The 60/40 Portfolio--Good, Bad, or Ugly?
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- Опубліковано 23 лип 2024
- The 60/40 Portfolio--Good, Bad, or Ugly? Article with resources: robberger.com/60-40-portfolio/
The 60/40 portfolio has powered retirements for decades. With 60% stocks and 40% bonds, this balanced fund offers equity-fueled growth and fixed income stability.
Today, however, many are calling into question the sustainability of the 60/40 portfolio. Some even argue that it’s dead and that retirees need take on more risk if they want to avoid outliving their retirement savings.
In this video we’ll take a deep dive into the 60/40 portfolio and whether it’s still a viable approach to investing for retirees.
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Article with resources: robberger.com/60-40-portfolio/
The way I would look at it is that the allocation that keeps you from selling everything after a 30% drop in the market is what you should use. Selling at the bottom is the worst investing mistake you can make. Enjoy your videos.
Thank you. This simply lazy 60/40 investing strategy has served me well over the years, but then when we have markets like 2022 and I hear all the headlines out there, sometimes it gets in my head and I start doubting myself and questioning myself. Thank you for doing this in that logical, down to earth, straight forward manner that reminds us why we don't get caught up in the drama of today and think long term. Oh! And I love the T-Shirt !!!
Great video Rob. I’m 60 and have been contemplating moving from 100% stocks to a stock/bond mix for some time now. I was always worried about losing growth but I feel much better now about a 60/40 mix!
The I bond is lately a great 'safe' option at 7 %. I have held for 10 years as an investment insurance policy. The remainder of my portfolio is 15% bond funds and 85% value and dividend stocks, and I'm 55!
Another helpful video. Thanks so much!
Excellent video!!!! Thank you 😊
Excellent video! I have heard so much negativity around the 60/40 split (and the 4% withdrawal rate as well). I was about to re-balance my portfolio, and then decided to check out a YT video. I have 16 months to go before retirement age at 65. I'll be subscribing to your channel. Thanks for sharing.
Thank for the video. Very informative!
That was incredible! That's the first time I've heard it make sense... Thx so much..
Thank you so much for this video!
This was a great one
Cool vid Rob! All my friends who are aggressive go w 80% stocks or more cos decades to retire, however, have friends who want to sleep at night so they are moderate and do 60/40 like my parents.
Rob, new to the channel. Like your approach and information. Thank you
Another very informative video
Very interesting and important topic.
You're the best financial commentator out there by far.
Rob
Much appreciate the video 👍
As always, great content and perspective. Great topic! Also dig the promo reggae colors! 🤘
Hi Rob, great video and awesome content. Loved it. Question -Where can I get the portfolio visualizer?
Thanks and keep up the great work.
Great video - as always!
I have mostly TIPS and a much smaller percentage of bonds with about 60% equity ETFs and mutual funds. Not looking for a huge return on that portion of my portfolio, just want to keep up with inflation and have a buffer to protect against sequence of return risk when I retire in a few years.
The 60/40 portfolio may not be the most optimal, but the number of investment choices that are worse are infinite. I will hold 60/40 and if I have to take out less than 4% I will be able to do that. The only other way to get better returns is to take on more risk, and I'm not willing to do that at 57 years old. For the record, 60/40 is not that conservative. It falls under the moderate category. Conservative is 30/70.
"Risk" just means a roller-coaster that may make you vomit.
It doesn't mean
"I'm gonna lose everything!"
60/40 is very conservative for a 57 yo.
You may not be able to keep too far ahead of inflation with that ratio
Maybe if someone is 30 years old, its better to go with 100% stocks and at 50, lets all put into 60/40... you should have a lot money to live with them and for you its important less volatility so you can enjoy your 4%.. it seems right for me, what is your opinion?
Hey Rob, great video and well-researched. Question for you: Do the comparisons (in Portfolio Visualizer) between the 60/40 and 100% stock portfolios include reinvested dividends in the CAGR's? I would have expected the 100% stock portfolio to show a wider margin over the 60/40 and was wondering if the tool was simply taking the index performance and excluding the very tangible benefit of reinvested dividends. Thanks!
