Unbalanced Year
Jeff Brown
Strategic Advisor | Board Director | Speaker | Private Investor ? At the Nexus of Policy, Politics & Finance | An Unbiased Perspective & Expert Insight for Investment Decision Making
2022 has not been the year to be stuck in a typically risk-averse, balanced portfolio. Through August, investors in a classic 60/40 stocks-bonds portfolio were painfully sitting on a -14% total return. For those keeping track, that is the worst decline since at least 1976. Typically, declines in stocks are offset by gains in bonds and vice versa but not this year.
Source: Koyfin
Some investment strategists advocate adding commodities to the portfolio mix to dampen volatility and that would have worked fabulously this year, declining only -1.1% through August. But an equal-weight portfolio made up of stocks, bonds and commodities has not done as well as the classic 60/40 portfolio over longer periods. Investors haven't been willing to give up the returns to further reduce volatility but this year's painful reality may change their minds.