This Retirement Strategy Is Crushing the '60/40 Portfolio'

The '60/40 portfolio' is in bigger trouble... 'In bull markets only'... An alternative solution... This retirement strategy is crushing the '60/40 portfolio'... Stay nimble... Doc Eifrig shares all the details... A gold vs. 'digital gold' debate...

The '60/40 portfolio' is in even bigger trouble now...

In the February 15 Digest, we reported that what has become the most conventional of long-term portfolio allocations, especially for many retirement accounts – 60% stocks, 40% bonds... set it and forget it – was down about 5% to start off the year...

The 60/40 portfolio was in "real trouble," we said.

A month later, this widely used passive strategy is faring even worse... down by 10% since January 1, according to the benchmark we use. Put another way, millions of folks are simply losing money by "doing nothing" with passive investments...

It's not surprising once you understand why...

For a variety of reasons – like the Federal Reserve tightening monetary policy and war breaking out in Eastern Europe – stocks have sold off across the board, with some glitzy growth names in the U.S. down by at least 50%...

Meanwhile, "safe" bonds – what many investors have considered the thing to get a portfolio through rough times – today don't yield anywhere close to enough (like 2%) to keep up with record-high inflation that hasn't yet slowed down...

In other words, both the '60' and the '40' are losing money...

I don't know about you, but I (Corey McLaughlin) don't like losing any money... especially if it's just sitting there doing nothing in the same allocation as the year before. But here's the point most people miss... Market conditions change. Be nimble and change with them.

If you are a longtime Digest reader, you've likely already taken many steps to do this over the years. But if you are new to our research, let me explain and please hear me out...

Don't get me wrong. Passive investing can work for a lot of people, if you want to be totally hands off and are fine with roughly 10% annual gains, as the 60/40 strategy has returned over the past decade... with one very important disclaimer: in bull markets only.

You won't often hear people acknowledge that last part, but I bet many folks wish they'd heard the advice before the financial crisis in 2008... or the dot-com bubble before that... or any other number of financial busts that "no one saw coming."

Mr. Market does not always go up. There are bull markets, yes, and you want to ride them, but there are bear markets, too... and as we've been saying, you want to protect yourself from major losses. Because they could take years to recoup... if things go right.

As we wrote last month...

Many people have come to expect 10% annual returns by simply "doing nothing."

But that's not always what happens... When the markets go down, indexing really hurts passive investors, like in 2008 during the financial crisis...

We wrote those words about a week before Russian forces invaded neighboring Ukraine... a war that has stoked stock market volatility and inflation concerns even more. Our point has become even more timely.

As we wrote last week, if anything, several reliable market indicators now suggest we're closer to a bear market... a sustained loss of value in stocks generally accepted to be at least 20%... than a bull market in stocks that's hitting new highs.

In other words, anyone who simply expects passive investments to do what they've done for the last 10 years again in 2022 is going to be sadly disappointed...

Just to hit its annual average number over the last decade, the "60/40 portfolio" would have to return 20% over the next nine months.

That's not totally impossible... but it's also not totally likely.

But enough with the bad news...

Here's something good.

What if I told you we have a simple, alternative portfolio allocation designed for folks' retirement funds... one that has been making money the last few months... crushing the "60/40 portfolio"... and is just as simple to put into action?

Well, we do. We call it the "Intelligent Retirement" portfolio.

Stansberry Research partner Dr. David "Doc" Eifrig, editor of our Retirement Millionaire and Income Intelligence newsletters, and his research team created and launched it last June – for the exact reasons we're seeing today...

Markets change. Be nimble and change with them.

Last summer, Doc delivered a "retirement wake-up call" to all Stansberry Research subscribers to this point. He said most people thinking about retirement were probably overlooking the current risks in the market...

We shared Doc's messages in several Digests, including on June 23, 2021. He wrote then...

Many people simply expect that the 60/40 portfolio will keep making a "safe" 7% or 8% annual return in the years ahead... But that's based entirely on the faulty premise that the returns of the past 30 years will continue in the future.

And the thing is, we're already seeing the conventional wisdom might be outdated...

In short, Doc said that folks who expected stocks to return what they have over the prior decade were in for a shock given the day's eye-popping valuations... and people holding a lot of bonds were "guaranteed to lose money" because of inflation.

Over the last several months, that's exactly what we've been seeing play out...

Many folks have been losing money this year by doing the same thing they always have. Meanwhile, the "Intelligent Retirement" portfolio is up 7% since its launch... and has enjoyed its best gains in the past month while all hell has broken loose.

