This conventional formula governing how much of your nest egg should be divided between stocks and bonds clocked one of its worst years in over a decade in 2022, when both asset classes tanked at the same time.
To further diversify that portfolio, the investments within the equity and fixed income portions are spread among US and international markets, Schlanger said. Rapidly rising inflation, which peaked in June 2022, clobbered both stocks and bonds. The S&P 500 lost over 19% in value, while the Nasdaq plunged 33% as the Fed hiked its benchmark interest rate in response to inflation, making borrowing costs for companies a lot more expensive.
With all that said, the 60/40 portfolio is not for everyone. Someone's risk appetite and age play a big role, too.