Sometimes boring is better, especially when the investment markets are volatile, which is what Bank of America’s “Sleep Like a Baby” 25% stocks, 25% bonds, 25% cash and 25% commodities portfolio is proving.
The investment portfolio, which is spread out evenly between stocks, bonds, cash and commodities, is having its best performance since 1933, recently up 26% since the start of the year, according to Michael Hartnett, chief investment strategist for BofA Global Research.
Since earlier this year, Hartnett has argued that while the traditional 60/40 split served investors well in the past, the 2020s call for a different approach, reported Yahoo Finance.
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From the 1980s through the 2020s inflation was low and interest rates were falling, which made the 60/40 split a good place for investors to park their money. The 2020s has seen higher inflation and higher interest rates, which is why Hartnett says a 60/40 split is no longer sufficient.
Peace Of Mind With A Little Growth
Rather than chasing the AI boom or investing in a red-hot sector, the “Sleep Like a Baby” portfolio is designed to provide investors with peace of mind by giving them exposure to growth via equities, stability through bonds, liquidity with cash and defense through commodities.
The portfolio isn’t designed to win everything in a given year but the idea is it also won’t all blow up.
Diversity is the name of the game with this portfolio but commodities are turning out to be the star of the show, outperforming a 60/40 split, reported Yahoo Finance.
There were only two other occasions when the 60/40 split did better than this allocation — in 1946 following the post-war inflationary period and in 1973 during the oil crisis, according to Toronto’s Globe and Mail.
Gold Is Driving The Performance
Not surprisingly, gold is the driving force behind the double-digit gains, although it’s not the only commodity in the portfolio. After all, gold is up 31% annualized, as investors seek a safe haven amid the conflict in Iran, concerns over inflation and volatility in the stock market, according to Yahoo Finance.
Despite gold’s driving force in the portfolio’s performance Yahoo Finance noted that many investors remain underweight gold, presenting an opportunity to increase their exposure.
While investors may not be able to construct a portfolio exactly like the “Sleep Like a Baby” on their own, there are low-cost ETFs that can give them broad-based exposure to stocks, bonds, cash and commodities.
Build More Balanced Portfolios
For investors looking to build more balanced portfolios without relying on outdated allocation models like the traditional 60/40 split, newer tools are making it easier to adapt to changing market conditions. Platforms like Public now offer AI-powered features such as Generated Assets, which allow investors to turn a specific thesis—like inflation …
This post was originally published here
