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Bank Of America Declares ‘The End Of The 60-40’ Standard Portfolio

FYI: Investors have long been told that the ideal portfolio should carry 60% of its holdings in equities and 40% in bonds, a mix that provides greater exposure to historically superior stock returns, while also granting the diversification benefits and lower risk of fixed-income investments.

But in a research note published by Bank of America Securities, titled “The End of 60/40,” portfolio strategists Derek Harris and Jared Woodard argue that “there are good reasons to reconsider the role of bonds in your portfolio,” and to allocate a greater share toward equities.

“The relationship between asset classes has changed so much that many investors now buy equities not for future growth but for current income, and buy bonds to participate in price rallies,” Harris and Woodard wrote.

Indeed, the $339 billion in inflows to bond funds globally in 2019, and the $208 billion in outflows from global equity funds underscore the power of the ongoing rally in bonds, which has caused bond yields to fall enough that there are now 1,100 global stocks that are providing dividend yields above the average yield of global government bonds.
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