The Balanced Portfolio: Portfolio Grand Daddy

The balanced portfolios consist of two asset classes, stocks, and bonds. What they lack in flair and sexiness they make up for in simple effectiveness.

This is the page for the balanced portfolios. Here you will find an overview of what a balanced portfolio is. You can also see the asset allocation of the various balanced portfolios.

The Balanced Portfolio: Portfolio Grand Daddy

What is a balanced portfolio?

The balanced portfolios consist of two asset classes, stocks, and bonds. They are the simplest portfolios to implement. What they lack in flair and sexiness they make up for in simple effectiveness. They can be modeled to almost any risk level. John Bogle, supreme hero of the investing world, recommends that you hold a total stock market fund and a total bond fund.

A rule of thumb is that the percentage of bonds should equal your age, so a 50-year-old should hold 50% VTI (stocks) and 50% BND (bonds). This may be too conservative for many. Stocks have historically outperformed bonds so holding a good portfolio of your portfolios in stocks for as long as possible is recommended. Stocks are riskier than bonds so you should check your appetite for risk. The best portfolio is the portfolio that you are going to stick with.

One can argue that all portfolios are descendants from the balanced portfolios. Other portfolios simply slice up the stock and bond portions of the portfolio. For example instead of just US Total Stock Market, you can add international stocks, or small-cap stocks and so forth. For the bond portion, you can add TIPS or more corporate bonds and so forth.

Performance of the balanced portfolios

Performance of the balanced portfolios

Portfolio NameNumber of asset classes1 year return 2019YTD (incl. December 2019)10 year returnDrawdownRisk LevelMarket CorrelationDollar Value
S&P 500 (Benchmark)131.25%31.25%12.97%-37.71%5 - very high risk0.99$167,045.76
Balanced Portfolio 10/90211.02%11.02%4.35%-2.41%1 - very low risk0.46$64,395.11
Balanced Portfolio 20/80213.20%13.20%5.38%-3.37%1 - very low risk0.72$74,264.67
Balanced Portfolio 30/70215.39%15.39%6.39%-7.57%1 - very low risk0.86$84,899.95
Balanced Portfolio 40/60217.57%17.57%7.39%-11.78%1 - very low risk0.93$96,206.80
Balanced Portfolio 50/50219.75%19.75%8.38%-15.99%2 - low risk0.97$108,052.29
Balanced Portfolio 70/30224.12%24.12%10.31%-24.41%3 - medium risk0.99$132,614.65
Balanced Portfolio 80/20226.30%26.30%11.26%-28.62%4 - high risk1$144,847.01
Balanced Portfolio 90/10228.48%28.48%12.20%-32.83%4 - high risk1$156,648.41

Asset Allocation for the balanced portfolios

Balanced Portfolio 10/90                             

  • 10.00%  US Total Stock Market   (VTI)
  • 90.00%  Total US Bond Market    (BND)

Balanced Portfolio 20/80                             

  • 20.00%  US Total Stock Market   (VTI)
  • 80.00%  Total US Bond Market    (BND)

This portfolio is also very close to JL Collins’ Wealth Preservation Portfolio also on Portfolioeinstein.com 

Balanced Portfolio 30/70                             

  • 30.00%  US Total Stock Market   (VTI)
  • 70.00%  Total US Bond Market    (BND)

Balanced Portfolio 40/60                             

  • 40.00%  US Total Stock Market   (VTI)
  • 60.00%  Total US Bond Market    (BND)

Balanced Portfolio 50/50                             

  • 50.00%  US Total Stock Market   (VTI)
  • 50.00%  Total US Bond Market    (BND)

Balanced Portfolio 60/40                             

  • 60.00%  US Total Stock Market   (VTI)
  • 40.00%  Total US Bond Market    (BND)

This is also called “the benchmark portfolio” and is often a benchmark for pension funds, institutions, family offices etc. Read more about the 60/40 in Meb Faber’s very recommended book Global Asset Allocation: A Survey of the World’s Top Asset Allocation Strategies.

Balanced Portfolio 70/30                             

  • 80.00%  US Total Stock Market   (VTI)
  • 30.00%  Total US Bond Market    (BND)

Balanced Portfolio 80/20                             

  • 80.00%  US Total Stock Market   (VTI)
  • 20.00%  Total US Bond Market    (BND)

Balanced Portfolio 90/10                             

  • 90.00%  US Total Stock Market   (VTI)
  • 10.00%  Total US Bond Market    (BND)

Alternatives to the balanced portfolio

There are many alternatives to the balanced portfolios. The 60/40 balanced portfolio is a good starting point. A good way to improve upon the balanced portfolio in terms of returns is to break up the stock and bonds portfolio into small slices. The ultimate portfolio from Paul Merriman does just that. Many target-date funds also do this.

Conclusion

Which portfolio do you use? Why do you think the balanced portfolio too simple for you?

After having read up on the balanced portfolio I encourage you to find other great portfolios right here on portfolioeinstein.com.

If you have suggestions to new portfolios be sure to add them in comments or reach out to me!

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