Analyzed another way, since Doc launched this portfolio in June, the "Intelligent Retirement" model has outperformed the 60/40 portfolio by 10%... As crisis has hit Mr. Market, the outperformance has really taken off.

Take a look...

These might not sound or look like huge numbers – or maybe they do. But in a year when "everything" has sold off, this performance is – without too much hyperbole – crushing the market... and is also proof that not everything has lost value.

Realizing this, and adjusting to reality in good times and bad, can add up to big gains over the long run and a more lucrative nest egg. The back-testing Doc and his team ran on this strategy showed this. As we wrote back in July 2021...

If you would've put $100,000 into a 60/40 portfolio in 1973, it would've grown to more than $7.5 million today. That's pretty good, but you also would've experienced drawdowns as high as 35%.

With this new approach, $100,000 in 1973 would've turned into $18 million... And get this, you never would've experienced a drawdown of more than 12%. It's more reward and lower risk at the same time.

Without giving too much away, I can tell you Doc's "Intelligent Retirement" strategy considers traditional stocks, bonds, and real estate investments, but importantly also takes gold – which Doc has long called a "chaos hedge" – into account more than any retirement strategy we've ever seen.

And as gold has risen recently – the price is up about 8% year to date – the "Intelligent Retirement" portfolio has benefitted. But here's the important thing though...

Doc's subscribers were positioned for these results months ago...

Doc first recommended the portfolio's current allocation in September 2021... and it hasn't changed since.

As Doc wrote to subscribers of his Income Intelligence advisory in a September 2 quarterly update, it was precisely warning of inflation concerns spreading throughout the market...

Today, our allocation moves aggressively toward inflation protection.

Even if you fear inflation, you can still grow your wealth. Inflation can pair with a rapidly growing economy to drive stocks. However, they may struggle in the short term as inflation fears take hold. The value of real assets, like real estate and gold, tends to rise during inflation.

And it's worth noting that this is an automatic and quantitative system. While Doc did personally predict inflation, he didn't have to... The "Intelligent Retirement" model understood the threat by reading market data, taking note of the current conditions, and deciding it needed inflation protection without human input...

As you might be able to gather from just this small example, this strategy is more hands-on than traditional "passive investing." But frankly, this strategy is as simple to use as the 60/40 portfolio...

It isn't complicated...

Putting Doc's research into action only takes a few minutes each year, or each quarter if you'd like. With just one or two simple moves, your portfolio could see these results we're talking about...

If you're nearing retirement... or even if you are many years away or never want to retire – and just simply hate losing money as much as I do and want to seriously build lasting wealth – I urge you to learn more about Doc's "Intelligent Retirement" portfolio now.

In this new video, Doc shares the details... much more about what he's expecting in the months and years ahead, plus why he thinks the next market crash will be different than anything in his 40-year career.

Just for watching, Doc also shares one way to protect your money in today's environment – and earn an income stream of nearly 8% – absolutely free. Don't miss it... and stay nimble.

And I'm curious, are you using Doc's Intelligent Retirement model already? If so, are you happy that you are? If not, why not? Let me know with an e-mail to feedback@stansberryresearch.com.

Moving on to a somewhat-related question...

In response to last Thursday's Digest about the U.S. government unveiling plans to regulate cryptocurrencies – in which we talked about bitcoin's recent price behavior and raised the question of if it was a true "store of value" – subscriber Eugene L. wrote in with a question...

You are always talking about cryptos as a store of value, yet in [Thursday's] article you state how they have decreased in value since their November high and compare them to the decrease in tech stocks.

I do not understand how a store of value can be compared to the falling value of tech stocks or how a store of value can decrease that much?

Great question, Eugene. In general, this is exactly why we made the comparison between tech stocks and cryptocurrencies you're alluding to... but let me make two important points before we get into an answer...

First, I referred specifically to the idea of bitcoin as a store of value, not all cryptos. That was on purpose... This is a big distinction. Many cryptocurrencies have a limited supply baked into their code like bitcoin does with its 21 million, but not all of them do.

It's important to know the difference... and think about which cryptos have "store of value" features, and which ones don't, if that's what you're looking for in an investment.

Second, bitcoin is only 13 years old... And like a young teenager, it's volatile.

Bitcoin has dropped more than 50% in price eight times since 2009, and notably has also enjoyed spectacular rallies, like more than 1,000% in one year from March 2020 to March 2021.

An ounce of gold, which has been around so long that it has become part of the Earth's crust, doesn't move in price nearly that wildly...

In other words, you could say bitcoin has been more volatile than a "store of value" should be... but, then again, it has also risen nearly 4,000% over the past five years. That far outpaces any asset class that is deeply woven into a world of devalued fiat currencies.

