Should You Buy Stocks, Bonds, or Both? Statistically Speaking, This Is the Best Investment Strategy
Conventional wisdom teaches investors to buy stocks when they are young, then gradually rebalance their portfolios to favor bonds as they age. That thinking has made target date funds popular. For context, target date funds blend stocks and bonds at different ratios, slowly moving from stock-focused to bond-focused over time.
The 60-40 portfolio (60% stocks and 40% bonds) is a popular alternative to target date funds. That strategy offers the benefit of more reliable returns over time, and it avoids becoming too conservative in retirement. In general, stocks and bonds tend to move in opposite directions, such that a 60-40 portfolio should limit downside in all market environments.
However, a recent study by a group of academics representing three universities examined whether target date funds and 60-40 strategies are truly a better option than an all-stock approach. Here's what investors should know.
Source Fool.com
