0.99: The correlation of a traditional 60% stock / 40% bond portfolio to the S&P 500
The most popular Daily Stat of 2012 helps address a question on everyone's mind...So what do I do with my money?
The traditional 60/40 allocation to stocks and bonds no longer appears sufficient. Such a "balanced" portfolio, with a 0.99 correlation to stock returns, has moved virtually in lockstep with a 100% equities allocation over the past 15 years. Given that the risks in a so-called balanced portfolio are primarily equity-related, this portfolio approach clearly lacks true diversification.
Understand the sources of risk and return in your portfolio: it's crucial to a strong investment strategy.
Source: BlackRock, Bloomberg, Informa Investment Solutions.
Traditional 60/40 portfolio composed of 60% S&P 500 Index and 40% Barclays
Aggregate Index, rebalanced annually 1997-2011. Stock returns are represented
by the S&P 500 Index.
Prepared by BlackRock
Delivered courtesy Joel W. Grams, CRPC®, CLTC,
Registered Representative, Financial Planner, 212 Capital Group
38 Main Street Suite 360, Westlake Ohio 44145
(440) 835-4501 Ext 17, firstname.lastname@example.org
The foregoing discussion is general in nature and not intended as specific advice.
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