Last Week US News and World Reports asked for my opinion on the the following question: “As stocks and bonds sank in tandem this year, market watchers couldn’t help but wonder aloud: Has the traditional 60/40 portfolio outlived its usefulness?” It is an important question because the answer impacts tens of millions of investors.
Today, US News and World Reports published my answer and commentary in their article “Is the 60/40 Portfolio Dead?” Here are my comments featured in the article.
“Markets do go down, and it is important to remember that when they are down, buy more,” Weir says. Avoid selling in a panic when the market is down, he says.
He notes that equities have gone down as much as 30% recently. “If you look at the growth of the U.S. economy over 30 years, it is a good time to be in. It is a good time to buy if you’re not in,” he says. “If you’re in and down, it is a good time to add. But it goes back to perspective and timing. The more time in the market, the better the result.”
When it comes to the fixed-income allocation, Weir says a good mix would be 60% equities, 20% bonds and 20% cash. But that doesn’t mean the cash should be parked there indefinitely.
“It is worth considering taking the 20% cash and investing it monthly over the next year,” he says.
For stability of the sort that a 60/40 strategy is intended to convey, Weir suggests including not just stocks, but also 20% commodities, along with 10% cash and 30% fixed income. “This approach would likely be more stable than a simple mix of just stocks and bonds,” he says.