Have you ever stopped to ask why you’re supposed to allocate a good chunk of their portfolios to fixed income BIV, +0.08% ?
Probably not, since most retirees take it as obvious that bonds have a low correlation to stocks. If that were the case, of course, a stock-bond portfolio would be a lot more conservative than a stock-only portfolio.
In fact, however, the correlation between stocks and bonds has varied widely over the last century. Sometimes that correlation has been low or even negative, as indeed is the conventional wisdom’s expectation. But at other times the correlation has been strongly positive, and retirees will be in for a rude awakening if that turns out to be the case during the next stock market downturn To continue reading, please subscribe. Already a Subscriber? Log in Actionable trading strategies Easy-to-follow guidance Weekly market navigational tool
