Are 60-40 Multi-asset funds dead?

threlkeld53

I came across Pensioncraft videos on Youtube. A few in particular suggested that multi-asset funds with a 60%-40% split between equities and bonds were now more or less dead and no longer worth investing in.

For somebody planning to contribute into multi-asset funds with this particular split, it does play on one's mind. Then again, I also came across a video which suggested the opposite and that the videos in question were grossly exaggerated.

I suppose it makes life easier to watch less Youtube videos!

dunstonh

I came across Pensioncraft videos on Youtube. A few in particular suggested that multi-asset funds with a 60%-40% split between equities and bonds were now more or less dead and no longer worth investing in.

circa 60% equity split is probably the most dominant out there. Both across multi-asset funds and investment portfolios.   Whoever is referring to it as dead and not worth it doesn't understand investing and should be ignored.

mark55man

There is an active thread on Annuities which is (towards the end) suggesting that the 40% (or any proportion of bonds) is unlikely to behave as well in the future as in the past. 

Which is different from saying they are any better or worse than the alternatives from this point on - but that they are unlikely to be able to fulfil the role that people want from them in providing a blend of stability and return

Audaxer

mark55man said:

There is an active thread on Annuities which is (towards the end) suggesting that the 40% (or any proportion of bonds) is unlikely to behave as well in the future as in the past. 

People having been saying that about bonds for the last 3 or 4 years and they are still doing okay. Who knows what will happen in the future, but 60:40 portfolio for a retiree still seems to me like a good option.

JohnWinder

Thanks for the pointer to the Pensioncraft videoes.

You and I must have watched a different one. The 'Is the 60/40 Portfolio Dead?' video concludes there's nothing obviously better amongst the options they considered, and that rather than making any portfolio changes one simply needs to recognise that returns in the medium future may be less than in recent decades. All up, I don't think there was much to criticise there, and nothing to be alarmed about. Just keep in mind that asset correlations in the past may not be those in the future.

Good luck.

Thrugelmir

"Worth investing in" is a subjective term. The offset of potentially lower returns in the future from a 60:40 portfolio is to increase contributions to the investment. As an investor never assume there's a free lunch to be had. Control your own destiny. 

[Deleted User]

I’ve heard this for at least 10 years. And yet year in, year out a balanced 60/40 portfolio does the job.  Whether its 2008 or March 2020, 60/40 had a short and small drop followed by a quick recovery. 

...but I don’t like long duration bonds right now.

NottinghamKnight

Deleted_User said:

I’ve heard this for at least 10 years. And yet year in, year out a balanced 60/40 portfolio does the job.  Whether its 2008 or March 2020, 60/40 had a short and small drop followed by a quick recovery. 

...but I don’t like long duration bonds right now.

Yes, that bond elastic band keeps stretching, it will presumably break at some point. 

Bravepants

If I listened to every single opinion on T'Internet, they would likely all cancel each other out and I'd never do anything!

Albermarle

It feels more comfortable at this moment in time to have the '40' more diversified than previously e.g less bonds and more cash.
Or more in property, precious metals, infrastructure etc but dumping bonds altogether seems a bit extreme.

dunstonh

You don't invest in bonds to make money (caveats apply).   You invest in them to reduce investment volatility to a level that you are comfortable with.  Unless everyone suddenly gets a risk tolerance/capacity for loss for 100% equity, then there will always be a need for risk-reducing assets.
Investment grade bonds are generally out of favour at the moment for risk reduction.  Cash and Gilts are seen as the least worst option.  There is no ideal alternative option available and until there is, cash and gilts (and bonds in other times) will continue to fill that gap.