2022-11-25 11:08:43

Bond Expert: 60/40 Portfolios Should Focus on Short-Term Bonds

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Nasdaq
By Finsum

Much has been written about the failure of the 60/40 portfolio this year. What was once the classic allocation has seen its share of losses in 2022. Fueled by drawdowns in both the equity and fixed-income markets, advisors and investors are now thinking twice about the following a 60% allocation in stocks and a 40% allocation in bonds. However, there could be a fix. According to fixed income specialist David Norris, the 60/40 portfolio split should be flipped and focused on short-term bonds. Norris, head of U.S. Credit at TwentyFour Asset Management, toldFinancial Advisor Magazinethat the bond side of that reversal should be anchored in short-duration bonds. Norris said that the rate cycle we are in now, with a lot of volatility and inflation, has created a fixed income market with rates we have not seen for a decade. Yields for short-duration bonds are very attractive now. Norris is not wrong; U.S. short-term government bonds are paying more than 4.5% right now. A focus on short-term bonds should help investors better navigate the current volatility in the market.

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