Here’s How to Simplify Investing and Make It Less Stressful
Using a “60/40” portfolio to “set it and forget it” (sort of)
As an investor and a portfolio manager for several family members, I support a simple approach to long-term investing. I have suggested this approach to a few family members and friends over the years. Additionally, in my investments class, I teach about diversification and the pros and cons of this passive investing approach.
When it comes to longer-term investments, like retirement savings, many people feel overwhelmed trying to actively manage their accounts. Should you choose stocks? Bonds? What about international exposure? Deciding on an asset allocation and then constantly tweaking it can be daunting. That’s why a balanced 60/40 portfolio may be a good option for hands-off investors with longer time horizons. (see my recent article on bond investments).
What is a 60/40 Portfolio?
A 60/40 portfolio allocates roughly 60% of the investments to stocks and 40% to bonds. The stock segment often uses a broad market index fund like the S&P 500 or the Wilshire 5000 to provide exposure across large companies. The bond segment generally utilizes a diversified, bond aggregate index, like the Bloomberg US Aggregate Bond Index, to gain exposure to high-quality US government and corporate bonds of…
