ADVISORY

October 28, 2022 The 60/40 Portfolio Model Revival

For decades, the 60/40 portfolio has been a highly regarded method of portfolio construction. In its simplest form, the 60/40 portfolio is having 60% of your portfolio invested in higher risk, historically higher return, assets such as stocks and the other 40% invested in lower risk, but lower return, assets such bonds.    For several decades the 60/40 portfolio strategy consistently provided investors with risk adjusted returns outperforming a 100% all equity portfolio, like the S&P 500 Index. The returns for the 60/40 were marginally lower, but the volatility was largely lower.   2022 has been challenging for 60/40 portfolios. The total return of the 60/40 was historically low due to persistent inflation, rising interest rates and growing recession fears. There is a fear that continued high inflation levels could continue to produce a positive correlation between stocks and bonds, reducing the potential diversification benefits of a 60/40, stock/bond mix. It is tempting to want to give up on the 60/40 portfolio, but we believe its long-term prospects are likely to be robust, and now, even more than for years, its potential is excellent.     The 60/40 is designed for a long-term investor. Over the past 95 years, this strategy has been positive 78% of the time.

Notice one particularly painful thing about the above table? Correct, there are only two years in the last ninety-five where the 60/40 performed worse than 2022. Talk about an outlier year!    It appears that Central Bank intervention will continue. The Fed has been proactive in fighting inflation, but recent past is not representative of permanent future. In the markets, the only constant is change. We believe that bonds remain good diversifiers for stocks, and stocks good diversifiers for bonds, each helping to dampen the effects of volatility of the other, especially so for bonds dampening stocks volatility.   While the 60/40 portfolio did not produce positive results so far in 2022, we believe that a long-term, prudent approach to a volatile market is using a 60/40 portfolio, or other closely similar combination of stock/bond, to produce competitive risk adjusted returns. Welcome back 60/40. Call us today at 833-592-5252 or visit us at www.vestbridge.com.

Thank you for the opportunity to be of service.   Sean Hanlon, CFP®, and Linda Lemieux

Vestbridge Advisors, Inc. (“VB”) Is registered with the US Securities and Exchange Commission as a registered investment advisor with principal offices at 3393 Bargaintown Road, Egg Harbor Township, NJ. The information contained in this publication is meant for informational purposes only and does not constitute a direct offer to any individual or entity for the sale of securities or advisory services. Advisory advice is provided to individuals and entities in those states in which VB is authorized to do business. For more detailed information on VB, please visit our website at www.Vestbridge.com and view our Privacy Policy and our ADV2 Disclosure Document that contains relevant information about VB. Although VB is a fairly new organization, any references herein to the experience of the firm and its staff relates to prior experience with affiliated and nonaffiliated entities in similar investment related activities. All statistical information contained herein was believed to be the most current available at the time of the publishing of this publication.

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3393 Bargaintown Road | Egg Harbor Township, NJ 08234 (833) 592-5252 | Vestbridge.com