So maybe bitcoin already is a store of value, when you consider what the future might hold, in a world where the U.S. dollar is not the world's reserve currency anymore... and paper currency is valued more like paper than currency.

To put it another way, in the long run, there are reasons to believe bitcoin – which has been called "digital gold" – can be a store of value worthy of the comparison to gold.

I personally see signs already... like the returns over the past decade in the face of the same ol' piling-up-the-debt central bank monetary policies that have ushered in another crisis – inflation...

But here's the best answer we can give you to "Is bitcoin a store of value?"...

We're still very early in the game so far...

Nobody knows for sure.

Our colleagues Dan Ferris, who writes to you each Friday here, and senior analyst Matt McCall debated this very idea during our recent special Town Hall event about the influence of the war in Ukraine on the markets.

During the conversation, our Director of Research Matt Weinschenk asked Dan...

We're still trying to figure out if bitcoin is a risk asset or a defensive asset... The story is kind of defensive asset, but it seems to behave like a risk asset. Do you have any thoughts?

Here was Dan's take...

We talked with Mike McGlone from Bloomberg on the [Stansberry Investor Hour] podcast, and he insisted that 2022 is going to be the year when bitcoin is no longer this sort of risk-on speculative thing... and it turns into a real risk-off asset like gold has been recently and for the last 5,000 years. And so far, that hasn't happened.

I expect it to happen if things work out over the long term, but I watched this... As soon as the invasion of Ukraine hit the headlines and hit the markets, I was like, "OK, stocks are down 2% or 3%. And bitcoin is down 7% or 8% or 9%. Well, it hasn't happened yet."

I think it will be from a store of value over time. But it's still like a speculative tech long.

Then Matt McCall jumped in...

I take the opposite side. I think it's going to be there sooner rather than later. It will be a store of value and it comes down to simple supply and demand. There's only ever going to be 21 million mined and over 19 million mined already. There's speculation 4 to 5 million of those are already lost forever.

It is simple supply and demand... Very little supply is coming online right now. Demand is increasing at a higher rate, so over time that simple economics tells you prices will go up.

I think there's a large portion of the crypto market that will not be around in a few years, but I do believe bitcoin will be around and it will be a true store value.

And Dan again...

One day, we'll have a little debate about this. But gold's a 50-bagger since 1971. It's been around for 5,000 years. The currency went this way, gold went that way and made a new high only recently...

It's done exactly what we thought it would do...

Not you or me or anyone on this call knows really what bitcoin is or what it's going to do. It's not even 20 years old yet, it's not even 15 years old yet.

It's worth owning because of its characteristics. But as a store of value, it is completely untried and unknown.

Gold, on the other hand, is not untried or unknown. And it's done really well over the long term. In another 5,000 years we'll still be owning gold.

As you can see, there's plenty of room for debate...

And there has been before.

Longtime readers might remember our editor-at-large Daniela Cambone hosted an epic gold versus bitcoin debate between laser-eyed Michael Saylor and gold-mining financier Frank Giustra back in April 2021.

If you're interested in more on this, that video is worth another watch today.

But here's the bigger practical point that might be most useful... This "debate" shows why there is a place for gold and bitcoin in a diversified portfolio. It doesn't have to be one or the other, nor should it.

Times like we're seeing today prove it.

Gold Is Setting Up for a Big Run

"Monetary policy going forward will dictate what the gold price does," says Rudi Fronk, founder and chairman of Seabridge Gold (SA). "We think [the Fed] will err on the side of keeping rates low."

Hear why in an exclusive interview with our editor-at-large Daniela Cambone, recorded at the 2022 Gold Stock Analyst Investor Day Conference last month in Florida...

Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.

New 52-week highs (as of 3/11/22): Bunge (BG), Royal Gold (RGLD), Rayonier (RYN), Telekomunikasi Indonesia (TLK), Travelers (TRV), and W.R. Berkley (WRB).

In today's mailbag, feedback on Dan's latest Friday Digest... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"Dan, Nicely put. Not a particular surprise. However, you neglected to mention one of the classic examples of the first decade of this century: Ken Heebner's CGM Focus Fund. People piled into that in the years when he was way up, and they hung on until he got destroyed the next year. The number that I remember seeing many years ago was that considering the money flow in and out of CGM Focus, the average investor that decade lost 13% a year. A year. I won't even bother compounding that over 10 years, though easy enough to calculate." – Paid-up subscriber George G.

All the best,

Corey McLaughlin
Baltimore, Maryland
March 14, 2022