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We have previously written about the supposed demise of the classic 60/40 portfolio, a moderately balanced allocation of stocks and bonds. Here we will take a closer look at the solution usually proposed, the replacement of a portion of the conventional allocation with some mix of alternative asset classes or strategies. Some major endowments, such as Yale University’s, have used alternative investments with great success.
Is this an approach that ordinary investors, by which we mean middle wealth investors as opposed to ultra-high net worth investors, should emulate? The answer is, probably not or, at least not unless you possess the same advantages that have allowed Yale to succeed.
First, let’s recall what we mean by alternative investments. Traditional investments include stocks, bonds, and cash or cash equivalents like money market funds….
