Tried And True But Not So Good This Year

The 60/40 portfolio has survived the test of time, and yet, no one likes it this year. It is down more than 15% year to date and is unlikely to recover in the 6 weeks remaining in the year. Since 1928 there have been five instances where such a portfolio fell more than 10% year over year. Three of those were before 1940.

History doesn’t command the future, but you might want to consider that it tends to have a driver of some kind. Probably the economy itself. You could think about the portfolio in terms of how likely the economy is to be strong enough to support growth that averages more than 9%.

On the other extreme

There have been nine instances where the year earned more than 25%, but the last was in the late 1990s. As bond interest rates fell from their peak in 1980, the bond share of the portfolio did well. I think it is likely that band rates will rise rather than fall in the near term and so hold down increases in value in the 40%.

If you have been in the habit of using this portfolio style, it is not the time to lose faith. Every market needs a period of adjustment to dial out inefficiencies. This time is no different.

The bit to take away

Patience is a superpower, even when it doesn’t feel good right now.

I build strategic, fact-based estate and income plans. The plans identify alternate ways to achieve spending and estate distribution goals. In the past, I have been a planner with a large insurance, employee benefits, and investment agency, a partner in a large international public accounting firm, CEO of a software startup, a partner in an energy management system importer, and briefly in the restaurant business. I have appeared on more than 100 television shows on financial planning and business matters. I have presented to organizations as varied as the Canadian Bar Association, The Ontario Institute of Chartered Accountants, The Ontario Ministry of Agriculture and Food, and Banks – from CIBC to the Federal Business Development Bank.

Be in touch at 705-927-4770 or by email at

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