The new 60/40 portfolio

May 27, 20214 min read
The new 60/40 portfolio
Share on facebookShare on TwitterShare on Linkedin

Key takeaways

  • Rebalancing your portfolio can lead to positive and less volatile investment returns.
  • Bond prices tend to go up as interest rates go down.
  • Wealth professionals suggest allocating 15% to 20% of your portfolio to alternative investments.

The traditional 60/40 portfolio has been a staple investment strategy for decades. It’s simple enough: 60% stocks and 40% bonds, with stocks traditionally giving you the chance for higher upside and bonds traditionally offering steadier returns without much correlation to stocks. Rebalancing between the two regularly can lead to positive and less volatile investment returns.

The issue in the current market is that with interest rates at or near zero, bond returns are less appealing than they once were. The actual yields that investors receive from bonds are minimal and pale in comparison to the yield earned only 10 years ago. Bond prices go up as interest rates go down, but we’re already near zero, so bond prices themselves have less room to go much higher (unless, of course, yields go negative as we have seen with government bonds in parts of Europe and Japan). We’re also potentially entering into an inflationary environment. For bond investors, inflation means that the dollar returns they receive from a given bond will be worth less over time due to the erosion of their purchasing power. And just as bond prices go up as interest rates go down, bond prices also go down as interest rates go up. There’s no more popular cure to inflation than raising interest rates, potentially putting bondholders in a tough spot.

Portfolio diversification across asset classes is still important. Diversification helps lower portfolio volatility and allows investors a better chance to weather all types of markets without seeing the significant market drawdowns that a concentrated portfolio might experience. So, investors can consider taking the same 60/40 principle but applying it to include new asset classes. We’ll call it the new 60/40.

We can start by leaving the stocks portion alone. While the types of stocks that do well in the next 5-10 years may vary from the pandemic winners or the 2010s’ bull market winners, the leading indices are still pretty solid representations of the U.S. and global economy. They are a useful anchor to a portfolio.

The rest of the portfolio is where things get interesting. This is where alternative asset classes come in. They can achieve many of the diversification goals that bonds offered in the traditional 60/40 – uncorrelated returns, potentially lower volatility – but in many cases, may have the potential to offer higher returns. 

It’s worth noting that alternatives do carry their own set of risks, and the specific allocation may not be the right one for your investment needs – investors should assess their own time horizon, risk appetite, liquidity, and financial needs and goals. Wealth professionals suggest allocating 15-20% of one’s portfolios to alternatives. 

Here are a few common alternative asset classes to consider:

  • Real Estate – this is a classic alternative. Many already invest in real estate through their primary home. Investors may consider investing in real estate through a second property or through managed indirect real estate opportunities as a way to generate regular income via rents and potential upside if real estate prices go higher.
  • Private Markets – Private markets are by definition less liquid and less easily accessed, which comes with trade-offs. Private markets may include private equity and private debt opportunities. Among the potential benefits are less competition for investors and returns that are measured over longer periods instead of the day-to-day fluctuations of the stock market. While private markets are often reserved for accredited investors, there are, in a word, alternatives to that condition.
  • Commodities – The commodity sector often sees the effect of inflation most directly, and investing in them can help investors hedge against inflation and stock market risk. And gold is its own sub-category as an inflation hedge.
  • Art & Collectibles – When there is a lot of money in the economy, people will often spend it on items they want to have, including art or other collectibles. Art has been a popular store of value for decades and gives the investor some aesthetic pleasure with the potential for price appreciation over time.

The idea of the traditional 60/40 portfolio is to have uncorrelated, less volatile investment returns to grow and preserve capital in any environment. In this day and age, with low interest rates and potential inflation, investors should consider investments beyond bonds to help achieve their goals. With alternatives, you may be able to find the right combination for your new 60/40 portfolio.

Learn more about the ways Yieldstreet can help grow your portfolio

We believe our 10 alternative asset classes, track record across 470+ investments, third party reviews, and history of innovation makes Yieldstreet “The leading platform for private market investing,” as compared to other private market investment platforms.

1 Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in significant losses.

3 "Annual interest," "Annualized Return" or "Target Returns" represents a projected annual target rate of interest or annualized target return, and not returns or interest actually obtained by fund investors. “Term" represents the estimated term of the investment; the term of the fund is generally at the discretion of the fund’s manager, and may exceed the estimated term by a significant amount of time. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by Yieldstreet of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modelling error, or other reasons.

4 Reflects the annualized distribution rate that is calculated by taking the most recent quarterly distribution approved by the Fund's Board of Directors and dividing it by prior quarter-end NAV and annualizing it. The Fund’s distribution may exceed its earnings. Therefore, a portion of the Fund’s distribution may be a return of the money you originally invested and represent a return of capital to you for tax purposes.

5 Represents the sum of the interest accrued in the statement period plus the interest paid in the statement period.

6 The internal rate of return ("IRR") represents an average net realized IRR with respect to all matured investments, excluding our Short Term Notes program, weighted by the investment size of each individual investment, made by private investment vehicles managed by YieldStreet Management, LLC from July 1, 2015 through and including July 18th, 2022, after deduction of management fees and all other expenses charged to investments.

