The traditional portfolio is dead

The 60/40 portfolio, comprised of 60% stocks and 40% treasury bonds, has been the staple of portfolio construction for the last 50 years. The 40% of the portfolio in bonds is supposed to diversify risk away, but as markets, retirement expectancies, and inflation rise, this portfolio is becoming less and less efficient. On pace to finish the year down 25%, this will be the worst year for the 60/40 portfolio ever since the great depression in 1931. The 200 day correlation factor of stocks and bonds is now .87, the highest it has ever been. For the portfolio to work efficiently, this correlation should be negative, with bonds moving in opposite directions as stocks. On top of that, people are retiring now for over 20 years, rather than closer to 12 as they did in the late 1900s, causing more need for growth, rather than conservation.

The question now becomes: How can one stay safe in the markets as well as have enough income for a long, peaceful retirement without worrying about running out of their life savings? Two answers remain. We can all work another 10 years OR restructure and find different investment strategies to preserve wealth and guarantee growth into the future.