Exploring Alternatives To The US 60/40 Benchmark: Part I

Systematically expanding the standard 60/40 US stock/bond mix into international markets and then adding US real estate investment trusts and commodities has merit, but the results have been disappointing in recent years. That could change, of course, and there are several reasons for entertaining that possibility.

Meantime, here’s how the three alternative portfolios compare to the US 60/40 mix, based on a start date of Dec. 31, 2010.

Have the results materially changed in the past five years? In a word, no.

The main takeaway from these results suggests that developing an alternative to the US 60/40 allocation isn’t going to be easy, which is to say without paying a price. In this initial test, it appears that you’ll have to pick your poison: accept substantially lower return or embrace a higher (or at least materially different) risk profile, or some combination.

In part II, I’ll push the envelope a bit more and consider another trio of alternatives that move beyond the standard choices outlined above in an effort to find a better trade-off between risk and return.

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Disclosures: None.

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