The 60/40 Portfolio’s Demise Reignites Enthusiasm For These Two Asset Categories

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The 60/40 portfolio is having one of the most disappointing years in decades.

In 2022, it took an almost 17% nosedive, shining a light on its weakness. The age-old strategy became so trustworthy because of its counterbalancing properties. It was built on the premise that when stocks go up, bond yields go down and vice versa. Sadly, in the higher-for-longer atmosphere, this premise no longer holds water. 

Right now, the 60/40 strategy is attacked on both fronts. Rising interest rates are diminishing bond prices while slowing economic growth and high inflation negatively impact stocks. These new conditions call for portfolio adjustments, and even the biggest asset managers in the world are making them. 

The Final Nail In The Coffin 

With about $4.7 in assets, BlackRock Inc. is one of the biggest investment firms in the world. Such a power necessitates the highest level of precaution before a single dollar is spent. BlackRock has 18,400 employees who work to boost the profitability of the company’s portfolio in an ever-changing environment. Its analysts and decision-makers are arguably the best in the world, and their verdict is that the 60/40 strategy isn’t going to cut it any longer. A higher degree of diversification is needed to achieve noteworthy gains. 

That’s a big part of the reason the company holds $320 billion in alternative assets. In times of economic turmoil, the uncorrelated assets see a huge spike in favorability. And that makes perfect sense because they provide a place to park your savings while the hailstorm is raging and possibly see growth while the traditional markets are falling. 

Here are two big ones that regular investors are using at the moment and investment ideas you can take advantage of today. 

Real Estate 

Investing in real estate tends to demand a lot of time and know-how. If you want a rental in a hot market that keeps going up, you need to part with a considerable sum. However, with the boom in real estate crowdfunding, you don’t have to miss out on the returns just because you can’t afford the entire property. 

You can buy shares of individual units or real estate portfolios and secure passive rent dividends. Each time the tenants pay rent, a portion of that income is funneled into your account. On top of that, your shares can appreciate over time. 

Here are a few ways you can own cash-flowing real estate today:

Private Credit 

If you’re looking for high-yield securities that provide fixed income, private credit might be what you’re looking for. With private debt financing, you essentially act as a bank to a company seeking funds while earning monthly or quarterly interest over a predetermined period. In the end, you get the entire principal back. 

Private credit is generally less volatile than many other asset classes. By choosing senior debt financing, you can add an important layer of protection to your investment, as senior debt holders get paid out first in the event of a default. 

Here are some private credit investment opportunities to check out: 

Hold on!

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