The 60/40 Investing Rule is Dead — Here's What's Replacing It

About this video

• Video Title: The 60/40 Investing Rule is Dead — Here's What's Replacing It
• Channel: ClearValue Tax
• Speakers: Brian (implied, as the narrator uses "my opinion" and refers to "Brian")
• Duration: 12:07

Overview

This video discusses the decline of the traditional 60/40 investment rule (60% stocks, 40% bonds) and explores emerging strategies recommended by financial experts. It examines why the 60/40 rule is no longer considered effective due to changing market dynamics, particularly the inverse relationship between stocks and bonds not consistently holding true. The video suggests that gold is increasingly being seen as a more resilient asset and a viable alternative or supplement to bonds in investment portfolios.

Key takeaways

• The 60/40 Rule: Traditionally, this strategy allocated 60% of a portfolio to stocks for growth and 40% to bonds for stability and income. It aimed to balance risk and reward.
• Obsolescence of the 60/40 Rule: Recent market behavior, where both stocks and bonds have declined simultaneously, has challenged the effectiveness of this traditional diversification strategy. The inverse relationship between stock market dips and bond market gains is no longer reliable.
• Emerging Alternatives: Experts and financial institutions are suggesting shifts in portfolio allocation.
  • BlackRock's CEO suggests a 50% stock, 30% bond, 20% private assets (like real estate) allocation.
  • Morgan Stanley's CIO recommends a 60% stock, 20% bond, 20% gold allocation, citing gold's role as an inflation hedge.
  • Ray Dalio suggests allocating up to 15% of portfolios to gold.
  • Jeff Gundlach proposes a 25% allocation to gold.
• The Rise of Gold: Gold is increasingly recommended as a hedge against inflation and a more resilient asset compared to traditional bonds, especially long-term U.S. Treasury bonds. Central banks have increased their gold holdings, signaling a shift in perceived value.
• Critique of U.S. Treasury Bonds: The speaker argues that long-term U.S. Treasury bonds are a losing proposition due to interest rates being locked in below the true rate of inflation. The video questions the accuracy of government CPI inflation reports, suggesting the true inflation rate is higher and more subjective.
• Future Outlook: The video anticipates a significant increase in demand for gold as more investors, institutions, and advisors shift allocations towards it, potentially driving gold prices much higher.