This has been a challenging year for investors. On top of the equity bear market, the steep losses in bonds1 have been especially surprising, leading some investors to question whether the classic 60/40 portfolio is dead. Although 2022 has seen the worst start to a year in history for many bond indices,1 the year-to-date experience for a 60/40 portfolio has not even cracked the top (or, alternatively, worst) five historical drawdowns of the last century. A 19% loss of wealth is not all that fun, but it’s only two-thirds of the drawdown investors endured through the financial crisis of 2008–2009 (see Exhibit 1).
Exhibit 1
Not Such a Low Blow 60% S&P 500 Index / 40% Five-Year US Treasury
Notes: January 1926—September 2022
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
Please see the end of this document for important disclosures.
A CASE FOR OPTIMISM
It is important, and especially so during difficult market conditions, for investors to focus not solely on where returns have been but also on where they could be going in the months and years ahead. Looking at the performance of a 60/40 portfolio following a decline of 10% or more since 1926 (see Exhibit 2), we seeclearly that returns on average have been strong in the subsequent one-, three-, and five-year periods. History makes a strong case for investors to stick with their longer-term plan and should help serve as a reminder that steepdeclines shouldn’t derail investors’ progress toward reaping the expected benefits of investing.
Exhibit 2
Still in the Fight
60%S&P500Index/40%Five-Year US Treasury Notes: January 1926—September 2022
Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio.
ROLL WITH THE PUNCHES
Markets have proven quite resilientoverthelongrun. Like a boxer stepping inside the ring, investors should expect (and prepare) to take a few shots and get pushed up against the ropes every so often. The most important thing, though, is to roll with the punches and not get knocked out by short-termmoves. If history is any guide, there’s reason to believe the classic 60/40 portfolio is alive and well and could be poised to deliver healthy returns going forward.
The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional to be reliable, and Dimensional has reasonable grounds to believe that all factual information herein is true as at the date of this material.It does not constitute investment advice, a recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. Before acting on any information in this document, you should consider whether it is appropriate for your particular circumstances and, if appropriate, seek professional advice. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized reproduction or transmission of this material is strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
This material is not directed at any person in any jurisdiction where the availability of this material is prohibited or would subject Dimensional or its products or services to any registration, licensing, or other such legal requirements within the jurisdiction.
“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, DimensionalFund Advisors Pte. Ltd., Dimensional Japan Ltd. and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
Risks
Investments involve risks. The investment return and principal value of an investment mayfluctuate so that an investor’s shares, when redeemed, may be worth more or less than theiroriginal value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
UNITED STATES
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.
CANADA
These materials have been prepared by Dimensional Fund Advisors Canada ULC. The other Dimensional entities referenced herein are not registered resident investment fund managers or portfolio managers in Canada.
This material is not intended for Quebec residents.
Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.
AUSTRALIA
This material is issued by DFA Australia Limited (AFS Licence No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the target market determination that has been made for each financial product either issued or distributed by DFA Australia Limited prior to proceeding with any investment. Go to dimensional.com/funds to access a copy of the relevant target market determination. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.
NEW ZEALAND
This material is issued by DFA Australia Limited (incorporated in Australia, AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. This material does not give any recommendation or opinion to acquire any financial product or any financial advice product, and is not financial advice to you or any other person. No account has been taken of the objectives, financial situation or needs of any particular person.Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives,financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and for the Dimensional Wholesale Trusts the target market determination (TMD) that has been made for each financial product or financial advice product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to dimensional.com/funds to access a copy of the PDS or the relevant TMD. Anyopinions expressed in this material reflect our judgement at the date of publication and are subject to change.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
Issued by Dimensional Ireland Limited (Dimensional Ireland), with registered office 3 Dublin Landings, North Wall Quay, Dublin 1, Ireland. Dimensional Ireland is regulated by the Central Bank of Ireland (Registration No. C185067).
WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.
Issued by Dimensional Fund Advisors Ltd. (Dimensional UK), 20 Triton Street, Regent’s Place, London, NW1 3BF. Dimensional UK is authorised and regulated by the Financial Conduct Authority (FCA) – Firm Reference No. 150100.
Dimensional UK and Dimensional Ireland do not give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.
Dimensional UK and Dimensional Ireland issue information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from Dimensional UK and Dimensional Ireland will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
NOTICE TO INVESTORS IN SWITZERLAND: This is advertising material.
JAPAN
For Institutional Investors and Registered Financial Instruments Intermediary Service Providers.
This material is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as aFinancial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business.