Great information, Rob. Once again shows strong support (with data to back it up) for 60/40 when withdrawing ~4% (plus inflation in subsequent years) in retirement as a sound plan.
What I saw in this video (referring to the chart at 5:08) is that even though the max drawdown was much greater with the 100% stock portfolio, you still had more money with it compared to the 60/40 portfolio even during the early 2000s tech bubble, 08-09 financial crisis, and the 2020 COVID dip.
The Covid dip was a Buying opportunity
Exactly!
Stocks simply outperform.
If you can focus on that, you'll ignore the downturns as a necessary dip on the Rollercoaster
Thanks, Rob. Much appreciated.
This is what I need to look at since retirement is just around the corner.
Thank you. I keep hearing that the 60/40 portfolio days are over.
Rob - thanks again for another great video... in this one, you showed historical returns for Bonds. Can you provide the link to that graph or the steps one needs to follow to view it?
I think this is what you are referring to: www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
Great video. Would you make a video comparing performance of long term (meaning 20 years duration) performance of a two fund 60/40 portfolio (US total stock market index and International total stock market index), vs. a four fund 60/40 portfolio by adding in US small cap index and Non-US small cap index? Assume both portfolio just have one total US bond index fund for the 40% bond allocation. Just curious to see if having a more diversified portfolio really help either (1) increase returns or (2) decrease risk that much, during both accumulation stage and distribution stage.
It's on the list.
Rob, what do you think of the Guyton / Klinger model? They advocate 65% / 35% with 10% of the total being in cash or cash equivalents, coupled with an interesting rebalance / withdrawal strategy and guard rails to keep you from withdrawing too much or too little?
Rob I have a question I have recived an insurance dispersement that pays 3% and allows unlimited withdrawals, it works like a bank account that pays 3%. In the 40/60 scenario can I substitute this fund for stocks?
Thanks Rob for another great video. For the 60% stock part, will you ever make a video on factor investing using ITFs and your recommendations on factor allocation (value, size, foreign mkts, profitability )?
You bet. Excellent topic.
Can you answer a question regarding the trend towards moving away from dollar and the effect on investments ??
Watching this in October 2022 :D after equity and bond fall significantly this year. Spot on
Mr Bogle endorsed the 60/40 portfolio. The 60/40 is a war chest or work horse portfolio.
thanks
Has there ever been a case where debt levels, both government and private business and individual been so high? Does this put a lid on what high quality bonds are able to pay out in the future until a full deleveraging occurs?
Great show. Can you model a S&P 500 portfolio with a 5% withdraw rate from 2000 to 2021 vs the 60/40 portfolio and add your comments. I did this and used long treasuries as my bonds. It’s very surprising and was wondering what your thought are. It this valid or an “over fitting” model bias?
Go to Josh Scandlen channel on you tube . He does alot of these comparisons from 2000-2020. Vanguard Wellington fared really well for it being a 65/35 fund
How about internation, is there any need for international stock and bond in portfolio? Something like Vanguard lifestrategy
Interesting that you mention a Vanguard fund. John Bogle, the founder of Vanguard, felt that international funds were not needed to have a diversified portfolio. He advised that if you did want to diversify internationally, limit it to 20% of your overall portfolio.
Going with a total U.S. stock market fund and a total U.S. Bond fund. Plain and simple.
Thanks for this. Could you give us some ideas about how you would structure a 60-40 portfolio using the 3 or 4 fund portfolio? Thanks!
does the 4% rule exclude the amount my portfolio returns? Si...if I am getting a 6% avg return am I taking 4% in addition to the 6%?
Which bond etfs/index funds do you recommend? Just a total? Bnd or fxnax? Corporate? Or just intermediate treasury?
As I mentioned in the bond investing video, a total bond fund is solid, as is a Treasury bond fund. What I'm currently debating is short term vs intermediate. I've been intermediate for a very long time, but have moved some of my bonds to short term, yet I'm still evaluating that decision.
