Sleep Better with a Balanced Portfolio

Personal Finance Editor Jonathan Burton argues that a 50-50 portfolio of stocks and bonds will do as well over time while helping you sleep better during market downturns.

In the WSJ article How to Invest Well and Sleep Better, Burton admits that this advice may be coming a little too late for investors who had equity intensive portfolios.

That said, the idea is that the conventional wisdom that a stock heavy portfolio is necessary to fight off inflation can come back to bite you if the market crashes just as you are approaching retirement.

The 50-50 example Burton uses to illustrate his point includes the Dow Diamonds ETF (DIA) and iShares Lehman 20+ Year Treasury Bond ETF (TLT).

Check out the article to see the results of Burton’s study. You’ll be surprised at how close the 50-50 portfolio comes to matching the returns of an 80-20 portfolio while significantly reducing risk over a 21 year period.

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