If a Stock Market Crash Is Coming, History Says This Strategy Can Cut Your Portfolio's Recovery Time in Half
A time-tested strategy is popular for a good reason.
Since the early 1990s, many investors have noticed that stock market valuations are quite high, leaving room for a potential future crash. The bull market over the last four years has pushed both the S&P 500 and Nasdaq Composite to impressive heights, but such periods eventually end with a significant sell-off. To recover quickly from a crash, a simple strategy of holding a 60/40 stock/bond portfolio with periodic rebalancing can be effective.
Since 1988, this type of portfolio has recovered from a 20% drop in just 11 months on average, compared to 24 months for the S&P 500. The 60/40 portfolio offers stability and positive returns over both five- and 10-year periods, while bonds provide diversification and protection during market declines. With bond values currently low, this strategy may offer significant upside at an affordable cost.
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