A 50/50 Allocation in Traditional Investment Accounts

Today I met up with an old friend of mine and one of the better financial advisors I know out there.

He basically does full service wealth management for clients at one of the bigger investment brokerages and we were talking about people's stock exposure and how the majority of people are over-exposed to stocks.

50/50 Allocation

He told me that they automatically rebalance their clients portfolios to 50/50 continuously. Meaning, 50% of an account in invested in different stocks and the other 50% is in fixed assets, such as bonds.

Most people have a 60/40 or even 70/30 allocation of stocks to bonds. It's super risky and, yes may be great when the stock market is going up, but when we inevitably pull back....look out below.

So the irony is he and his partners have literally had to defend the 50/50 allocation in the past few years as technically they are under-performing the broad market by just a little.

However, over the long term this allocation will outperform the others time after time. In fact, the ideal allocation from all the research I have read is 35/65...yep even less in stocks then they are doing.

Over the course of 30 years (basically the investing life of a working career) it has shown to outperform based on historical data and studies.

Anyway, just some food for thought on portfolio allocation.

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Disclaimer: All info in this post is my opinion and for informational purposes only