Swap Your 60/40 Portfolio With This for Steady Gains and Lower Volatility, Vanguard Says | Global News Avenue

Classic 60/40 fair and fixed income The portfolio has reaped gains as stocks have soared this year, but analysts at Vanguard recommend switching it to a more conservative fixed-income allocation of 50/50 or even 40/60 over the coming year.

A senior portfolio construction manager at Vanguard expects the company to generate annualized returns of 5% to 7%. 60/40 Portfolio Earlier this week, the company released a conference call on Wednesday regarding its 2025 outlook, discussing developments over the next decade. But what’s even greater is touch Fixed income may be more advantageous.

“Given the lower expected equity risk premiums, the optimal balance among bonds may be slightly different than 60/40,” Roger Aliaga-Diaz, global head of portfolio construction at Vanguard Group, said in a conference call on Monday. “From a risk perspective Look, a tilt toward fixed income can be beneficial — something like 50/50 or even 40/60 — because it can produce very similar returns to 60/40 at a much lower cost. volatility“.

Why should investors become more conservative?

So why are analysts at Vanguard Group more bullish? conservative investment portfolio?

Arriaga-Diaz said he believes stock market returns are likely to decline in the future because of their high returns. equity valuation The U.S. market has been growing for the past two years.

“In the short term, we’re likely to continue to see momentum in the market. When we think about the next five years, such as retirement or retirement portfolios, save for college), valuations will start to weigh on long-term returns,” he said.

Therefore, Arriaga-Diaz stressed that no Timing the market and international diversification, noting that “starting valuations are much lower” for global stocks outside the U.S.

As for fixed income, Vanguard’s long-term yield outlook is more positive. Its analysts said they believe that globally, interest rate It will eventually stabilize at higher levels than in the 2010s.

“The era of sound money – characterized by positive real interest rate— will continue, laying the foundation for solid cash and fixed income returns over the next decade. ” Vanguard analysts wrote in their 2025 outlook.