According to some money managers, it depends. “A 60/40 allocation is appropriate for many investors at some point in their lives,” Goland said. “An alternative is to adopt a more flexible strategy where your allocation weightings change over time depending on your time horizon, cash flow needs and risk tolerance.”
60/40 is a low split and definitely favors the boss/owner. 70/30 is more in line with what lots of groups offer, but I have seen better ones yet. I just pay a flat rate for the office and keep 100%.
The 60/40 is fine and has always been fine for moderate risk tolerance so I would suggest leaving it alone.
How Many Stocks and Bonds Should Be in a Portfolio? If you take an ultra-aggressive approach, you could allocate 100% of your portfolio to stocks. A moderately aggressive strategy would contain 80% stocks to 20% cash and bonds. For moderate growth, keep 60% in stocks and 40% in cash and bonds.
Which Mix Is Right for You? If you're a younger investor with a long time horizon and are comfortable taking on more risk, the 80/20 portfolio may be a good fit. However, if you're closer to retirement or prefer a more conservative approach, the 60/40 portfolio may be a better option.
The reality is that stocks do have market risk, but even those of you close to retirement or retired should stay invested in stocks to some degree in order to benefit from the upside over time. If you're 65, you could have two decades or more of living ahead of you and you'll want that potential boost.
The 60/40 portfolio, a long-used allocation strategy, has been challenged since the link between economic growth and inflation started to sever during the pandemic. Bonds' low or negative correlation to stocks, low volatility and consistent returns reversed, limiting their effectiveness as a portfolio diversifier.
The 60/40 Portfolio Performance in 2024
Kephart: 2024 has been great for the 60/40 portfolio. It's up over 15% for the second year in a row. Both stocks and bonds have had positive returns.
Under this strategy, the owner would pay themself 60% of earnings as a salary and the other 40% as distributions. [1] That percent split is applied regardless of the company's earnings, which makes it easy and often advised by accountants and other sources, but also problematic.
The 60/40 landscape is different in 2024
Inflation has eased. Interest rates are falling but still elevated, which means new bonds are paying solid returns. And investors who follow the 60/40 rule are doing pretty well. In 2022, by Jablonski's calculations, the 60/40 portfolio lost 15.8%.
When you're focusing your energy into giving 60% into your relationship and only expecting 40% back, that's when you've developed a healthy and successful relationship. This is my new golden rule. Lindsey Porter and 15 others.
Yet it's remarkable how little thought has been put into the right approach to time management for key leaders. My suggestion: Spend 60% of time scheduled – divided into quarters: 1/4 each devoted to customers, external constituencies, product and people. Spend 40% on unscheduled activities.
With $1 million in a 401(k) and no mortgage on a $500,000 home, retirement at 60 may, in fact, be possible. However, retiring before eligibility for Social Security and Medicare mean relying more on savings. So deciding to retire at 60 calls for careful planning around healthcare, taxes and more.
Since 1997, the interquartile range of 10-year returns remained relatively tight around its 6.8% average annualized return at 5.6% to 7.6%. Diversification drives the 60/40 portfolio's long-term consistency.
“With a nest egg of $100,000, that would only cover two years of expenses without considering any additional income sources like Social Security,” Ross explained. “So, while it's not impossible, it would likely require a very frugal lifestyle and additional income streams to be comfortable.”
“But that's not to say that 60/40 is any better than a 40/60 or 90/10 portfolio for investors who need a more conservative or more aggressive portfolio for their goals, time horizon, and risk tolerance. In other words, 60/40 is not the best choice for the average twenty-something with a 60- or 70-year time horizon.
The “Rule of 110” is a popular glide path rule of thumb that suggests the percentage of equities should be 110 minus your age, with the remainder invested in fixed income or other stable investments. For instance, a 70-year-old retiree might aim for 40% in equities and 60% in bonds or cash equivalents.
Once a mainstay of savvy investors, the 60/40 balanced portfolio no longer appears to be keeping up with today's market environment. Instead of allocating 60% broadly to stocks and 40% to bonds, many professionals now advocate for different weights and diversifying into even greater asset classes.
Bonds remain a safe, easy way to save and earn money over time. The Treasury guarantees to not only pay you back – but to double your initial investment over 20 years.
The 60/40 portfolio should offer a better risk-reward in 2024. The 60/40 formula for buy-and-hold investment portfolios may return between 4% and 5% and become less risky next year, as major central banks gradually pivot from ratcheting up interest rates to lowering them, according to Goldman Sachs Research.
What Should My Portfolio Look Like at 55? Begin by evaluating your tolerance for risk at that age and decide how focused on growth you still need to be. Some financial advisors recommend a mix of 60% stocks, 35% fixed income, and 5% cash when an investor is in their 60s.
Older investors in their 70s and over keep between 30% and 33% of their portfolio assets in U.S. stocks and between 5% and 7% in international stocks. Generally speaking, your age determines how much risk you're willing to take on your investments.
Treasuries are safe investments because they are backed by the “full faith and credit” of the US federal government. The US government has never defaulted on a debt obligation. One special category of treasury securities is Treasury Inflation-Protected Securities (TIPS). TIPS interest rates are indexed to inflation.
Aggressive portfolios generally contain investments with an increased potential for capital appreciation. They tend to have larger allocations of stocks and smaller allocations of bonds and cash reserves. Aggressive investment strategies are most commonly pursued by young investors who are still of working age.