Reports of the death of 60/40 have been greatly exaggerated
The Portfolio Construction and Strategy (PCS) Team at Janus Henderson believes that it is (once again) too early to call time on the classic “60/40" and traditional balanced portfolios. But why?
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- There were just four years between 1928 and 2022 when both equity and bond markets fell and in which the returns of balanced allocations subsequently also slipped into the red.
- Balanced portfolios have the unique characteristic of providing investors with a potentially competitive return during positive market environments and packing an element of fixed income-like protection during selloffs.
- We on the PCS team believe that a nimble allocation to dynamic, one-stop actively managed multi-asset strategies can help investors to stay true to their long-term objectives.
The story of balanced portfolios is one of consistency and long-term investment, combining the best of both worlds from equities and bonds. But the scale of market turmoil and uncertainty over the last 18 months, together with a year like 2022 when both bonds and stocks posted double-digit losses, resulted in a loss of confidence in these hybrid investment strategies.
Though there is no guarantee of positive returns each year, those patient investors who retained conviction in balanced strategies have been rewarded with double-digit returns thus far in 2023, despite the ongoing war in Ukraine, sustained inflationary pressures and consequent central bank intervention. This piece gives some insight into why investors should keep in mind how a nimble allocation to actively managed asset allocation strategies can help them to achieve their long-term objectives.