Is the 60/40 Portfolio Dead? Exploring Alternatives for Smarter Asset Allocation

For a long time, the 60/40 portfolio was the cornerstone of financial planning for advisors. This simple strategy, allocating 60% to stocks and 40% to bonds, offered a balance between growth potential and stability. However, recent market trends are challenging the effectiveness of this traditional approach, prompting advisors to explore alternative asset allocation strategies.

Why is the 60/40 Portfolio Crumbling?

  • Low Bond Yields: Bonds offer minimal income due to historically low-interest rates. This weakens the 60/40 portfolio’s ability to hedge against stock market downturns and reduces overall returns.
  • Market Concentration: Major indices like the S&P 500 are dominated by a few large companies, leading to overexposure to specific sectors. This reduces diversification, a crucial risk management principle.
  • Increased Volatility: Geopolitical tensions, inflation concerns, and other factors create a more volatile market. The 60/40 portfolio might struggle to keep pace with growth or adequately protect against significant losses.

Read the full article on the Equity Armor blog

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Joe Tigay, Portfolio Manager
Joe Tigay, Portfolio Manager
Joe Tigay is Managing Partner at Equity Armor Investments, sub-advisor to a volatility-hedged equity strategy at Rational Funds. Joe began his career in finance as an options market maker with Stutland Equities LLC. in 2005, working on the Chicago Board of Options Exchange and specializing in electronic market making. In 2008, Mr. Tigay became a member trader of the Chicago Board of Options Exchange (CBOE). As a member trader, Joe was a very active market maker in both SPX and VIX options from 2008 to 2012. Discussing options, volatility, and market insight, Joe has appeared on Bloomberg, BNN, and has a regular segment on CBOE.tv. Joe graduated from Michigan State University with a B.A. in Economics. He currently holds licenses for Series 3, 56, 65.

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