@@rob_berger thanks! I have to rewatch it. Being so long it's hard for me to digest it all. 😪but I love your videos.
Hello Rob , so is the 60/40 portfolio better than a 3 fund portfolio???
You're referring to two different things. See Rob's vid on 3 fund portfolio: ua-cam.com/video/kmw8OpGp2rM/v-deo.html
Question: in your porfolio allocation, do you consider the value of your house as part of asset allocation? After all, it is part of anybody's net worth value, and it can be used as a source of leveraged income (reverse morgage, etc). Would you consider it as a replacement for REIT?
do you consider the value of your house as part of asset allocation?
No. A house is part or your "net worth" not "investment portfolio." You cant sell a house to buy groceries.
@@DavidEVogel Sure. Why not? Admittedly, homes are very illiquid assets, but assets theirmare. Let's say, you have 100k of cash, you can buy stocks or pay offmthe remaining mortgage. Clearly a financial decision that affects your asset allocation. Is home you live in an income producing investment? Nope, but it can be converted to one. Let's say, owning a house which make up 60% of your net worth value. If you added 10% REITS to your investment portfolio, wouldn't this create a risk of asset overnighting to your net worth value? Think 2008. 🤔
@@MrNoBSgiven your house is a liability not an asset unless you're actively selling it.
You can get a cash out refinance when you are 80 .. lots of spending money if your investments run out... you die before paying back all the money 💰💰💰. Or get a reverse mortgage. It does seem kinda like a shame to not have the equity working for you in some way.
NTSX?
Great Information Rob. I put away some money in a Fidelity Managed Bond Fund 12 months ago. Lost 2% yet to recover. So are you saying to swallow the losses to maintain portfolio stability? At what point do you cut and run? Fidelity is making a cut each month, not me however.
I'm not sure I follow your question, but I evaluate each investment as is and with the present value. The fact that an investment has lost money is, in my opinion, neither a good reason to hold it longer or sell it. Is it a good fund and does it meet your investment needs? To me that's the only question to ask. By managed fund do you mean actively managed? if so, one question to ask is whether you prefer index funds over actively managed funds. I should add that I too have lost money in "safe" short-term bond funds over the past 12 months.
@@rob_berger Thanks Rob. Yes Fidelity Active Bond Funds that included 30 Year "Safe" Treasuries and some Corporate Bond Funds (btw have done well). Still to get any return on 30 Year Treasuries. I like your suggestion to consider Index Funds managed by myself. I am paying $460 each qtr. mgmt. fee and getting a little return after I pay the fees. My view at this time is that Bonds are not "Safe" and I don't think I can wait 30 years to get my money back. 60/40 sounds good in theory but actually you would need to wait a life time to experience a positive result in today's climate. What's more interesting is when I asked Fidelity why they systematically draw money from the 30 Treasury when it was going down each month they said because the algorithm in HDQ determines that. I am not a seasoned investor but I tend to like the quote from Mr. Buffet that says..."Rule #1 regarding investing...Never Lose Money and Rule #2 Never Forget Rule #1" I don't see the point of investing to lose money. Thx
@@user-uy3oz7bv9t h
@@b320i3 You could buy Funds with that fee. I hope you've moved your money out. You could do better on your own. Watch Rob's 3-Fund Portfolio (VTSAX, VTIAX, and VBTLX). You got this.
Hey Rob! New to your channel and really like your approach. At what point or age do you recommend investors to make this shift from a more aggressive stance to something as conservative at a 60/40?
What is your time horizon? More than 5 years until retirement you should be 100% equities. Less than 5 years a percentage in fixed-income securities.
@@DavidEVogel I'm 90/10 today with a 7-10 year horizon. Have 6x my income saved today in 401k
Thanks for the great video. Does investing in VBIAX equal to a 60/40 portfolio? Is it better than your 3 Fund Portfolio: VTSAX, VTIAX and VBTLX?
VBIAX has 16 % bonds in it.
