how far VLAAX has dropped given its 50-70 and still trailed this fund. I could be wrong but I think VLAAX was once 30-50.
  • I have to ask, how many of us have YTD returns in our portfolios of 17-18%? I do not.

    Some times I have to laugh at myself for thinking I can do better than these balanced funds by making my "strategic" selections. I can't. I would have been better off over the years just putting everything in PRWCX and maybe a couple others.
  • edited December 2021
    Conservative-allocation (CA2) 30-50% VTMFX +12.63%.

    M* broke up/expanded the old conservative-allocation into CA1 15-30% and CA2 30-50%.

    M* moderate-allocation is 50-70%.

    These are wide variations and some of the variations in performance can be explained by equity percentages.
  • >> if I am doing the math right,

    Always worth saying, at least for me.

    I did the math wrong, quite aside from assuming buy-hold, meaning no touching through this last year.

    If you bought VONE and STIP in a 2:1 ratio last NY Day and left it alone, you have made 18.6% not including today's jump.

    (That is, if my math is right.)

    Edits tk above :( , phooey and apologies.

    The FBALX victory lap would be in large part due to the flatlining of FTBFX.
  • msf
    edited December 2021

    Conservative-allocation (CA2) 30-50% VTMFX +12.63%.

    VTMFX looks even better when one considers that the income side is federally tax-exempt.

    Interesting factoid I wasn't aware of from M*'s writeup of the fund:

    "they have to maintain at least 50% of assets in the muni sleeve in order to pass the tax-advantaged treatment of these distributions to fundholders."

    This is why its allocation is 50-/50+ (equity/bonds). Same for American Funds Conservative Growth and Income Portfolio℠ TAIFX.
  • edited December 2021
    MikeM said:

    Some times I have to laugh at myself for thinking I can do better than these balanced funds by making my "strategic" selections. I can't. I would have been better off over the years just putting everything in PRWCX and maybe a couple others.

    While Geroux appears to be perfect genius, I’m not sure PRWCX has been tested in a prolonged bear market (measured in years) since he took the helm or since the fund ballooned to its current
    $52.7B size. Depending on time horizon it may or may not be a good idea to have all your eggs in that basket.

    Personally, I own it, but have little (5-10%) allocated to it - and have to laugh at myself too.:)
    But hindsight is always 20/20.

  • Giroux (46) has been with PRWCX since mid-2006 (he was only 31 then). So, he has been through the Great Financial Crisis (2007-09), the Covid selloff (2020) and other minor selloffs in between. He may have 2-3 decades ahead of him unless he gets bored. But his new roles at Price should keep things interesting for him. PRWCX is closed to new investors, but those who hold it don't have to worry about manager change any time soon.
  • edited December 2021
    Good morning @hank. I was kind of using PRWCX as an example of the simplicity and the decent return you get by just owning a good or a few good balanced funds and holding them for a long time. That always seemed to be your style and over the years I've gravitated to it myself.

    Hind sight is 20/20 and I've come to understand that sticking with a good fund, like PRWCX, versus collecting funds or jumping in and out of last years best funds wins in the end. The latter to me is like playing "fantasy football". It's a whole lot of fun. You build a new team of star players every year, dumping a player and "re-drafting" a new hot player during the year. Watching players (or funds) stats in the sports page (or MFO?) Your team at the end of the year often looks different than your original picks. Hind sight is, IMHO, this doesn't work well in investing.

    I have about 25% in PRWCX. I could call it my Tom Brady fund because it has lasted and been a winner for many years, but I hate TB for obvious reasons - so I won't:)

  • edited December 2021
    Thanks guys. No intent to diminish a fund I’ve owned since the late 90s. But I seriously doubt whether PRWCX would hold up as well in a bear market today as it did in 2008 (when it fell 27%). It was 2.3 months later (3/10/‘09) when equities finally stopped falling and turned up. So the drawdown must have reached 30% at one point. The fund’s a lot bigger (less nimble) today and bonds (which Giroux currently despises) wouldn’t provide any offset to falling equities. Also, it’s more concentrated in mega-caps - much different than when first conceived in the 90s.

    As I noted, it has a lot to do with time horizon. If as a retired single person or couple you can watch your entire investment portfolio fall 25-30% in a year’s time and not panic and sell out (likely near the bottom), than a 100% allocation to PRWCX probably makes sense. I “bought-down” all through that year, which eventually paid off. But a -21% beating in ‘08 was hard enough to stomach.

    Not trying to trash the fund. Certainly it would hold up better than most equity funds. Just looking at it through the theoretical concept of an older retiree putting 100% in it. In fairness to Mike, he did say “PRWCX and maybe a couple others.”

    PS - @MikeM - Maybe TB will start his own fund, or at least lend his name to one. I’ve a feeling it would sell.:)
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