The 60/40 Portfolio: Is It Dead?

You might not think that investing is for you, but with a little bit of education and some advice from an experienced investor, you can be more comfortable investing your money. Investing can play an important role in how we live and how we provide for ourselves and our families. Mark Matson firmly believes that the 60/40 Portfolio is still alive and well.


There are financial experts and investors across the country who believe that the 60/40 Portfolio is dead. One of the few who thinks it still works is Matson. First, the 60/40 Portfolio is one that is made up of 60 percent stocks and 40 percent bonds.

Money is flying


Quite possibly the scariest part of investing for people is the volatility of the market. This is understandable. Mark Matson recommends finding a fair balance between stocks and bonds in your portfolio in an effort to reduce the volatility of your portfolio to meet your personal risk tolerance. Stocks are volatile and it is likely that you will take a big hit in a bad economy, which is why you should never invest more aggressively than you can personally handle.


One of the most difficult aspects of being a financial advisor is keeping people focused on more than just the next 30 minutes. Instead, the advisor needs to find ways to get people to focus on the next 30 years of their lives. When this is done, people can plan for their future and invest properly.


How Mark Matson Wants to Save Investors

Mobile Stock Investing


In 2015, Mark Matson gave the introductory speech at the 2015 Investor Symposium where he talked about saving the investor. He played off the tagline of the NBC show Heroes, which was “Save the Cheerleader; Save the World.”  He instead said we should “Save the Investor to Save the World.”


Matson wasn’t suggesting that the start of any utopian is to make sure that investors are happy, which he notes, but he does provide significant evidence of how conditions for investors have diminished in the past quarter century. While we certainly recommend that you check out the entire speech, here are a few key points to consider:


The Investor Has Not Received an Adequate Return on Investment


A simple index of the S&P 500 would have seen an annualized return of more than 11% over the course of the last 30 years. Based on DALBAR’s annual Quantitative Analysis of Investor Behavior study, the average investor investing in an equity fund would have only received a return of less than 4%. Investors who hoped to get a market-based return instead found that their returns underperformed the market. These meager returns are due primarily to investor behavior and the fact that investors might not be sticking with their funds long enough. The DALBAR study referenced by Mark Matson found the average amount of time an investor will hold on to his or her portfolio is three years.  Those who invested in fixed income saw even more dismal results. While the aggregate for fixed income was 7%, the average return over 30 years was not even 1%.


Inflation Supersedes Market Volatility


In 2015 when Mark Matson gave the speech, inflation was hovering around 3%. While he concedes that this is rather low when you look the numbers historically, you also have to consider the fact that investors were often not receiving significant returns on their investments. When you get returns in equity mutual funds of less than 4% and less than 1% on your mutual funds invested in fixed income, inflation can really eat up any returns you might have made.


Investors Are Feeling Mental Anguish


Check the news right now, and you’re likely to find scary headlines about the economy, terrorism, climate change, and more. Investors should know that the media is in the business of making money, and there is no better way to make money than to create headlines that cause fear and keep you tuned in. In his 2015 address, Mark Matson was quick to tell those in attendance that investors should keep one thing in mind to sleep at night: nobody can predict the future one way or the other.

Young Investors: Understanding Diversification and Why It Matters

If you decided to make 2017 the year you start investing, congratulations. You have taken a big step towards achieving financial independence.
If you’re new to investing, there are a lot of buzzwords financial advisors use in the world of investing. One highly familiar word is diversification. For investors who are just starting out, you may have heard this term and you may be wondering what diversification is and why it matters. Financial coach Mark Matson reviews the meaning of diversification and why it’s important.

Defining diversification
Many are familiar with the common saying, “don’t put all your eggs in one basket.” It’s a phrase frequently used by financial experts. Diversification is commonly a vital component to reaching your long-term financial goals. The goal of diversification is to reduce risk, which is done by allocating your investments among various asset classes. By spreading around your investments, they will react differently to the same events, generally maximizing your return.