Dimensional Japan Ltd.
Director of Kanto Local Finance Bureau (FIBO) No. 2683 Membership: Japan Investment Advisers Association
SINGAPORE
This material is deemed to be issued by Dimensional Fund Advisors Pte. Ltd., which is regulated by the Monetary Authority of Singapore and holds a capital markets services license for fund management.
This advertisement has not been reviewed by the Monetary Authority of Singapore and should not be shown to prospective retail investors. FOR PROFESSIONAL INVESTORS IN HONG KONG
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not intended to constitute and does not constitute marketing of the services of Dimensional Hong Kong or its affiliates to the public of Hong Kong. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis.Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.
Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors. Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.
The 60/40 Portfolio: Down but Not Out
This has been a challenging year for investors. On top of the equity bear market, the steep losses in bonds1 have been especially surprising, leading some investors to question whether the classic 60/40 portfolio is dead. Although 2022 has seen the worst start to a year in history for many bond indices,1 the year-to-date experience for a 60/40 portfolio has not even cracked the top (or, alternatively, worst) five historical drawdowns of the last century. A 19% loss of wealth is not all that fun, but it’s only two-thirds of the drawdown investors endured through the financial crisis of 2008–2009 (see Exhibit 1).
Exhibit 1
Not Such a Low Blow 60% S&P 500 Index / 40% Five-Year US Treasury
Notes: January 1926—September 2022
Please see the end of this document for important disclosures.
A CASE FOR OPTIMISM
It is important, and especially so during difficult market conditions, for investors to focus not solely on where returns have been but also on where they could be going in the months and years ahead. Looking at the performance of a 60/40 portfolio following a decline of 10% or more since 1926 (see Exhibit 2), we seeclearly that returns on average have been strong in the subsequent one-, three-, and five-year periods. History makes a strong case for investors to stick with their longer-term plan and should help serve as a reminder that steep declines shouldn’t derail investors’ progress toward reaping the expected benefits of investing.
Exhibit 2
Still in the Fight
60% S&P 500 Index / 40% Five-Year US Treasury Notes: January 1926—September 2022
ROLL WITH THE PUNCHES
Markets have proven quite resilient over the long run. Like a boxer stepping inside the ring, investors should expect (and prepare) to take a few shots and get pushed up against the ropes every so often. The most important thing, though, is to roll with the punches and not get knocked out by short-term moves. If history is any guide, there’s reason to believe the classic 60/40 portfolio is alive and well and could be poised to deliver healthy returns going forward.
The information in this material is intended for the recipient’s background information and use only. It is provided in good faith and without any warranty or representation as to accuracy or completeness. Information and opinions presented in this material have been obtained or derived from sources believed by Dimensional to be reliable, and Dimensional has reasonable grounds to believe that all factual information herein is true as at the date of this material.It does not constitute investment advice, a recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. Before acting on any information in this document, you should consider whether it is appropriate for your particular circumstances and, if appropriate, seek professional advice. It is the responsibility of any persons wishing to make a purchase to inform themselves of and observe all applicable laws and regulations. Unauthorized reproduction or transmission of this material is strictly prohibited. Dimensional accepts no responsibility for loss arising from the use of the information contained herein.
This material is not directed at any person in any jurisdiction where the availability of this material is prohibited or would subject Dimensional or its products or services to any registration, licensing, or other such legal requirements within the jurisdiction.
“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. These entities are Dimensional Fund Advisors LP, Dimensional Fund Advisors Ltd., Dimensional Ireland Limited, DFA Australia Limited, Dimensional Fund Advisors Canada ULC, DimensionalFund Advisors Pte. Ltd., Dimensional Japan Ltd. and Dimensional Hong Kong Limited. Dimensional Hong Kong Limited is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
Risks
Investments involve risks. The investment return and principal value of an investment mayfluctuate so that an investor’s shares, when redeemed, may be worth more or less than theiroriginal value. Past performance is not a guarantee of future results. There is no guarantee strategies will be successful.
UNITED STATES
Dimensional Fund Advisors LP is an investment advisor registered with the Securities and Exchange Commission. Investment products: • Not FDIC Insured • Not Bank Guaranteed • May Lose Value
Dimensional Fund Advisors does not have any bank affiliates.
CANADA
These materials have been prepared by Dimensional Fund Advisors Canada ULC. The other Dimensional entities referenced herein are not registered resident investment fund managers or portfolio managers in Canada.
This material is not intended for Quebec residents.
Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise noted, any indicated total rates of return reflect the historical annual compounded total returns, including changes in share or unit value and reinvestment of all dividends or other distributions, and do not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.
