The Rebirth of the 60/40 Portfolio Has Been Greatly Exaggerated

Article Summary

• The traditional 60/40 portfolio (60% equities, 40% bonds) has underperformed in recent years, returning just 2% annually over the past three and a half years, with both stocks and bonds sometimes losing value simultaneously contrary to the negative correlation theory.
• In 2022, both the S&P 500 and Bloomberg U.S. Aggregate Bond Index fell together for the first time in history, while alternative investments provided positive returns during this market downturn.
• The shrinking number of public companies (from 7,300 in 1996 to about 4,300 today) has reduced investment opportunities in innovation through stocks, with just seven companies representing about 30% of the S&P 500's value.
• Christian Salomone argues that accredited investors should incorporate alternative investments (private equity, private credit, venture capital, real estate) into their portfolios alongside traditional assets for better diversification and access to broader investment opportunities.