All-bond allocation unwise despite equity jitters, says Ibbotson

Despite the superior performance of fixed-income assets recently, an all-bond asset allocation is unlikely to deliver investors the returns they need in the future, according to analysis released by Ibbotson Associates, the research division of Morningstar Inc. of Chicago.
JUL 22, 2009
By  Sue Asci
Despite the superior performance of fixed-income assets recently, an all-bond asset allocation is unlikely to deliver investors the returns they need in the future, according to analysis released by Ibbotson Associates, the research division of Morningstar Inc. of Chicago. “This is the worst time to put all of your money into bonds, given the low-yield environment,” said Peng Chen, president of Ibbotson. In an analysis of the 40 years through March 31, the firm found that the Standard & Poor’s 500 stock index had an average annual return of 8.70%, compared with returns of 8.03% and 8.79%, respectively, for the SBBI Intermediate Term Government Bond Index and the SBBI Long-Term Government Bond Index. The performance was influenced by high interest rates in the 1970s, followed by almost 30 years of declining interest rates, said Mr. Chen, who predicted that this scenario — which also created capital gains — is not likely to be repeated in the future. Going forward, bond returns probably will average 3% to 4% annually, he said. A diversified allocation to stocks and bonds remains the best strategy, the researchers found. In fact, over the 40-year period, a portfolio with an allocation of 60% stocks and 40% bonds had an average return of 9.11%.

Latest News

Morningstar forges fintech partnership with SS&C
Morningstar forges fintech partnership with SS&C

The alliance will give Black Diamond users the first chance to use a newly launched advisory suite as Morningstar shutters a legacy advisor platform.

Passive pressures will drive continued mutual fund consolidation into 2030, PWC says
Passive pressures will drive continued mutual fund consolidation into 2030, PWC says

A continuing shift to low fees, growing dominance of mega-managers, and the clamor for product innovation are set to reshape the landscape.

Amid festering trade tensions, Grantham's GMO launches China-dodging ETF
Amid festering trade tensions, Grantham's GMO launches China-dodging ETF

Notwithstanding a recent tech-driven rebound in Chinese markets, five- and 10-year lookbacks suggest dropping the emerging-market giant is still the winning strategy.

Finra sanctions smoothie-throwing broker over alleged cash reporting failures
Finra sanctions smoothie-throwing broker over alleged cash reporting failures

But the Finra panel's decision against James Iannazzo was not unanimous.

Student debt has a chilling effect on employees' retirement planning
Student debt has a chilling effect on employees' retirement planning

A new study highlights how debt-saddled public and private workers are forced to focus on shorter-term investments and immediate financial concerns.

SPONSORED Record growth: Interval funds emerge as key players in alternative investments

Blue Vault Alts Summit highlights the role of liquidity-focused funds in reshaping advisor strategies

SPONSORED Taylor Matthews on what's behind Farther's rapid growth

From 'no clients' to reshaping wealth management, Farther blends tech and trust to deliver family-office experience at scale.