Goldman’s Getting Real: Here's What's In Its New All-Weather Portfolio

Goldman’s Getting Real: Here's What's In Its New All-Weather Portfolio
Theodora Lee Joseph, CFA

8 months ago2 mins

As we flit between inflation concerns and growth concerns, one thing is for sure: this economy is unpredictable.

Now, it used to be that you could count on the traditional 60/40 portfolio (60% in stocks and 40% in bonds) to meet your investing needs over the long haul. But things are changing. That’s why strategists at Goldman Sachs have looked back over the past 70 years to create an all-weather optimal portfolio. What they came up with is surprising.

They say the optimal portfolio now includes a 30% allocation to real assets like real estate investment trusts (REITs), gold, and infrastructure funds. This chart explains the rationale. On the left side, Goldman shows what percentage of stocks versus bonds would have given you the best returns, across various time periods. And on the right, it shows you the breakdown of stocks, bonds, gold, and REITs that would have been optimal. The big takeaway is this: aside from the recent era of ultralow interest rates, it has always paid to add real assets into your investment mix.

And that’s why Goldman is calling for change now: in the past decade, nominal assets like stocks and bonds performed well because of low inflation and low yields. But, with inflation still higher than normal, Goldman says you’ll need real assets that can meaningfully improve your portfolio’s risk-adjusted returns, (that is, the maximum returns you generate for a given amount of risk), and offer both an opportunity for uncorrelated returns and competitive real return potential.

To add those assets to your portfolio, you could consider investing in real assets individually or through some REIT, gold, and infrastructure ETFs. Or you could think about an ETF that packages them all together, like the FlexShares Real Assets Allocation Index Fund (ticker: ASET; expense ratio: 0.57%).



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Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

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