Here’s a novel investment portfolio that you’ve never heard about: the 59/41 portfolio.
What’s that? The exact opposite of the 60/40 portfolio and other generic one-size-fits-all portfolios that have invaded the financial services industry.
The 59/41 portfolio isn’t a literal representation of the optimal investment portfolio or asset mix. Rather, it’s a figurative depiction of a custom-tailored portfolio handcrafted by a licensed professional with complete and firsthand knowledge of the person who it was designed for.
And both individuals – the advisor along with the investor – fully recognize that the 59/41 portfolio is the only acceptable default investment choice.
Today, the idea of customized investment solutions – or everything the 59/41 portfolio genuinely represents — is being fiercely attacked.
Investment advice delivered by mobile applications, automated software programs, so-called “robo-advisors,” and other artificial intelligence is Wall Street’s latest fashion trend. And while these technological trends may give the phony appearance of portfolio customization, their chief preoccupation is with clever algorithms vs. having a personal relationship with investing customers.
And that’s why the 59/41 portfolio solution sold by Mario Bros.-driven robots is highly misleading; you can’t say you have a truly hand-tailored solution without knowing a person.
Besides their attempt to assault financial advisors, these technology-based platforms promote a fairyland view of investing and finance. They promote dangerous concepts like one-size-fits-all investing and other propaganda like “press a button and all your financial problems will be solved.”
What ignited the current bull market in canned portfolio solutions?
In the 1990s, Wells Fargo birthed the first target-date retirement fund (TDF) and never looked back.
Other financial services companies like Fidelity, T.Rowe Price and Vanguard joined them, and today the TDF marketplace commands over $1 trillion in assets.