The 60/40 portfolio has been a popular investment strategy for many years. It consists of 60% stocks and 40% bonds. This mix has provided steady returns for investors.
However, the 60/40 portfolio has faced some challenges recently. In 2022, many of these portfolios lost over 15% of their value. This has led some to question whether the 60/40 mix is still the best approach.
Despite the recent struggles, the 60/40 portfolio has a strong long-term track record. Todd Schlanger, a strategist at Vanguard, noted that these portfolios have returned an average of 6.8% per year since 1997. The key to success with any investment strategy is to stay invested for the long haul.
Challenges facing the 60/40 mix
This means balancing risk and reward while keeping costs low. A mix of dividend stocks and low-cost ETFs may be a smart approach for those nearing retirement.
The Vanguard Balanced Index Fund is a good example of a successful 60/40 fund. It was started in 1992 and now manages over $57 billion. Despite a tough year in 2022, the fund has performed well over the long term.
It has beaten most managed funds over 10- and 15-year periods. The fund’s strong performance is due to its low expenses, which average just 0.18% per year. It also maintains a steady 60/40 balance of U.S. stocks and bonds.
By investing wisely and avoiding knee-jerk reactions to the market, investors can achieve solid returns over time.
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