Return of the balanced portfolio

[Adamski]

Vanguard lifestrategy 60, 60% equities/ 40% bonds, has had a good year.

2022 was a bad year for both stocks and bonds and after that many commentators suggested the 60/40 portfolio dead. However some commentators are now returning to the balanced portfolio for passive investors:-

"Vanguard has “substantially” increased its U.S. bond return expectations over the next decade to a nominal annualized 4.8%-5.8% compared with 1.5%-2.5% it expected before the Fed’s rate-hiking cycle began. Similarly, for international bonds, Vanguard expects annualized returns of 4.7%-5.7% over the next decade, compared with a forecast of 1.3%-2.3% when policy rates were low or, in some cases, negative."

Also with interest rares now at 5.25% can get 5% on 1-2 year bonds with banks and building societies which can be used instead of bonds to de-risk portfolios and lower volatility. .. that's my approach anyway.

I think those "100% stocks" are (I guess will be) diversified by other means such as cash savings and/or workplace pensions.

Your thoughts on the classic 60/40 for 2024?

[tjh290633]

Vanguard lifestrategy 60, 60% equities/ 40% bonds, has had a good year.

2022 was a bad year for both stocks and bonds and after that many commentators suggested the 60/40 portfolio dead. However some commentators are now returning to the balanced portfolio for passive investors:-

"Vanguard has “substantially” increased its U.S. bond return expectations over the next decade to a nominal annualized 4.8%-5.8% compared with 1.5%-2.5% it expected before the Fed’s rate-hiking cycle began. Similarly, for international bonds, Vanguard expects annualized returns of 4.7%-5.7% over the next decade, compared with a forecast of 1.3%-2.3% when policy rates were low or, in some cases, negative."

Also with interest rares now at 5.25% can get 5% on 1-2 year bonds with banks and building societies which can be used instead of bonds to de-risk portfolios and lower volatility. .. that's my approach anyway.

I think those "100% stocks" are (I guess will be) diversified by other means such as cash savings and/or workplace pensions.

Your thoughts on the classic 60/40 for 2024?

As one of those 100% stocks people, you are correct that I have a state pension, an occupational pension and an index-linked annuity. My portfolio therefore has that backup and it's purpose is to fund occasional big purchases or long cruises.

Having said that, I would still steer well clear of bonds.

TJH

[Adamski]

Having said that, I would still steer well clear of bonds.

They've had an ok year, after a terrible one in 2022. I think they're useful in smoothing volatility and helping an investor sleep at night. But do think fixed interest at banks better now that they offer a guaranteed 5% return.

Good to have bavkup options. Long cruises, not my thing, but know lot love them.