A balanced portfolio is the holy grail of investing.
A tried and tested investment strategy to achieve this — practised by professional and private investors alike — has been to hold 60 per cent of a portfolio in shares and the remaining 40 per cent in fixed income.
The theory is that the shares provide the growth and the bonds act as a cushion against losses in equity markets during times of stress.
Over the past ten years a 60:40 strategy has done just that. Analysis by AJ Bell comparing the Vanguard LifeStrategy 60 per cent equity fund with the Life Strategy 100 per cent equity fund showed that the 60:40 portfolio experienced less significant falls.
The biggest drop in value of a 60:40 portfolio