Vanguard is recommending investors tilt heavily toward bonds, with a 70% allocation to fixed income, as high stock valuations and a historically low equity risk premium point to better long-term returns in the bond market.
Vanguard's model portfolio, based on the Vanguard Asset Allocation Model, or VAAM, increased its bond weighting by 3 percentage points in July from the month before, expanding fixed income exposure to 70% and trimming equities to 30%, according to the firm's time-varying asset allocation report released last month. The shift moves further away from the traditional 60/40 portfolio split between stocks and bonds.