@@danielyang4707 37% bonds
Thanks for the video. I’m currently at 50/50 but want to transition my retirement funds to 60/40. Should I do this gradually or all at once? I’m thinking the market maybe over valued. Also I’m 61, very close to retirement, and hoping to live well into my 90’s.
The "experts" will tell you that you should do it all at once (i.e. "lump sum"). This has been studied and the data supports that recommendation. However, it probably doesn't make a lot of difference how you do it, and doing it gradually (dollar cost averaging) may give you some piece of mind of the market takes a dump while you're doing it.
Agree with Gary. Dollar cost averaging is the way to go.
I am not worried one iota about the last 50 years I am worried about the upcoming 50 years. Well at least some of that. I am also a hospital based RN life expectancy is completely irrelevant. In those 30 some will spend hundreds of thousands in HC costs. Forget who they are even where they used to bank. I have had husbands who had millions but their wives could not get to it as the husband had a stroke or heart attack but did not actually die. Make sure you have a plan in writing for your family. Accounts numbers contacts. Be prepared but maybe that is just the Marine in me talking.
To be prepared, you have to have a plan. And to have a plan, life expectancy is most certainly not irrelevant. I think I will probably check out at around age 85 but my plan assumes it will be 90. I get to spend a little more each year than if I had a plan to take me to 100, which is very unlikely. My second point is that you don't develop a plan when you are 65 and then stick to it until you die. You review your plan annually and adjust it as needed. If it turns out you will have some unforeseen costs related to long term care, then you will need to dial it back a little. If it turns out that your doctor tells you that you have two years to live, you may want accelerate your spending a little. Same if you win the lottery. You made a good point about a written plan though. You cannot tell people what your plan was after you are gone unless you write it down.
@@jamesdarnell8568 i
I've decided to defer my federal pension to age 70, where it will be about 42% higher (in Canada), by using a couple hundred k in cash from my retirement savings to bridge the deferral period. The effect, from a lifetime guaranteed cash flow perspective, is similar to using the same money to purchase an annuity, except the payout is significantly higher than current annuity rates AND the payout is indexed to inflation with open ended indexing, something you can't get with an annuity at any price. My bridge-then-federal pension plus company DB pension brings my guaranteed income level to about 60% of total income when investment income is added on top, allowing me to go all-stock with a focus on hard asset cash flow holdings. A crash that causes a 60% drop in distributions/dividends will only lower my gross income by about 20-25%.
As you noted bond yields are very low for high quality bonds, so to expect anything like historic bond yields you need lower rated higher yielding bonds. Maybe something like VWEHX. Investing in treasuries is just a market timing cash drag ploy that doesn't work.
It's definitely a problem. One thing I neglected to point out, however, is that while bonds go down in value when rates rise, we do at the same time benefit from the higher rates. It takes time, but eventually the higher rates offset the loss of value on the bonds.
Boy george and ATeam, heck seems like a couple of months ago.
Is it possible to project how much is left after 30 years from 100% stock vs 60:40 with 4% withdrawal each year?
There are studies that show this. Here's one of them: (Exhibit 1, p. 8)--blog.iese.edu/jestrada/files/2015/08/Glidepath-2.pdf
"I pity the fool who doesn't like the 60/40 portfolio!" -Mr. T
Sell your gold chains and buy a new van.
@@geoffgordon9569 😂
Rob, your videos are great. However, you need to upgrade your mike. Too much good information to miss parts of it.
I think Vanguard's Wellington Fund is the 60/40 with good historical data. I'm with you on the diversification. I've got some international stocks and bonds in my portfolio along with REITs and TIPS because the last two typically don't correlate with equities during crashes. I hope it buys me some extra stability during equity selloffs.
And VBIAX is an index version of the 60/40: investor.vanguard.com/mutual-funds/profile/overview/vbiax
Wellington fund is my biggest holding. It's pretty hard to beat!
FBALX is very similar to Wellington in allocations and returns. I think Wellington is still closed to new investors.
It's not closed if you buy it through vanguard.
