The 60/40 portfolio is not dead and remains a valuable approach to investing as inflation rises, economists have claimed.
Poor performance in 2022 led many to question the effectiveness of the 60/40 approach.
But speaking at the FTAdviser Financial Advice Forum on Thursday (September 28), George Lagarias, chief economist at Mazars Wealth Management said there is still value in this approach as an investment practice.
The 60/40 portfolio sees investors put 60 per cent into stocks and 40 per cent in bonds.
He said: “It is not dead, as an investment principle it still holds.
“If there is any reason why equity shouldn’t perform, bonds promise you yield.
“Because we see correlations going down this is actually the environment for the 60/40.”
While Freya Beamish, chief economist at GlobalData TS Lombard, warned that investors have to be careful of rising yields which could affect the approach.
She added: "The 2010s were an anomaly in the 60/40, it was a very abnormal period, we had hyper globalisation. It was good for asset prices but we are moving away from a tight fiscal policy."
In May this year, responses to an FTAdviser poll revealed 44 per cent of advisers said they saw no change in the role of corporate bonds in the 60/40 portfolio while 37 per cent said they saw an increasing role for this type of asset.
Last month, Russ Koesterich, BlackRock’s managing director with global allocation, said the 60/40 portfolio has “mounted a respectable comeback”.
In a Blackrock blog post, he wrote: “For most long-term investors, a broad mix of stocks and bonds still makes sense.
“That said, it is likely that recent changes in bond markets represent a fundamental shift in the investment landscape. Investors needn’t abandon the 60/40 portfolio, but they should consider being more flexible and dynamic in how they implement hedges.”
tara.o'connor@ft.com
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