Stocks/Bonds 80/20 Portfolio: ETF allocation and returns (2024)

FAQs

Stocks/Bonds 80/20 Portfolio: ETF allocation and returns? ›

It's exposed for 80% on the Stock Market. In the last 30 Years, the Stocks/Bonds 80/20 Portfolio obtained a 9.36% compound annual return, with a 12.51% standard deviation.

The All Country World 80/20 Portfolio is a Very High Risk portfolio and can be implemented with 4 ETFs. It's exposed for 80% on the Stock Market. In the last 30 Years, the All Country World 80/20 Portfolio obtained a 6.55% compound annual return, with a 12.76% standard deviation.

If you're a younger investor with a long time horizon and are comfortable taking on more risk, the 80/20 portfolio may be a good fit. However, if you're closer to retirement or prefer a more conservative approach, the 60/40 portfolio may be a better option.

So, if you think you could tolerate 100 percent stocks respect what you don't know. Build a portfolio with 80 percent stocks and 20 percent bonds. If you think you could tolerate a portfolio with 80 percent stocks and 20 percent bonds, build a portfolio with 70 percent stocks and 30 percent bonds.

"A newer investor with a modest portfolio may like the ease at which to acquire ETFs (trades like an equity) and the low-cost aspect of the investment. ETFs can provide an easy way to be diversified and as such, the investor may want to have 75% or more of the portfolio in ETFs."

The 80/20 rule is a concept suggesting that 80% of your results come from 20% of your efforts. This rule can be used in various contexts; however, investing experts caution against using it in portfolio management.

The Growth Fund seeks to provide capital appreciation and some current income. The fund holds 80% of its assets in stocks, a portion of which is allocated to international stocks, and 20% in bonds, a portion of which is allocated to international bonds.

This investment strategy seeks total return through exposure to a diversified portfolio of primarily equity, and to a lesser extent, fixed income asset classes with a target allocation of 70% equities and 30% fixed income. Target allocations can vary +/-5%.

According to this principle, individuals should hold a percentage of stocks equal to 100 minus their age. So, for a typical 60-year-old, 40% of the portfolio should be equities. The rest would comprise high-grade bonds, government debt, and other relatively safe assets.

All Country World 80/20 Portfolio: an investment of 1$, since May 1994, now would be worth 6.71$, with a total return of 570.63% (6.55% annualized). Stocks/Bonds 60/40 Portfolio: an investment of 1$, since May 1994, now would be worth 10.89$, with a total return of 988.55% (8.28% annualized).

Should a 70 year old be in the stock market? ›

Conventional wisdom holds that when you hit your 70s, you should adjust your investment portfolio so it leans heavily toward low-risk bonds and cash accounts and away from higher-risk stocks and mutual funds. That strategy still has merit, according to many financial advisors.

If you are a moderate-risk investor, it's best to start with a 60-30-10 or 70-20-10 allocation. Those of you who have a 60-40 allocation can also add a touch of gold to their portfolios for better diversification. If you are conservative, then 50-40-10 or 50-30-20 is a good way to start off on your investment journey.

Buffett takes an entirely different approach. Berkshire held more than $360 billion of stocks, $167 billion of cash (mostly Treasury bills), and just $24 billion of bonds at the end of 2023. Nearly all those investments were held at its insurance unit.

This is commonly referred to as The 4% Rule. The Trinity Study found that you can 'safely' sell off 4% of your total ETF investments once each year, and they 'should' last the next 30 years before you run out.

Experts agree that for most personal investors, a portfolio comprising 5 to 10 ETFs is perfect in terms of diversification.

One option for a solid three-ETF portfolio could be to include the Schwab U.S. Dividend Equity ETF (SCHD), the Vanguard S&P 500 ETF (VOO), and the Invesco QQQ Trust (QQQ). The SCHD ETF focuses on high-quality dividend stocks, which can provide stable income and potential long-term growth.

The 80-20 rule, also known as the Pareto Principle, states that 80% of all outcomes result from 20% of all causes. In business, this means seeking the most productive inputs that will generate the highest outcomes/returns.

From 1926 through 2021, the average annualized return of an all-stock allocation was 12.3%. What might surprise you is the long-term effect of adding just a small allocation of bonds into the mix. Under this analysis, a portfolio of 70% stocks and 30% bonds would have achieved a 10.5% annualized return.

A good return on investment is generally considered to be around 7% per year, based on the average historic return of the S&P 500 index, adjusted for inflation. The average return of the U.S. stock market is around 10% per year, adjusted for inflation, dating back to the late 1920s.

A thirty percent return is an achievable feat for one year if you're aggressive enough (and shall I say lucky enough), AND have the stomach to ride out the volatility, but consistently performing year after year becomes an incredible challenge that no one to my knowledge has done.