Why The Beloved 60/40 Investment Portfolio Is Now Loaded With Risks

‍The traditional 60/40 investment portfolio, a staple of American retirement planning, has been taking a beating since the start of 2022. Incredibly, even during a bear market, this supposedly moderate-risk approach has underperformed compared to the S&P 500. This unexpected phenomenon can be traced back to peculiar economic conditions over the past two years.

The rapid rise in interest rates has devastated the 40% bond allocation of the 60/40 portfolio. The Vanguard Total Bond Market Index Fund ETF is down more than 15% since January 2022. Simultaneously, the stock market has also experienced losses with the Vanguard Total Stock Market ETF down 13% over the same period.