JPMorgan says its 60/40 portfolio is far from dead and poised to outperform cash.

Oct 19
According to JPMorgan Asset Management, the well-known 60/40 portfolio is still alive and will become a far more appealing investment than cash over the next ten years.

"The strategy of allocating 60% of assets to stocks and 40% to Treasury bonds is designed to outperform cash on an annualized basis by 4.1 percentage points and inflation by 4.5 percentage points over the next 10 years, even though money market funds are paying more than 5% these days," the investment manager's strategists wrote in a report.
Given its poorest performance since the global financial crisis last year, the tried-and-true portfolio is facing an increasing number of detractors as a result of the endorsement.

Bloomberg's 60/40 model has lately decreased by around 4% since July as a result of Treasury market instability that triggered a coordinated selloff of stocks and bonds and drove investors to seek out safer investments.

JPMorgan continues to advise several alternative investing strategies to maximize returns despite the long-term benefits of a 60/40 portfolio, particularly now that stock-bond correlations are no longer consistently negative.

Investors can increase their returns by 0.6% percentage points yearly over the next ten years while lowering risk by adding a 25% allocation to alternatives, such as private equity, real estate loans, and commercial mortgages, to the typical asset mix.

According to a JPMorgan estimate, $100 in cash will only be worth $133 after ten years. Comparatively, the identical sum invested in a 60/40 model portfolio would increase to $197 throughout this time. When the alternative is included, the amount rises to $208 instead.

The analysts stated, "While high cash rates are alluring, investors should keep in mind that keeping Treasury bills may mean receiving 5% today for low risk, but it misses the chance to accumulate gains over the long term.

David Kelly, chief global market strategist at JPMorgan Asset Management, says that a client's time horizon ultimately determines where they should allocate their money. "This is very much a world in transition," he declared. "We don't anticipate low rates returning anytime soon,"

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