What You Need to Know
- The Ritholtz Wealth CEO says an 80% stock allocation is common for those who can afford the risk or must take it in order to meet investment goals.
- Brown expects $1 trillion of wealth management funds will be invested in blockchain-related assets in 2022.
- He says Ritholtz Wealth Management is working on solutions for clients to invest in crypto assets.
An 80/20 portfolio is the new 60/40 portfolio, according to Josh Brown, the CEO of Ritholtz Wealth Management and author of The Reformed Broker blog.
Speaking Tuesday at the Dynasty Financial Partners Investments Forum about what’s been happening to the traditional 60/40/stock/bond portfolio allocation, Brown said the 80/20 split is becoming very common among advisors for clients who can afford to take the additional investment risk and for clients who “have no choice given return expectations” to achieve their investment goals.
Whether stocks can continue to gain as much in the future is in question, Brown implied. From the bottom of the stock market in March 2020 to March of this year, “96% of all stocks appreciated,” and the market saw the “fastest doubling in value going back to at least at 1950,” Brown said. (It took just 354 days for the S&P 500 to double in value from its bottom in March, according to a CNBC analysis of data from S&P Dow Jones Indices going back to World War II.)
Such growth “introduces a lot of confusion, a lot of bewilderment from people who think that they … understood everything there was about investing and then they see some stocks like Tesla and Bitcoin,” said Brown. (Both are now trading near 10 times their price in late March 2020.)
What Your Peers Are Reading
Then investors may think they need to change everything they’ve been doing to keep up with the changing investment landscape, and that’s where the advisor comes in, Brown said.
An advisor’s job in that context, he said, is to make it clear to their client that they can “absolutely” take additional risks in their portfolio since it’s their money, but the advisor can help the client decide which bucket of money to tap to take those risks as well as the purpose of such an investment.