Just 14% of Financial Pros Are ‘Very Confident’ in This Popular Strategy

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Skeptical financial advisor
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Some savers have no problem taking on risk and investing a huge share of their money in stocks. Others get very nervous at the thought of losing any cash, even if it’s only temporary.

The sweet spot between these two extremes long has been the “60/40 portfolio.” In this approach, investors put 60% of their money into stocks and the other 40% into bonds.

But this tried-and-true approach holds less sway over today’s financial advisors. Just 14% of advisors say they are “very confident” that such a strategy will work as well in the future as it has in the past, according to a recent survey by the Financial Planning Association.

To be fair, the survey of 208 financial planners did find that 75% of these advisors expressed at least some level of confidence that a 60/40 portfolio would deliver returns similar to those it has offered in the past. (That 75% includes the 14% “very confident,” as well as 32% who were “confident” and 29% “somewhat confident.”) And that share is actually higher than the 71% who felt that way in 2023.

But the lack of deep conviction that a 60/40 portfolio will work as well as it has in the past is a sign that advisors suspect something has changed.

This is not the first time that financial pros have voiced some doubt about the future performance of the 60/40 portfolio.

When stocks and bonds plunged in unison in 2022, many pundits played taps for the 60/40 approach. That year, stocks fell about 19%, while bonds fell 13%.

However, as Morningstar reported, the 60/40 portfolio rose from the ashes in 2023, with the combination leading to a healthy 18% gain. Morningstar also noted that the portfolio outperformed other highly touted strategies last year.

Writing for Morningstar, chartered financial analyst Amy Arnott acknowledges that the 60/40 portfolio could underperform in the future, particularly if inflation again shoots higher. During periods of higher prices, stocks and bonds tend to move in the same direction, either higher or lower.

The moral of the story — as ever — is that even those who study the markets for a living have a very difficult time forecasting what the future might hold.

As Arnott writes for Morningstar:

“The 60/40 portfolio strategy may not be perfect, but its simplicity and proven long-term resilience make it a much better starting point than most other approaches to portfolio construction.”

Perhaps the 60/40 portfolio makes sense for you. Or, maybe another approach would suit you better. If you are unsure, you might want to consider consulting a financial advisor of your own.

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