Bonds are getting thumped. Yields are surging. The 60/40 portfolio is bleeding. Financial journalists are now pretending they understand duration.
Duration measures how much a bond's price drops when rates go up. It's arithmetic. It's been arithmetic since 1938. But every time yields spike, we get these breathless explainers like someone just discovered fire. Check your duration, the article warns. Shop around for inflation protection. As if the guy who bought a 30-year Treasury at 1.2% in 2020 is going to read this and slap his forehead.
The 60/40 portfolio exists because someone needed to sell something to pension funds that wasn't 100% stocks. It became gospel. Now both legs are down and advisors are doing what they do best: recommending you look at things you should have looked at before you bought them.
Credit quality matters now, apparently. Not in 2021 when junk bonds yielded less than inflation. Not when everything was going up. Now. When you're already underwater.
Long-term investors don't need to check duration. They need to check whether their advisor knows what duration is. Most don't. They know it's a number on a fact sheet between expense ratio and yield. They know higher is riskier the way a dog knows sit gets a treat.
Inflation protection means TIPS or commodities or some dogsh*t bitcoin pitch from a guy named Skyler. None of it works when you need it to. All of it gets sold in the article as prudent diversification, which is finance-speak for we have no f*cking idea what happens next.
The 60/40 portfolio is fine. It'll come back. It always does. But watching retail investors discover that bonds have risk is like watching someone learn that the ocean is wet while they're drowning.
Photo by Behnam Norouzi on Unsplash
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