If you haven’t touched anything in five years, a 60/40 mix is now around 75% stocks and 25% bonds.
A portfolio that started 10 years ago with a 60/40 mix would now be 85% invested in stocks and 15% in bonds, as during this period US stocks have gained over 375% and bonds base gained 34%.
It’s time to correct wallet drift
Without debating the best stock market gauge, there is little debate that US stocks aren’t really cheap right now. It’s unclear when a correction (10% to 20% loss) or a bear market (20% + loss) might strike, but a retreat wouldn’t be much of a surprise given the recent teardown. Since the March 2020 low in the COVID bear market, U.S. stocks have more than doubled.
It is therefore more advisable to consider checking your investment portfolios to make sure they contain the correct mix of stocks and bonds.
Plus, take a step back and think if your long-term asset allocation strategy still makes sense. Maybe you went for a 70/30 or 80/20 mix at 35. But now you have 55 or 60. Do you still want to own that many shares? Maybe the 80/20 mix went down to 70/30. Or from 70/30 to 60/40.
To be clear, there is no one right answer. If you have a pension and all of your living expenses can be covered by that and your Social Security benefits, you may want to keep a good chunk of stock as part of wealth planning. This may make sense given that you don’t depend on your stock portfolio to cover basic living expenses.