Why diversification matters

As previously mentioned, diversification is simply about spreading your portfolio across various asset classes. Diversification is not necessarily to boost performance and it won’t guarantee a profit, but it does substantially help balance risk and reward in your investment portfolio. It may provide the potential to improve returns for your level of risk.

  • Look for different asset classes

    In order to create a diversified portfolio, you should look for different asset classes. Different assets, such as stocks, bonds, cash and others, typically don’t react the same way to the same events. Look for assets whose returns haven’t moved in the same direction and the same degree over the years. In doing so, even if a part of your portfolio declines, the rest of your portfolio may be growing.


  • Different levels of risk tolerance

    One key to successful investing is choosing your risk tolerance based on your financial goals and time horizon. Young investors can seek bigger returns by taking bigger risks. This is because if they lose money, they have time to earn back their losses. Invest too conservatively at a young age and the growth rate of your investments may not outpace inflation. Conversely, if you invest too aggressively when older, you are at a higher risk of losing your assets and will be less able to recover potential losses. Therefore, investors with lower risk tolerances should typically shift their portfolios toward a lower risk/reward investments.


5 Tips for First-Time Investors

So, you’ve decided to take the plunge and invest in the stock market. Congratulations! Investing in the stock market is one of the best ways to establish financial security. By investing, your goal is to turn assets into wealth over the long-run and have money for future expenses, such as retirement or your children’s college education.

Since you’re new to investing, how do you know what choices to make that will best benefit your long-term goals? Investment advisor Mark Matson reviews important tips for first-time investors.

1. Know Your Long-Term Goals

Why are you investing in the stock market? Are you saving for your retirement? Are you building an estate to leave to your beneficiaries? Before you invest, establish your reasons for investing in the stock market. This will help you determine when you will need the funds. Then, you can calculate how much you should invest to reach your financial goal.

2. Recognize Your Risk Tolerance

Risk tolerance is an important concept in investing and is a fundamental issue to consider when planning your investment strategy. All investments involve some degree of risk. Risk tolerance refers to how much risk you’re willing to take in order to achieve your goals. Your individual risk tolerance is heavily dependent upon when you will need your funds. If you have a long-term financial goal, you can invest in higher-risk assets. If you have short-term financial goals or are nearing retirement, lower-risk investments are appropriate.

3. Determine How Much You Want to Invest

While there is no correct amount as to how much you should invest, it does depend on how much money you want to save and when you need it. If you’re just starting out, you may have to start small, and that’s OK. You can always increase the amount of money you invest over time. To help you figure out how much to invest, it’s ideal to speak to a financial advisor.

4. Determine What You Want to Invest In

You have options in regards to what to invest in. You can invest in almost anything, including stocks, fixed income, mutual funds, even residential or commercial properties. When choosing what to invest it, it’s a matter of the value of the investments and how they will help your money grow. A financial advisor can help you determine which types of investments are appropriate to invest in.

5. Diversify Your Investments

Investment professionals like Mark Matson heavily encourage diversification. When you diversify your investments, you spread your investments around. If you put all of your cash into one company and the company falls, you will likely lose all of your money. By investing in different companies in different industries, and sometimes different countries, a single bad event should not be catastrophic to your overall portfolio.

Broadening Your Investment Portfolio

When it comes to the stock market lately, many investors have been solely focused on US-based investments.  Limiting investments to only US stocks could prevent your portfolio from taking advantage of other opportunities. Zack Shepard, Vice President of Communications at Matson Money, recently appeared on After the Bell, airing on Fox Business, to discuss the importance of international diversification.

A common strategy at Matson Money involves portfolio diversification, where rebalancing investments and focusing on the long-term market should be the main priority. With the Matson Money strategy in mind, Zack Shepard explains that incorporating international investments into a portfolio may help broaden the opportunity for success. But, it should be noted that past performance is not a guarantee of future results, because no one has the power to predict the market and trying to anticipating market moves is a bad practice.

