There’s a lot of chatter in the personal financial space on whether a 60-40 allocation of stocks and bonds can still fly in the current market environment. Investors who still want to opt for tradition can use two ETFs: the iShares Core S&P 500 ETF (IVV ) and the iShares Core U.S. Aggregate Bond ETF (AGG ).
IVV eeks to track the investment results of the S&P 500, which measures the performance of the large-capitalization sector of the U.S. equity market. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.
It may invest the remainder of its assets in certain futures, options and swap contracts, cash and cash equivalents, as well as in securities not included in the underlying index, but which the advisor believes will help the fund track the underlying index.
- Exposure to large established U.S. companies
- Low cost, tax efficient access to 500 of the largest cap U.S. stocks
- Use at the core of your portfolio to seek long-term growth
As for AGG, it seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment-grade bond market. The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.
“Diversifying across many stocks is a good start, but most portfolios ought to be diversified across asset classes given all stocks have some sensitivity to common economic factors,” an iShares article by Daniel Prince noted. “Such asset allocations have everything to do with an investor’s goals, timeline, and risk tolerance, but in all cases iShares Core ETFs can help here as well. They seek to track widely recognized stock and bond market indexes, like the S&P Total Market Index (broad U.S. equities) and Bloomberg Barclays US Aggregate Bond Index (broad U.S. bonds), helping investors to track these markets at the center of their portfolio.”
“Consider the classic ‘60/40’ portfolio, a blend of stocks and bonds that is commonly used as a proxy for the average person’s investment mix,” the article added further. “This year, the mix would have worked well amid extraordinary volatility. Through November, a 60/40 blend of the S&P Total Market Index and the Bloomberg Barclays US Aggregate Bond Index would have gained 12.3% with less volatility than owning equities alone (see below).”
