The 60/40 Investment Portfolio is Dead. What is a Retiree To Do?

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Key Takeaways:

  • A 60-40 investment portfolio (60% stocks to 40% bonds) that was highly recommended 10 years ago – is quickly losing importance. Here’s why:
    • Equity markets today are at record high levels with a probability of a major correction high.
    • Bonds pay next to nothing and in some cases provide negative yields.
    • Cash has no return and is less than inflation.
  • Investors face a dilemma on how to generate safe returns that beat inflation today.
  • Below we talk about some alternate methodologies you can use.
Bonus: At the end and I’ll show you my personal strategies to generate high income + growth with low risk in today’s overvalued markets.

What are the implications?

  • Investors will need to take on more risks to meet their long-term needs.
  • “I would bet a meaningful number of people allocated to a 60-40 portfolio should be in a higher risk profile to meet their long-term needs,” said Jim McDonald, chief investment strategist at Northern Trust.
  • Loading up on stocks wouldn’t be smart for investors in or near retirement, who need income and don’t have the benefit of time as most investors would not be able to handle the volatility of an all-stock portfolio.

What is a retiree to do?

  • I don’t use any alternative investments in my personal portfolio.
  • I follow a bucket strategy in my personal income portfolio which has been working well.
  • Bucket 1 – Cash for year 1 expenses  (5%)  Bucket 2 – Safe income funds for year 2 (5%) and Bucket 3 – High yield monthly income funds with downside protection, and low fees (they do exist!).
  • All the details can be found here:


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