From The Motley Fool · Adam Levy · · 1m 10s
Market Crash Strategy Cuts Recovery Time
60/40 portfolio strategy recovers from crashes in half the time.
In brief
60/40 portfolio strategy recovers from crashes in half the time. A 60/40 stock-bond portfolio with rebalancing recovers from 20% market drops in 11 months versus 24 months for S&P 500. Originally reported by The Motley Fool.
Market Bull Run
The last four years pushed s&p 500 116% higher while nasdaq composite rose 156%.
High Valuations Risk
Stock market valuations are particularly high and unsustainable without fast earnings growth or price drops.
Market Crash Inevitability
Stock prices crash 20% or more in the future due to market cycles.
60/40 Portfolio Strategy
A 60/40 stock-bond portfolio with rebalancing recovers from 20% drops in 11 months.
S&P 500 Recovery Time
S&P 500 takes 24 months to recover from 20% drops even with dividends reinvested.
Rebalancing Benefits
Rebalancing buys stocks when they drop and sells when they rise for quicker recovery.
Bond Performance
Bonds produced positive returns in 21 of last 25 years when s&p 500 declined.
Current Bond Opportunity
Vanguard total bond market etf offers 5.5% yield to maturity with $389.30b aum.
Here's the gist
A 60/40 stock-bond portfolio with rebalancing recovers from 20% market drops in 11 months versus 24 months for S&P 500.