Matson Money and Shepard advise their investors to stay diversified globally in over 46 countries all over the world, because no one knows where the next large percentage movement of the markets may arise. They believe investors should stay internationally diversified, including the U.S. and emerging markets.  Shepard highlighted Israel and Spain during his appearance.

Shepard explained that Israel has been under some turmoil yet their markets were up 26 percent according to MSCI index data over the previous year ending October, 2014. He also noted that Spain has had two recessions in the past 5 years, a 25 percent unemployment rate and 28,000 companies going bankrupt, yet their markets are up 7 percent according to MSCI index data over the previous year ending October, 2014. This shows that markets can be unpredictable, but internationally diversifying may offer  beneficial opportunities. Not every investment strategy is proven to work and this past performance is not  a guarantee of future performance.

*MSCI Individual Country Indices were created by MSCI and are available on MSCI’s website*

( – The MSCI IMI, Large, Mid, SMID, Micro Cap, Small + Micro Cap, All Cap, EM, FM and ACWI Small Cap Indexes and their corresponding Value and Growth Indexes, together with the Provisional Standard, DM Provisional Small Cap and DM Small Cap Value and Growth Indexes are all based on the MSCI Global Investable Market Indexes Methodology.   MSCI’s DM and EM Standard Indexes and their respective Value and Growth Indexes, as well as DM Small Cap Indexes, followed the MSCI Standard Index Methodology based on a sampling approach until June 2007, when they began to be transitioned to their respective Provisional Indexes in two phases (November 2007 and May 2008). Since June 2008, these indexes are also based on the MSCI Global Investable Market Indexes Methodology. MSCI Euro and MSCI Pan Euro Indexes, which were subsets of MSCI EMU and MSCI Europe Indexes respectively, transitioned in one phase as of the close of November 30, 2007, to the MSCI EMU Large Cap and MSCI Europe Large Cap Indexes, respectively. MSCI Provisional Indexes were maintained during the transition to the MSCI Global Investable Market Indexes Methodology from June 2007 to May 2008. The ongoing calculation of these indexes was discontinued on June 30, 2008. Historical index levels for these provisional indexes continue to be posted to provide access to their back-calculated history.

Preparing For The Next Crash

Let’s face it, the stock market unpredictable and ever since the market had a downfall during the 2008-2009 recession, some investors backed out and started playing the waiting game. Waiting for the perfect time to get back into the market. But that time will never come, because it’s impossible to predict when it will do well. While the past five years have seen some positive market returns, could other investors be over-confident in the market?

Panic can play a factor when the market is doing well. Some investors fear a pullback when the market is at an all-time high. However, this only applies to short-term investors and short-term investing really doesn’t do much good. Long term investments can give you investing peace-of-mind no matter what the market does because you aren’t looking for the next investment that might give you a 20% return— you are looking at potential investment returns for the next 5, 10, 15 or 20 years down the road.

Take for instance a $100,000 investment in a well-diversified portfolio of large cap stocks initially made in 1984. If you examine historical stock market data as captured by the S&P 500, an index that measures the market performance of large cap stocks, from then to now, a well-diversified large-cap stock portfolio held from 1984 to now could potentially be worth $2.5 million. It’s similar to a roller coaster with ups and downs, but long term investing provides the greatest likelihood of safety.

Waiting for certainty in the market won’t get you anywhere. Another market crash could happen in the future, which is why you should prepare yourself with long term, diversified investments that offer the potential to survive rough times. The problem isn’t the crash, the problem is the behavior of investors when the crash actually happens. Historically speaking, investors’ first instinct is to sell, which is a panic reaction that doesn’t offer the chance for good results. The general rule of thumb is to buy equities in a down market because they may bounce back with your long term goals. The result can be a massive transfer of wealth from people who panic to people who don’t panic.

Want to learn more about what Mark Matson has to say about the next crash? Watch this video!

*Past performance is not indicative of future results.