403(b) Curriculum Library

Chart of the Month: Range of Stocks, Bonds and Blended Total Returns

Source: Morningstar
Data: Stocks: S&P 500 Index, Bonds: Bloomberg Barclays U.S. Aggregate Bond Index, Blend: 60% S&P 500 Index/40% Bloomberg Barclays U.S. Aggregate Bond Index

Market Observations

A 60/40 mix of stocks and bonds is the classic asset allocation for investors. It is easy to see why a 60/40 portfolio mix has been so popular over the years, as the blend has generated equity-like returns, with lower investor risk for a significant annual portfolio drawdown. As stock valuations are near all-time highs and bond yields are still hovering near all-time lows, there has been a lot of speculation that the 60/40 blend may no longer be appropriate for investors. While return expectations over the coming decade are likely to be more muted compared to longer-term historical averages (J.P. Morgan estimates a 60/40 U.S. stock-bond portfolio mix will only produce a 5.4% return over the next 10-15 years), this asset mix remains a simple starting point for investors. However, investors should increasingly look for diversification in other asset classes, such as dividend-paying stocks, global equities, REITs or high-yield bonds, which overtime can help reduce risk and enhance returns.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.

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