A balanced portfolio of the typical 60/40 mix of stocks and bonds may not be as productive as you might think.
According to Bret Arends of Smart Money, a re-balanced 60/40 portfolio would have averaged an 8% return since 1920. That number is misleading. It not only ignores inflation but most of those gains came in just two booms: during the 1950’s and in the past 30 years. For other periods the returns were meager or non-existent, in fact from 1937 to 1950 and from 1965 to 1982 a re-balanced 60/40 portfolio would have yielded absolutely nothing after inflation.
This is why as investors we must look at adding alternative investments in real estate, debt, commodities, life annuities, and other insured investments to a balanced portfolio so that our retirement won’t be disrupted by following only a 60/40 mix.