How the Classic 60/40 Investment Strategy Fell Apart

Ryan Wheless discusses a recent Wall Street Journal article talking about how the classic 60/40 investment strategy falls apart and for many it feels like there is no place to hide.

Both the stock and bond market are down substantially in 2022 which has dramatically hurt the 60/40 balanced portfolio allocation so many investors and retirees and retirement-minded individuals.

For decades, Americans planning for retirement have been advised to invest in a mixture of stocks and bonds.

The idea was simple. When stocks did well, their portfolios did, too. And when stocks had a bad year, bonds usually did better, which helped offset those losses.

The 60/40 investment strategy was one of the most basic, dependable ways of investing, used by millions of Americans. This year it stopped working.

What is a 60/40 portfolio?

A 60/40 investment strategy is a type of strategy that involves dividing your investment portfolio into two main asset classes: equity and bonds. The goal of this approach is to balance the potential for high returns from stocks with the stability and income provided by bonds.

Stocks, also known as equities, represent ownership in a company. When you own stock in a company, you have the potential to earn returns through dividends and capital appreciation, which is the increase in the value of the stock over time. However, stocks are also subject to market fluctuations and can be more volatile than other investments.

Bonds, on the other hand, are a type of debt instrument that allows investors to lend money to a government, municipality, or corporation in exchange for periodic interest payments and the return of principal at the end of the bond’s term. While bonds are generally considered to be less risky than stocks, they may not offer the same potential for high returns.


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