You’ve heard of the 60-40 rule. But have you ever thought of flipping it?
For a certain breed of cautious investor, Vanguard suggests a tweak to the time-honored principle of investing. Call it the 40-60 rule.
The 60-40 rule suggests that investors park 60% of their money in stocks and 40% in bonds. The stocks deliver growth, but also volatility. The bonds deliver less growth, and less volatility. In theory, a 60-40 portfolio could provide an ideal balance of risk and reward.
If there’s a knock on the 60-40 rule, it’s that the formula might be too conservative.
The S&P 500 has risen by 216% over the last decade, or about 12% a year, according to The Motley Fool.
