Patrick R. McDowell, CFP®, AIF® was quoted in a US News & World Report article by Brian O’Connell discussing different investment models.
Age factors into the 60-40 equation as well, especially as Americans are living longer.
"A 60-40 portfolio doesn't make a whole lot of sense for a 20-something investor," says Patrick McDowell, a financial advisor with Arbor Wealth Management in Miramar Beach, Florida. "They have plenty of time for equity volatility and they are likely to be net contributors to investment (and) retirement accounts for the next 20, 30 or 40 years."
But for a 70-year-old retiree, McDowell would want to have at least a quarter of his or her portfolio in fixed income investments.
"Some folks want that number much higher, in the 40 to 50 percent range," he says. "Basically if you can't afford to take a 40 percent equity hit, you should own some bonds simply for portfolio diversification. The average retiree is withdrawing funds from their investment accounts (and no longer contributing) and therefore keeping a stable portfolio balance matters a whole lot more."
The 60-40 calculus may have worked when portfolio balance was underplayed by both investors and money managers. But times change, investment experts say.