Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

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whereskyle
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by whereskyle » Sun Jun 28, 2020 6:12 pm

nanameg wrote:
Sun Jun 28, 2020 5:19 pm
Where did the 60/40 portfolio come from in the first place? What’s the history behind that particular allocation? Why is it codified the way it is?
The magic of 60/40 was/is that it never had a 10-year period where it lost money (iirc). The reason why it is "dead" is that bond yields are so low. It's hard to imagine how bonds could save an investor from a bad decade for stocks when they are producing such little yield. But that doesn't really mean 60/40 is dead. It just means the popular advice is to hold more equities now.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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ruralavalon
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by ruralavalon » Sun Jun 28, 2020 6:44 pm

nanameg wrote:
Sun Jun 28, 2020 5:19 pm
Where did the 60/40 portfolio come from in the first place? What’s the history behind that particular allocation? Why is it codified the way it is?
This requires use of the wayback machine. The origin of 60/40 is a 2002 Peter Bernstein article in Bloomberg Personal Finance, Bernstein, pdf.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

boli74
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by boli74 » Mon Jun 29, 2020 12:55 am

I, too, have been thinking of the value of getting into bonds now.

With the current 10-year treasury yield at only 0.64%, I think a yield increase is very likely in the coming years, so a bond holder will get hit by capital loss. Even if they can hold it to maturity, the yield is only 0.64%, and the real return will likely be negative if we consider inflation. Given that the FED keeps providing liquidity, I think inflation is very likely in the coming years, so there seems to be no point in getting into bonds now.

But holding an all stock portfolio seems to be scary to me too. Did I miss anything about the value of bonds? Any insights would be highly appreciated.

DanFrancis
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by DanFrancis » Mon Jun 29, 2020 2:14 am

That recommendation is similar to my portfolio. Retired/65 y/o. Own Vanguard 2020 Target Fund. So far so good!

nanameg
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by nanameg » Mon Jun 29, 2020 6:08 am

ruralavalon wrote:
Sun Jun 28, 2020 6:44 pm
nanameg wrote:
Sun Jun 28, 2020 5:19 pm
Where did the 60/40 portfolio come from in the first place? What’s the history behind that particular allocation? Why is it codified the way it is?
This requires use of the wayback machine. The origin of 60/40 is a 2002 Peter Bernstein article in Bloomberg Personal Finance, Bernstein, pdf.
Interesting! I thought u were being facetious using the term “ way back machine” :happy
I only got one page of the article on the link though..

nanameg
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by nanameg » Mon Jun 29, 2020 6:12 am

ruralavalon wrote:
Sun Jun 28, 2020 6:44 pm
nanameg wrote:
Sun Jun 28, 2020 5:19 pm
Where did the 60/40 portfolio come from in the first place? What’s the history behind that particular allocation? Why is it codified the way it is?
This requires use of the wayback machine. The origin of 60/40 is a 2002 Peter Bernstein article in Bloomberg Personal Finance, Bernstein, pdf.
I also like your signature quote and have thought about it a bit in regards to my portfolio..I keep wanting simple simple simple....but can it be too simple? “ tax bombs” looming if I just use TDF in tax deferred accounts? Takes time and effort to get to simple maybe.

I’m struck by the fortitude of so many people in this community and I want to get there when I grow up. :wink:

MarkRoulo
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Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by MarkRoulo » Mon Jun 29, 2020 10:58 am

boli74 wrote:
Mon Jun 29, 2020 12:55 am
With the current 10-year treasury yield at only 0.64%, I think a yield increase is very likely in the coming years, so a bond holder will get hit by capital loss.
I wonder what the folks advocating more stocks think will happen to stock returns if/when interest rates go up.

"I believe interest rates are going up so I'm moving into stocks," doesn't seem like a common strategy.

boli74
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Joined: Sun Aug 29, 2010 4:53 pm

Re: Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Post by boli74 » Mon Jun 29, 2020 4:10 pm

MarkRoulo wrote:
Mon Jun 29, 2020 10:58 am
boli74 wrote:
Mon Jun 29, 2020 12:55 am
With the current 10-year treasury yield at only 0.64%, I think a yield increase is very likely in the coming years, so a bond holder will get hit by capital loss.
I wonder what the folks advocating more stocks think will happen to stock returns if/when interest rates go up.

"I believe interest rates are going up so I'm moving into stocks," doesn't seem like a common strategy.
When interest rate goes up, I think bonds will get a bigger hit, as the bond price will surely go down, while stock prices might be in any direction. That's my understanding. Not sure if it's right, though.

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