I brought it and moved it over to Merril lynch and dollar cost average into it weekly.
@@nbarbeer not since inception
Cant seem to find this pie chart on my Vanguard account anymore, can you assist? thx
Obsolete data. Bonds will never repeat history. The data needs to start 2021 and predict capital losses. So why present. Cash does better than bonds.
The "present" is all we have. You are making the erroneous assumption that we can predict interest rates. Everyone has been wrong in doing so at least for the last 2 decades.
👍😊
Dave Ramsey said the the biggest problem is not asset allocation or even rate of return. The problem is that people don't invest enough money. This is likely generally true but an over simplification. Scott Burns has a "couch potato" long term approach of 50/50 stock and bonds. The person who actually does this does quite well over time.
Dave ramsey also tells people to waste prime decades of compounding growth on paying off sub 3% mortgage debt.
@@aaront936 Don't underestimate the value of having a paid off home. It's great feeling when the inevitable recessions come.
A paid off home is very powerful and brings you peace of mind… look at how many people that were living very comfortable in their bank owned homes during the pandemic… lost their job due to no fault of their own and are now renting or out in the streets
Investing earlier in life can make up for not investing enough money. You have time and compounding on your side.
I'm going 90/10 till I die. Playing catch up means taking more risks.
MNU!
Personally i don't like it. I am playing catch up right now. I took the bonds out completely out of my biggest account. It was really stagnating my account growth especially being in a bull market.
But I don't see how your situation applies since you're still in the accumalation phase and not the retirement phase. I think most people would and probably should treat their portfolio a lot differently if they're retired vs still working. My understanding is this video is targeted towards those who have retired already and trying to determine if the 60/40 portfolio is right for them.
@@ariefraiser140 My financial advisor did that. I told him to take me out of the 60/40 split since i need the growth. I understand someone trying to minimize their loss in a bear market. I just wanted to hear what you had to say. There are alot of people behind on retirement.
Do you think a 70/30 portfolio would be better than a 60/40 ????
Mr Buffet is looking at a 90/10 split for his wife when he pops his clogs. Might this be a nod to these artificially low bond yields currently.
How about 60% in total stock market instead in S&P 500. Wouldn’t that be a better option? Also returns on bonds have been a drag in recent years. Maybe keeping 40% in cash would work better instead.
Great content but I wish your videos were a bit shorter. 30 minutes? I have to watch your content at 2x speed.
Yeah, I hear you. But I want to provide a lot of detail so folks can understand my reasoning and then do their own research. Perhaps I can try a 5 minute summary at the start, followed by more detailed explanation.
@@rob_berger your video lengths are perfect for my commute. Thank you.
Why not do 100%? You make a lot more $
True, over the right time period. In retirement, however, the volatility could be a problem, particularly if you retire just before a significant bear market.
@@rob_berger ok
Why does none of the advice take into account the absolute value of your portfolio? If you have $ 10 million, who cares how much you have in bonds. You will always have money. What if you only have $100,000 and the stocks drop 40%. You better have had short term bonds.
@rob_berger everything you mentioned on this video happened in 2022 when stocks fell 20% and with interest rates going up bond funds fell as well but you’re right we all are long term investors, this era is just a blip in a person’s investing horizon and that staying the course is key to investment success
what about cryptos?😅
so that's a 3 in 4 chance to not live past 90 and a 9 in 10 chance to not live past 100. LOL investing is a lot like gambling, odds are the only reality.
Rob, curious to hear what you think about portfolio complexity when it comes to bequests. That is, my spouse shows no interest in the details of what she will likely inherit from me. Like you, I've fought hard to eliminate debt and keep investing expenses low. Do I endanger all that hard work by leaving her a portfolio that consists of more than one fund when I could just leave it all in something like VBIAX or one of the LifeStrategy funds? In my mind, endanger in this case equals the possibility that she will find it too confusing and take it straight to a high fee shop when I'm gone. I have the details of everything spelled out for her in my estate documents and we've talked about it, but haven't seen a real interest yet from her in getting her head wrapped around it all.