Dominic Browning, Managing Director
Posted by Dom Browning
News, Resources, Insight and Opinion from Browning Financial Planning

The 60:40 Portfolio - A recipe for disaster

Dominic Browning, Managing Director
Posted by Dom Browning

For decades, both advisers and investors have regarded the default portfolio for a balanced investor to be a 60:40 portfolio.

This means investing 60% of your portfolio in equities and 40% in bonds(fixed income). These bonds are typically instruments which lend money to companies (corporate bonds) and the government (gilts).

There are millions of investors out there, many with advisers, who invest in these portfolios. We consider these portfolios a recipe for disaster.

The last 3 years is considered to be the worst bond bear market in history with "low risk" gilts (lending money to the UK government) down over 30%.

Equities are considered to be the best vehicles for long-term growth but the price you pay for them is short-term volatility, which at times can be frightening. So portfolio managers have tried to dampen this volatility by including bonds in their portfolios. A 60:40 portfolio would have 40% in bonds. What a nightmare.

We think you should embrace equities and if you want to "dampen the volatility", keep sufficient rainy day in cash instead. Our platform provider, Fundment pays 3% on cash holdings in the portfolios.

More News, Insight & Opinion
Will you outlive your retirement pot?

The most important question to be asked is ‘How long will you live?’  Continue

HMRC repaid record £198m on flexible pension withdrawals

A record £198m was repaid on flexible pension withdrawals for the tax year 2023/24, latest HMRC data shows. Continue

Lifetime ISAs - Why basic-rate tax-payers under 40 should consider them.

Lifetime ISAs were created to help people under 40 save for a house deposit. But are they any good as long-term savings if you do NOT buy a house? Continue

Life Boat Drills

If you have ever been on a cruise, you will be aware that the crew will carry out lifeboat drills either in harbour or shortly after leaving.  Continue

Why our fees are competitive

I was recently shown the pricelist of St James's Place, a FTSE100 financial advice firm. I nearly fell off my chair. Continue

Company Pension planning options

We regularly look at the company pension funds of prospective and existing clients. Continue