7 Investors should carefully consider the investment objectives, risks, charges and expenses of the Yieldstreet Alternative Income Fund before investing. The prospectus for the Yieldstreet Alternative Income Fund contains this and other information about the Fund and can be obtained by emailing [email protected] or by referring to www.yieldstreetalternativeincomefund.com. The prospectus should be read carefully before investing in the Fund. Investments in the Fund are not bank deposits (and thus not insured by the FDIC or by any other federal governmental agency) and are not guaranteed by Yieldstreet or any other party.

8 This tool is for informational purposes only. You should not construe any information provided here as investment advice or a recommendation, endorsement or solicitation to buy any securities offered on Yieldstreet. Yieldstreet is not a fiduciary by virtue of any person's use of or access to this tool. The information provided here is of a general nature and does not address the circumstances of any particular individual or entity. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of this information before making any decisions based on such information.

9 Statistics as of the most recent month end.

300 Park Avenue 15th Floor, New York, NY 10022

844-943-5378

No communication by YieldStreet Inc. or any of its affiliates (collectively, “Yieldstreet™”), through this website or any other medium, should be construed or is intended to be a recommendation to purchase, sell or hold any security or otherwise to be investment, tax, financial, accounting, legal, regulatory or compliance advice, except for specific investment advice that may be provided by YieldStreet Management, LLC pursuant to a written advisory agreement between such entity and the recipient. Nothing on this website is intended as an offer to extend credit, an offer to purchase or sell securities or a solicitation of any securities transaction.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. In addition, other financial metrics and calculations shown on the website (including amounts of principal and interest repaid) have not been independently verified or audited and may differ from the actual financial metrics and calculations for any investment, which are contained in the investors’ portfolios. Any investment information contained herein has been secured from sources that Yieldstreet believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore.

Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by Yieldstreet or any other party, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

Investments in private placements are speculative and involve a high degree of risk and those investors who cannot afford to lose their entire investment should not invest. Additionally, investors may receive illiquid and/or restricted securities that may be subject to holding period requirements and/or liquidity concerns. Investments in private placements are highly illiquid and those investors who cannot hold an investment for the long term (at least 5-7 years) should not invest.

Alternative investments should only be part of your overall investment portfolio. Further, the alternative investment portion of your portfolio should include a balanced portfolio of different alternative investments.

Articles or information from third-party media outside of this domain may discuss Yieldstreet or relate to information contained herein, but Yieldstreet does not approve and is not responsible for such content. Hyperlinks to third-party sites, or reproduction of third-party articles, do not constitute an approval or endorsement by Yieldstreet of the linked or reproduced content.

Investing in securities (the "Securities") listed on Yieldstreet™ pose risks, including but not limited to credit risk, interest rate risk, and the risk of losing some or all of the money you invest. Before investing you should: (1) conduct your own investigation and analysis; (2) carefully consider the investment and all related charges, expenses, uncertainties and risks, including all uncertainties and risks described in offering materials; and (3) consult with your own investment, tax, financial and legal advisors. Such Securities are only suitable for accredited investors who understand and are willing and able to accept the high risks associated with private investments.

Investing in private placements requires long-term commitments, the ability to afford to lose the entire investment, and low liquidity needs. This website provides preliminary and general information about the Securities and is intended for initial reference purposes only. It does not summarize or compile all the applicable information. This website does not constitute an offer to sell or buy any securities. No offer or sale of any Securities will occur without the delivery of confidential offering materials and related documents. This information contained herein is qualified by and subject to more detailed information in the applicable offering materials. Yieldstreet™ is not registered as a broker-dealer. Yieldstreet™ does not make any representation or warranty to any prospective investor regarding the legality of an investment in any Yieldstreet Securities.

YieldStreet Inc. is the direct owner of Yieldstreet Management, LLC, which is an SEC-registered investment adviser that manages the Yieldstreet funds and provides investment advice to the Yieldstreet funds, and in certain cases, to retail investors. RealCadre LLC is also indirectly owned by Yieldstreet Inc. RealCadre LLC is a broker-dealer registered with the Securities and Exchange Commission (“SEC”) and a member of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Information on all FINRA registered broker-dealers can be found on FINRA’s BrokerCheck. Despite its affiliation with Yieldstreet Management, LLC, RealCadre LLC has no role in the investment advisory services received by YieldStreet clients or the management or distribution of the Yieldstreet funds or other securities offered on our through Yieldstreet and its personnel. RealCadre LLC does not solicit, sell, recommend, or place interests in the Yieldstreet funds.

Yieldstreet is not a bank. Certain services are offered through Plaid, Orum.io and Footprint and none of such entities is affiliated with Yieldstreet. By using the services offered by any of these entities you acknowledge and accept their respective disclosures and agreements, as applicable.

Investment advisory services are only provided to clients of YieldStreet Management, LLC, an investment advisor registered with the Securities and Exchange Commission, pursuant to a written advisory agreement.

Our site uses a third party service to match browser cookies to your mailing address. We then use another company to send special offers through the mail on our behalf. Our company never receives or stores any of this information and our third parties do not provide or sell this information to any other company or service.

Read full disclosure