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Is the 60-40 Stock-Bond Pension Fund Rule Wise?

In: GREAT INVESTMENT IDEAS

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  • William T. Ziemba

Abstract

Pension funds typically suggest the 60-40 stock-bond rule to lower risk as during stock market declines bonds tend to rise. However, US investment returns have been presidential party dependent; and returns in the last two years of all administrations exceed those in the first two years. The strategies small cap stocks with Democrats and intermediate bonds or large cap stocks with Republicans yields final wealth about six times the large cap index, 50% more than small caps and more than twenty times the 60-40 mix since 1942.

Suggested Citation

  • William T. Ziemba, 2016. "Is the 60-40 Stock-Bond Pension Fund Rule Wise?," World Scientific Book Chapters, in: GREAT INVESTMENT IDEAS, chapter 10, pages 213-229, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813144385_0010
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    More about this item

    Keywords

    Investment Management; Portfolio Theory and Practice; Great Investors; Stock Market Anomalies; Evaluation Theory; Portfolio Performance; Stock Market Performance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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