60/40Mixed Asset Funds

ChainsawCharlie

Xxxxxxxxxxx

uss_tish

Interested in views too as my VLS60 opened in Nov 21 is minus 9.6% and seems on a continuing downward trend 😫

masonic

The landscape is changing. The correction in the bond market is already well underway and interest rate rises up to about 2.5% are already priced in. The UK Gilt index has fallen 20%, so much of the concerns have now been realised.

Albermarle

uss_tish said:

Interested in views too as my VLS60 opened in Nov 21 is minus 9.6% and seems on a continuing downward trend 😫

It is not just VLS 60 though . The large majority of  investments are down this year . The  tech heavy Nasdaq index is down 26% this year and I have a managed UK fund that is down about the same. ( bad choice in hindsight ) 
However overall in my approx 60/40 portfolio , due to the well telegraphed issues with bonds, I replaced some of them last year with alternatives , like infrastructure funds, property and precious metals and they have done OK and have checked the decline down to about 7% .
So it is probably more accurate to say that I have a 60:20:20 . Then if you take account of cash savings it is more like 50:15:15:20( cash ) 

JohnWinder

Well, it’s not dead by usual meanings of dead, as people still use it with conviction.

If ‘dead’ means it won’t be any good in the future, well I want to see their record of predicting investment returns to know if I can trust their predictions.

If it is going to be a failure from now on, what alternative(s) are we going to use? And what is the evidence that they will be better?

Two principal types of investment are owning a share of a company (stocks), or lending money (bonds). That’s how you get your slice of the profits businesses generate; they make money and you get some of it. What else is going to do that for you? A kg of gold doesn’t grow to be 1100gm because it sits in a vault for 2 years, and it doesn’t pay an interest. It can be a useful investment but it doesn’t generate wealth or pay interest. Real estate generates ‘interest’, and usually grows in value, but how does the ordinary woman own enough of it to be safe from weird events like compulsory acquisition for a new highway, or an earthquake? No, I think we’re stuck with stocks and bonds for now, or bitcoin if you have the courage,  and you mix the stocks and bonds according to your risk tolerance. 

That said, we might be facing 30 years of negative real returns from stocks and bonds, but what are we to do about it other than press on with ‘60/40’ (or whatever your flavour is). Lifetime annuities are one option; a non-rolling government bond ladder is another. No one sounds very keen on those just now.

Plenty to read on the subject here:

https://www.bogleheads.org/forum/viewtopic.php?t=310053

https://www.bogleheads.org/forum/viewtopic.php?t=193367

https://www.bogleheads.org/forum/viewtopic.php?t=319124

https://www.bogleheads.org/forum/viewtopic.php?t=333504

https://www.bogleheads.org/forum/viewtopic.php?t=333504

https://www.bogleheads.org/forum/viewtopic.php?t=352367

Thrugelmir

Until inflation returns closer to the targeted 2% range. Then a 60/40 portfolio isn't going to keep pace with the rate of inflation. A broad basket of equities isn't going to achieve the heavy lifting required to compensate for the return on bonds. 

Iain_For

Don’t think the 60/40 stocks/bond allocation is dead as an asset allocation strategy. I do think most of us don’t pay enough attention to the boring ‘40 part’ and whether it fits our strategy and attitude to risk.

Thrugelmir

Iain_For said:

Don’t think the 60/40 stocks/bond allocation is dead as an asset allocation strategy. I do think most of us don’t pay enough attention to the boring ‘40 part’ and whether it fits our strategy and attitude to risk.

The "40 part" has been discussed endlessly for a considerable number of years now. Only when performance dips do many investors take a real interest in what they are invested in. 

Frequentlyhere

I'd say the 60/40 has been a suboptimal choice for many recently, but is now improving rapidly. As others have said, much of the damage has already been done, bonds are already in an historic bear market.

The thing to remember with the bond component, as I see it, is that the Yield to Maturity % is roughly equivalent to what you'll get out of it providing you hold the bond for it's duration, regardless of the dips and crests it will take along the way. If bond prices fall, your yield rises to compensate, providing you don't sell too soon.

If you take an accumulating bond fund like VAGS (Vanguard global), it's YTM is now a shade above 3%. It's still below inflation, but not a bad rate, and it also has the possible benefit of increasing in capital value if equities continue to be hit hard.

So at this point I'd stay the course, if nothing else what better risk-adjusted option is there?

Albermarle

Thrugelmir said:

Until inflation returns closer to the targeted 2% range. Then a 60/40 portfolio isn't going to keep pace with the rate of inflation. A broad basket of equities isn't going to achieve the heavy lifting required to compensate for the return on bonds. 

I think probably we just have to accept keeping up with inflation is going to be very difficult whatever you do . At least for a year or two.

P933alilli

I'm in the same boat, VLS60, down 5.5% since i opened it in january. I was drip feeding £500 per month then put in a lump sum to get to last years isa allowance total. I was considering bringing the lump sum back to cash but i'm keeping my nerve and back to drip feeding £500 per month. I'm hoping this strategy will pay off long term (10 years!)