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Performance leadership among asset classes has varied year to year, however a consistent balance of 60% U.S. stocks and 40% U.S. bonds may offer smoother returns than most individual asset classes.”
As one of the industry’s first mutual funds, the Eaton Vance Balanced Fund has endured a myriad of stories over the past 93 years, extolling the benefits of and refuting the claimed drawbacks of the common 60% U.S. stocks and 40% U.S. bonds strategy. Perhaps the long-running story of the consistency and stability of a balanced fund has been unexciting for headlines that often tailor to bull-minded investors. However in today’s environment, I believe the time-tested smart and simple strategy may be worthy of some positive attention. Through a single structure, a balanced fund can help investors achieve diversification with the expertise of portfolio managers guiding assets through varying market environments.
Over the years, the 60/40 strategy has navigated many of the headlines we see flashing across our screens today. Politics, policy, trade, tariffs, taxes, war, inflation, deflation and other factors are all bringing a heavy dose of uncertainty to markets. However, that uncertainty paired with the S&P 500 experiencing back-to-back years of 25%-plus returns may present a timely opportunity for investors to recalibrate expectations and reallocate assets.
While the economic conditions of 2025 and beyond remain uncertain, the historical performance of the 60/40 strategy over various economic regimes indicates that the attractive growth and diversification benefits across a range of outcomes may make this a timely consideration as shown in the next two charts.
Growth over time, through varying economic conditions
As shown below, a hypothetical 60/40 strategy1 has demonstrated the ability to navigate varying economic conditions, making the portfolio an attractive long-term investment solution. While often utilized as the core of a portfolio, with clients additionally allocating to potentially more niche assets classes, a balanced fund may serve as a single fund starting point for new investors.
Attractive Capital Appreciation Since 1975
Attractive Capital Appreciation Since 1975
DISPLAY 1
A Historically Reliable Core Allocation
Performance leadership among asset classes has varied year to year, however a consistent balance of 60% U.S. stocks and 40% U.S. bonds may offer smoother returns than most individual asset classes, including reinvestment of distributions.
Annual Investment Performance by Asset Class (% Return)
Annual Investment Performance by Asset Class (% Return)
DISPLAY 2
Fixed Income for Income, Diversification and Risk Mitigation
By incorporating a portfolio of U.S. bonds alongside U.S. equity exposure, a balanced approach can capture attractive income opportunities across fixed income sectors, while potentially mitigating volatility experienced in the equity landscape. Further, in today’s environment, high starting yields are aiding in fixed incomes compelling proposition of delivering income, and total return and an actively managed approach can exploit inefficiencies compared to passive peers.
Bottom Line: Simple investment strategies like the 60/40 portfolio offer a place for long-term investors seeking diversification and attractive risk adjusted returns. An asset allocation framework like utilized in a balanced fund, could be a solution for 2025 as clients look to stay invested, while remaining focused on long term investment goals.
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