If you’re kicking yourself over a bad stock pick recently, we’re here to tell you that #1, who isn’t, and #2, even bonds—one of the safest (some would say boring) investments—is losing money this year, with a key index that tracks the asset dropping 16.8% since January.
Why it matters: Volatile markets have created problems for anyone following a traditional, and traditionally safe, 60/40 investing strategy—referring to the allocation between stocks and bonds, with the idea being if one goes down, the other will offset the losses, per Axios.
- A 60/40 strategy gives investors exposure to the capital gains (aka, profits) and dividends offered by shares as well as the relatively safe income stream of bonds.
- Historically, it’s been an effective strategy, with exceptions. 60/40 portfolios have posted negative returns six times since 1975, but losses this year are the worst.
In Canada: Similar Canadian bond indexes and the S&P/TSX Composite Index are currently down ~12% and ~6%, respectively, compared to last year, leaving the title of Canada’s top investor open to whoever can figure out how not to lose money this year.
- As high interest rates take their toll on markets, BlackRock, the world’s largest asset manager, says central banks will ease up soon. Central banks say otherwise.
Zoom out: Traditional investment advice suggests it’s best to stay the course during turbulent times, but it remains to be seen if even time-tested strategies are a match for the challenging conditions of 2022.