This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is The 60/40 Portfolio Obsolete? 2 Experts Debate

By MARK JEWELL

BOSTON (AP) â¿¿ Is it time to retire the idea of a 60/40 portfolio? The strategy has been generally regarded as a good starting point for most investors.

But many experts question whether a mix of 60 percent stocks and 40 percent bonds is suitable. Over the years, 60/40 has become a rough gauge for how to build adequate retirement savings without taking excessive risk. Typically, it's promoted as a sort of default portfolio balance for investors in their 40s, or even closer to retirement.

The basic rationale: Keep most of your retirement savings in the stock market, because stocks are likely to provide greater long-term growth than bonds. But when stocks fall, you'll want a significant percentage of your portfolio in bonds to cushion against steep losses.

That approach is under fire. Many suggest it's important to have more than 60 percent invested in stocks. That's because retirement can stretch for several decades, and investors will need to increasingly rely on stocks to limit the risk of outliving savings. Also, the long-term outlook for bonds is poor. Their yields are near all-time lows and interest rates are certain to eventually climb.

Another criticism: 60/40 is too narrow an approach to build a truly diversified portfolio because it fails to consider alternative assets classes. Think of investments in commodities such as oil, precious metals or real estate investment trusts. Alternatives may also include using complex strategies that hedge funds pioneered to protect against losses when stocks plunge or inflation spikes. These approaches may sound uncommon, but they're readily available. Hundreds of mutual funds using alternative assets or strategies have been launched in recent years.

The Associated Press interviewed two experts in asset allocation â¿¿ the mix of stocks, bond and alternatives in a portfolio â¿¿ to try to get to the heart of the debate.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG

Markets

DOW 18,080.14 +21.45 0.12%
S&P 500 2,117.69 +4.76 0.23%
NASDAQ 5,092.0850 +36.0220 0.71%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs