Return Stacking to Solve the 60/40 Dilemma

Everybody loves the 60/40 portfolio. And why not? It's worked really well for a long time, especially the past decade when both stocks (the 60) and bonds (the 40) went up. Yet investors fear the current inflationary environment could push both down. Enter “return stacking,” which attempts to solve this conundrum. Investors get the standard 60/40 allocation, only it’s leveraged in a way to add diversification and protection. (Oh, and by the way, that frees up a chunk of your portfolio for other exposures so you can have your cake and eat it, too….or at least that's what the backtest shows.)

On this episode, Eric and Joel speak with Corey Hoffstein, chief investment officer of Newfound Research, and Rodrigo Gordillo, president and portfolio manager of ReSolve Asset Management. Together, the two pioneered the concept with a widely-circulated research paper (which you can find at returnstacking.com) and an open-source model portfolio that allows anyone to implement the concept. The approach means higher fees than most ETF-based portfolios, but as the group discusses, inflation and rising rates mean investors might want to consider reconsidering their toolbox.

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