Advisor Flipbooks

10 INVESTMENT THEMES FOR 2023 · 11 Hilda Applbaum is an equity portfolio manager with 36 years of experience. She is a manager for American Balanced Fund®. Ask your favorite search engine, "Is the 60/40 portfolio dead?" and it will generate about half a million results. Such skepticism is understandable following a year in which stocks and bonds both declined for the fi rst time in decades. Despite the poor year, I believe the concept of a well-balanced portfolio — whether a 60/40 or 65/35 split — is indeed alive and well. For the fi rst time in years, it's possible to seek total returns in the high single digits by investing in core bonds and proven dividend- paying stocks without taking undue risk or reaching for yield. With the yield on the Bloomberg U.S. Aggregate Index currently above 4%, many core bonds can provide a consistent return in the mid-single digits. That's something we haven't seen since 2008. Investors who are comfortable taking a little more risk by including investment-grade and high-yield corporate bonds can look for their bond portfolios to potentially contribute even more. Companies that pay a dividend can contribute to an attractive return picture with yields north of 3% and the potential for capital appreciation. For example, Broadcom has raised its dividend 12 consecutive years and currently has a 3.3% yield (as of December 31, 2022). Traditional asset allocation is not a broken or failed strategy. It will always make sense to think about balance, diversifi cation and risk. A one-size-fi ts-all approach doesn't work for every investor. It's about building portfolios from the bottom up that align with investor goals. 10. Revisiting 60/40 Sources: Capital Group, Bloomberg Index Services Ltd., FTSE Russell, ICE Benchmark Administration Ltd., MSCI, Refi nitiv Datastream, Standard & Poor's. As of 12/31/22. "Buy the dip" strategy represents buying the prior year's worst performing asset class every year. "Ride the wave" strategy represents buying the prior year's best performing asset class every year. "Balanced portfolio" strategy represents maintaining a 60/40 split between U.S. large cap stocks and U.S. aggregate bonds. This assumes the portfolios are rebalanced annually. For full list of asset classes and benchmarks used in this analysis, please see the disclosures page. Past results are not predictive of results in future periods. Change in market value of a hypothetical $10k investment $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 2013 2019 2007 2010 2016 2022 $26,787 $13,170 $6,701 Initial investment Balanced portfolio Buy the dip Ride the wave Strategy used A balanced portfolio would have outpaced other strategies over the past 15 years

• Cover