Tuesday, March 6, 2018

The 60/40 Balanced Portfolio - Is It Best For You?

The longer you are invested in the stock market you will question your strategy. You will question your decisions and talk to yourself whether what you are doing with your money is the right thing to do.

I have learned a lot of tough lessons along the way and some have been quite painful and expensive.

Back in the nineties I had most of my wife's retirement savings exposed to junior mining stocks. She told me not to put anything at risk and that she wanted just conservative investments. I ignored her requests because I thought I could do better and for awhile her investments skyrocketed.

My arrogance didn't see the writing on the wall and it wasn't long before everything plunged in value. The year was 2008. Yes the financial crisis hit and I was 100% in high risk stocks.

I proceeded to do the wrong thing and started to sell off the losers not allowing them time to recover.

With what money of her's I had left I reinvested in a safer more diviersified portfolio. Enter the 60/40 balanced portfolio.

Her Balanced Portfolio

It consists of just 4 ETFs:

  1. 60% is split between 2 ETFs that cover Canada, U.S. and International Markets. This covers the equity portion.
  2. 40% is split between a bond ETF and a preferred share ETF. This covers off the fixed income portion.

Some would call the preferred share portion equity also but I have it in there to generate some extra monthly yield. 

Combined, the fixed income portion of her portfolio generates 3.5%. I learned this percentage weighting from reading the 'Greater Fool' blog.

It is less volatile massively diversified across the whole world of stocks and bonds. I don't look at it or touch it except to add more money to it and to bring it into balance once a year at RRSP time.

I learned my lesson and now just leave her money alone in a balanced portfolio. I think the majority of investors whether you do it yourself or pay someone, this is the approach that works best. It does for her and that's all that counts.

What the Experts Say

I'm a DIY investor so I don't pay someone to manage our money nor really do I take investment advice from paid advisors or brokers. If I did I would choose Turner Investments (look them up).

Most not all operate to make money from you, not for you. The more you can save on fees the more you will have in retirement.

You can find a ton of investment advice on the internet on different kinds of portfolios. You might hear names like;
  • The Sleep-Easy Portfolio
  • The All-Weather Portfolio
  • The Perfect Portfolio
  • The Couch Potato Portfolio
  • The Easy Chair Portfolio
There are more but you get the idea of just how much has been written on the subject. Larry Swedroe has written extensively on this subject and I think Canadians who want to take a balanced approach to investing can benefit greatly from his advice even though he writes for Americans.


I believe most people who don't have the time to pick stocks would be better off with a 60/40 balanced portfolio.

It's not my opinion but one I've learned from Garth Turner over at greaterfool.ca. 

Some of the advantages to being balanced include;
  • simple and easy to implement
  • only requires 3-4 investments
  • rebalance once a year
  • less risky than individual stocks
  • will decline less during a market pullback
  • perfectly suited for those who don't like investing
In the last month the Vanguard Company has introduced 3 new ETFs that are all in one. This now offers you a balanced fund with just one investment. Google their website for more info.

This is a great way to keep your wife happy and that's more important than taking unnecessary risk. Stay balanced!

Do you like a balanced approach or picking individual stocks?

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