Have you fallen victim to the â60/40â strategy? For decades, financial advisors have pounded the table about this investment approach. The idea was simple: If the market was booming, your 60% allocation to stocks could help grow your wealth. And in a bust, your 40% allocation to bonds would help limit your losses and provide [â¦] You're receiving this email as part of your subscription to Crowdability. [Unsubscribe here](. [Crowdability Editorial]( [feature] âBusiness Insiderâ â This Strategy Can Make You an Extra $310,000 Matthew Milner Have you fallen victim to the â60/40â strategy? For decades, financial advisors have pounded the table about this investment approach. The idea was simple: If the market was booming, your 60% allocation to stocks could help grow your wealth. And in a bust, your 40% allocation to bonds would help limit your losses and provide income. But as Business Insider just reported, a new study shows that allocating 100% to stocks crushes the 60/40 strategy. In fact, it could help an investor like you pocket an extra $310,000. Today, Iâll reveal why â then Iâll give you an even better alternative. What a Loser The average 60/40 portfolio tanked by 17% last year. According to an analysis done by Leuthold Group, thatâs its worst performance since at least 1937. So, is this a good time to re-assess its value? A new study that Business Insider just reported on might certainly lead you to that conclusion. The study is from financial experts including Aizhan Anarkulova of Emory Universityâs Department of Finance. Itâs called â[Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice]( In brief, the study found that âlong-term investors who invest solely in equities can expect much higher returns than those who diversify with fixed-income.â More specifically, it found that: - With a 100%-stocks strategy, the average U.S. household could accumulate $1.07 million in wealth over forty years. - Meanwhile, the traditional 60/40 strategy would create just $760,000 of wealth. Certainly, given the volatility of stocks, including bonds in your portfolio can provide some psychological relief. But for most people, that relief wouldnât be worth $310,000! Furthermore, it found that stocks and bonds often moved in the same direction. So much for the general âwisdomâ that bonds provide diversification. In conclusion, the researchers had this to say: "Bonds add virtually no value for the lifecycle investors we consider.â Given this new information, what are investors like you supposed to do now? One Tiny Change with a Huge Impact Making big changes to your portfolio can be scary. Thatâs why most investors donât make any changes at all. But what if you could make one tiny change⦠that had a huge impact? You can. In fact, with this one tiny change, you could potentially double your returns. A Magical Way to Double Your Portfolioâs Value What Iâm about to tell you isnât magic. But it sure might feel like magic. You see, to make this strategy work, you simply need to re-allocate 6% of your overall portfolio â just 6 cents of every dollar you have invested. But this one tiny move can give you the chance to earn nearly 100% more on your money. So if you have a 60/40 portfolio worth $100,000 â and youâre not comfortable moving to 100% stocks â you could potentially double your portfolioâs value simply by re-allocating $6,000 of it. Hereâs how it works. The âMagic Ingredientâ To keep the math simple, letâs say a traditional 60/40 portfolio returns about 10% each year. But now letâs add some âmagicâ: private equity. In other words, startup companies. According to Christian Mueller-Glissmann, Head of Asset Allocation Research for Goldman Sachs, private investments are a âsmart bet.â Mueller-Glissmann believes investors should consider âswitching up their asset mix as the outlook for stocks and bonds has dimmed.â According to a research report from SharesPost (an expert in private securities that was recently acquired by Forge), allocating just 6% of your assets to startups can boost your portfolioâs overall returns by 67%. And with a 67% boost, instead of earning, say, 10% a year, youâd earn 16.7% a year. Letâs see what that difference would add up to with a hypothetical portfolio of $100,000. Double Your Wealth with Startups At an average return of 10% a year, in ten years, a $100,000 portfolio of stocks and bonds would grow into about $259,000. Not bad. But in that same timeframe, a portfolio that includes a 6% allocation to startups (just $6,000) would grow to $468,000. So, as you can see, by allocating just a tiny amount to startups, you nearly doubled the size of your investment portfolio. Keep in mind, these returns include the winners and the losers. And furthermore, if you happen to invest in a startup like Facebook, Uber, or Airbnb â the type of investment that can deliver 20,000%+ returns â you could become a multi-millionaire. Bigger Returns â With Just a Tiny Tweak As you just saw, even a tiny allocation to private equity could help you escape the perils of a 60/40 portfolio and help your nest egg soar. Thatâs why we encourage all our readers to dive into the free educational resources Wayne and I put together for you. These reports show you how to get started investing in the private markets. And they also provide you with tips, tricks, and strategies for finding the best â and potentially, the most profitable â startup investments out there. [You can review them and download them here, for free »]( Best Regards,
[Matthew Milner]
Matthew Milner
Founder
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