If 60/40 Recipe Sours, Maybe Stir in Some Bitcoin
With government bonds no longer offering a buffer against a drop in equities, investors will have to get more creative.
Stacking up the alternatives.
Photographer: Chris Ratcliffe/Bloomberg
The 60/40 portfolio has been a mainstay of investing for years. After all, it’s been a winning defensive strategy — allocate the bulk of a fund to riskier equities with the remainder seeking the relative safety of fixed income. But with stratospheric stock markets sparking talk of a bubble, the bond side of the trade risks failing in its role of cushioning returns. Investors need to consider alternative buffers.
If the tide is turning, it would undermine a useful method for navigating markets. Returns by funds from Vanguard Group Inc., BlackRock Inc. and Dimensional Fund Advisors LP that use a 60/40 strategy were protected from a decline in global stocks in 2018 by their bond holdings.