60/40 Retirement Strategy

The traditional “60/40” retirement investment strategy involves allocating 60% of an investor’s portfolio into stocks and 40% into bonds. This strategy assumes that the prices of these basic investment components tend to move in opposite directions. For example, when bond prices fall, stock prices should rise to ensure stability in the investor’s overall portfolio. Recent studies, however, have proposed that it would be better to change to a pure equities investment strategy. Rather than allocating funds between stocks and bonds, these studies show that investors would reap greater returns by allocating retirement funds between domestic stocks and international stocks.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about research that shows the 60/40 retirement investment strategy is ineffective.

Below is a summary of the debate that ensued between the two professors.