The same returns with half the risk? - - MSN Money

The same returns with half the risk? - - MSN Money



Here is an outstanding article on why the traditional 60/40 stocks/bonds investment allocation is the best way to plan for the future.  Being 100% invested in stocks only beat 40% bonds slightly going all the way back to the 1920s.  If you consider the past 17 years, both types of portfolios are even.  If you consider going forward, it will probably be even also because an overvalued stock market will only provide small returns since the market cannot go much higher.



The reason that stocks and bonds are so close is that most people will sell out in bear markets.  Then, they will buy back in after the stock market has already risen significantly off the bottom.  So, when you average everything out, a 60/40 stocks/bonds allocation is the safest way to invest, and you can expect the same return in the long haul as being 100% invested in stocks.  I wholeheartedly believe in this strategy especially nowadays when nobody knows for sure when stocks will experience a severe decline or an outright bear market.