The 60/40 Portfolio - If It's Broken, Then Fix It!
Is the 60/40 Portfolio Broken?
And if so, what are you doing about it?
The simple truth is that the likelihood of bonds posting returns anywhere near their historic levels is close to zero. Mathematically speaking, investors will simply not enjoy the same return streams from high quality bonds and U.S. Treasury Bonds that they have over the last 30+ years.
Now with a demographic wave of Baby Boomers turning 65, 10,000 per day for the next 15 years (according to Pew Research), their capital is irreplaceable, while they need income to supplement Social Security and cover living/health costs.
Bonds typically serve 2 roles in a portfolio: income and capital preservation.
Yet with the U.S. 10yr yield at 1.58% (as of close 7/25/16), bonds are not producing much income.
And if/when rates rise, bonds will be hard pressed to provide the capital preservation.
In this piece we explore here the impact of interest rate changes on the 60/40 portfolio, as well as, what returns equities must generate in order to sustain assumed portfolio returns often used in financial/retirement planning.
Click on the button above to access our full white paper
And if so, what are you doing about it?
The simple truth is that the likelihood of bonds posting returns anywhere near their historic levels is close to zero. Mathematically speaking, investors will simply not enjoy the same return streams from high quality bonds and U.S. Treasury Bonds that they have over the last 30+ years.
Now with a demographic wave of Baby Boomers turning 65, 10,000 per day for the next 15 years (according to Pew Research), their capital is irreplaceable, while they need income to supplement Social Security and cover living/health costs.
Bonds typically serve 2 roles in a portfolio: income and capital preservation.
Yet with the U.S. 10yr yield at 1.58% (as of close 7/25/16), bonds are not producing much income.
And if/when rates rise, bonds will be hard pressed to provide the capital preservation.
In this piece we explore here the impact of interest rate changes on the 60/40 portfolio, as well as, what returns equities must generate in order to sustain assumed portfolio returns often used in financial/retirement planning.
Click on the button above to access our full white paper
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