Keeping You Informed – The Balanced Portfolio, A Cinderella Story

September 22, 2023 | Joanne Livingston


I am pleased to welcome back Suzanne Pellerin, who has returned after her maternity leave. For those of you wishing to discuss estate matters, please feel free to reach out to her. She will also be joining in on some annual review meetings, so please give her a warm welcome when you see her.

For years, a balanced portfolio was seen as the most efficient model to minimize volatility and maximize returns. The income from the fixed income smoothed over any market volatility, while the stocks took advantage of any market upswing. Investors flocked to fixed income in hard times, and to equity as the markets recovered. As a result, fixed income and equity typically moved in opposite directions. However, both fixed income and equity dropped in unison last year, causing people to question whether the balanced portfolio was still the best strategy. But as we look back, the concepts behind incorporating fixed income into a portfolio have stood the test of time.

Last year, it didn’t matter which asset mix you had in your portfolio – they were all down by roughly the same amount. Nothing was working. People began pulling out of balanced funds at an alarming rate. However, as of today, balanced funds are up and have already erased most of last year’s losses. With interest rates on the rise, GICs and bonds are now producing yields of 5-6% and preferred shares are yielding 6-7%, resulting in very good returns for little to no risk or duration. This allows the fixed income side of the portfolio to do a lot more than simply stabilize volatility; it can also help achieve a return that would have historically come predominantly from the equity side. 

Over the past year, we have done a great job of averaging into fixed income and locking in these high rates. We have overweighted fixed income in most portfolios to capitalize on this once-in-a-generation opportunity and we will continue to do so as these high rates persist. The balanced portfolio may have gotten a bad name last year, but holding the line and taking advantage of this opportunity will pay off.

Livingston Wealth Management Group