The mix of stocks, bonds, and cash that investors hold in their portfolios is a key driver of their long-term results. Here you can find our research and perspectives on all aspects of asset allocation.
With stocks and bonds well into negative territory, it’s tempting to call the traditional balanced portfolio dead. But we’ve been here before, says Roger Aliaga-Díaz, chief economist for the Americas and head of portfolio construction in Vanguard Investment Strategy Group.
With interest rates and inflation expected to rise, the negative stock/bond correlation that supports the diversification properties of a balanced portfolio could also be at risk. In this paper, researchers find that negative correlation will continue and the diversification benefits of a 60% stock/40% bond portfolio will persist.
Vanguard researchers classify the economic and market environment into five states: recession, recovery, expansion, slowdown, and high inflation. This paper discusses the characteristics, valuations, and return expectations of each and concludes that investors willing to take on active risk should adopt a dynamic, state-dependent approach.
Vanguard shares our current views on best practices for U.S. private-sector pension plan asset allocation. We highlight the value of identifying three targets—the return-seeking asset allocation, interest rate hedge ratio, and credit spread hedge ratio—that can be the foundation for a robust, customized portfolio construction process.
Most target-date fund series offer a single post-retirement asset allocation designed to help retirees replace a reasonable portion of pre-retirement income. In this paper, Vanguard researchers offer a framework demonstrating that adding a second asset allocation could support additional goals for those with the resources and desire to pursue them.
Notes: All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.
Vanguard is the trusted name in investing. Since our founding in 1975, we’ve put investors first.