The traditional 60/40 portfolio, 60% stocks and 40% bonds, has long been the standard advisor recommendation, but Fred Hubler points out it hasn’t kept pace with how major endowments invest. Over the last 30 years, a 60/40 portfolio returned an average of 8.2% in the US, while Yale’s endowment model earned 13.1% over that same period.
He explains why: large endowments typically keep most of their portfolio outside public stocks, since they don’t need the liquidity and can tie up money for longer stretches. Hubler notes the public market has fewer options than people assume, with 5,866 individual stocks today, down from about 8,000 in the 1990s and a low of 3,500 in 2016, and only a subset are the type most mutual funds and ETFs actually invest in. Individuals can access some of the same alternative asset classes endowments use, along with downside-hedging tools now available for public equity exposure, though accredited investors are typically capped at 10% in any one alternative and 25% total, restrictions endowments don’t face.
If a 60/40 split feels safe, consider that safe hasn’t been beating the endowment model for the last 30 years.
Read Hubler’s full case for endowment-style investing on Forbes, Investing For Grownups: Why Asset Allocation Matters.