The Capital Spectator weighs in on the riskiness of the traditional 60/40 portfolio:
It’s important to recognize that the US 60/40 strategy is a relatively risky allocation mix—one that’s paid off handsomely of late, but one that comes with higher risk vs. GMI or its equivalent.
The issue, of course, is that the US 60/40 strategy is cherry picking from the menu of global asset classes. The fact that this US-centric portfolio has delivered handsome gains will be mistakenly interpreted by some that more of the same is fate. Maybe, but maybe not. If we could muster a high degree of confidence about which asset classes would win or lose, we wouldn’t need to diversify globally. But in a world where uncertainty and surprise are forever harassing the best laid strategies of mice and men, the reality is somewhat different.
Good argument for employing a globally diversified portfolio.
HT: Abnormal Returns