AUSTRALIA
This material is issued by DFA Australia Limited (AFS Licence No. 238093, ABN 46 065 937 671). This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person. Accordingly, to the extent this material constitutes general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. Investors should also consider the target market determination that has been made for each financial product either issued or distributed by DFA Australia Limited prior to proceeding with any investment. Go to dimensional.com/funds to access a copy of the relevant target market determination. Any opinions expressed in this material reflect our judgement at the date of publication and are subject to change.
NEW ZEALAND
This material is issued by DFA Australia Limited (incorporated in Australia, AFS License No. 238093, ABN 46 065 937 671). This material is provided for information only. This material does not give any recommendation or opinion to acquire any financial product or any financial advice product, and is not financial advice to you or any other person. No account has been taken of the objectives, financial situation or needs of any particular person.Accordingly, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives,financial situation and needs. Investors should also consider the Product Disclosure Statement (PDS) and for the Dimensional Wholesale Trusts the target market determination (TMD) that has been made for each financial product or financial advice product either issued or distributed by DFA Australia Limited prior to acquiring or continuing to hold any investment. Go to dimensional.com/funds to access a copy of the PDS or the relevant TMD. Anyopinions expressed in this material reflect our judgement at the date of publication and are subject to change.
WHERE ISSUED BY DIMENSIONAL IRELAND LIMITED
Issued by Dimensional Ireland Limited (Dimensional Ireland), with registered office 3 Dublin Landings, North Wall Quay, Dublin 1, Ireland. Dimensional Ireland is regulated by the Central Bank of Ireland (Registration No. C185067).
WHERE ISSUED BY DIMENSIONAL FUND ADVISORS LTD.
Issued by Dimensional Fund Advisors Ltd. (Dimensional UK), 20 Triton Street, Regent’s Place, London, NW1 3BF. Dimensional UK is authorised and regulated by the Financial Conduct Authority (FCA) – Firm Reference No. 150100.
Dimensional UK and Dimensional Ireland do not give financial advice. You are responsible for deciding whether an investment is suitable for your personal circumstances, and we recommend that a financial adviser helps you with that decision.
Dimensional UK and Dimensional Ireland issue information and materials in English and may also issue information and materials in certain other languages. The recipient’s continued acceptance of information and materials from Dimensional UK and Dimensional Ireland will constitute the recipient’s consent to be provided with such information and materials, where relevant, in more than one language.
NOTICE TO INVESTORS IN SWITZERLAND: This is advertising material.
JAPAN
For Institutional Investors and Registered Financial Instruments Intermediary Service Providers.
This material is deemed to be issued by Dimensional Japan Ltd., which is regulated by the Financial Services Agency of Japan and is registered as aFinancial Instruments Firm conducting Investment Management Business and Investment Advisory and Agency Business.
Dimensional Japan Ltd.
Director of Kanto Local Finance Bureau (FIBO) No. 2683 Membership: Japan Investment Advisers Association
SINGAPORE
This material is deemed to be issued by Dimensional Fund Advisors Pte. Ltd., which is regulated by the Monetary Authority of Singapore and holds a capital markets services license for fund management.
This advertisement has not been reviewed by the Monetary Authority of Singapore and should not be shown to prospective retail investors. FOR PROFESSIONAL INVESTORS IN HONG KONG
This material is deemed to be issued by Dimensional Hong Kong Limited (CE No. BJE760) (“Dimensional Hong Kong”), which is licensed by the Securities and Futures Commission to conduct Type 1 (dealing in securities) regulated activities only and does not provide asset management services.
This material should only be provided to “professional investors” (as defined in the Securities and Futures Ordinance [Chapter 571 of the Laws of Hong Kong] and its subsidiary legislation) and is not for use with the public. This material is not intended to constitute and does not constitute marketing of the services of Dimensional Hong Kong or its affiliates to the public of Hong Kong. When provided to prospective investors, this material forms part of, and must be provided together with, applicable fund offering materials. This material must not be provided to prospective investors on a standalone basis.Before acting on any information in this material, you should consider whether it is suitable for your particular circumstances and, if appropriate, seek professional advice.
Neither Dimensional Hong Kong nor its affiliates shall be responsible or held responsible for any content prepared by financial advisors. Financial advisors in Hong Kong shall not actively market the services of Dimensional Hong Kong or its affiliates to the Hong Kong public.
11/17/2022
https://my.dimensional.com/the-60-40-portfolio-down-but-not-out
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