Cullen Roche on the Art of Building a Perfect Portfolio
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Why is the traditional 60/40 portfolio being questioned in today’s market?
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Hello and welcome to another episode of the Oddlots Podcast. I'm Joe Wasenthal
and I'm Tracy Alloway.
Tracy, I know like everyone is like really into what's the hot stock these days? NVIDIA, how do I play the AI boom? It's interesting. You can make a lot of money and get the right stocks. I love the general topic though of just like optimal portfolio construction. It seems like a fascinating puzzle to me. How to fit different types of assets together in one coherent thing.
It always felt to me like a study in behavioral science almost. Because I think Everyone always says, you know, just invest in an index fund or maybe sixty forty, although as we saw in twenty twenty two, that has its own problems and we can talk about that. But I think this is like the one area in people's lives where they actually crave complexity. Right. Like it doesn't sound right to be like I know just put your money in an index fund and forget about it.
I know. It's like the simplest it's like the simplest investing strategy is the hardest.
Yeah.
For people. It's really hard though. Like when you see people making life changing amount of money 'cause like, oh, I was in, you know, Sand Disk, right? And suddenly everyone wants memory because of AI and they're up five hundred percent and the year is like, damn, you know, like I'm really happy with my twelve percent year that I've been making. But I'm really no it's really hard.
I was a hundred percent invested in a leveraged Doge ETF, right?
Yeah, right. Like if you did that and then you retired the next day, I'd be like really annoyed. I'd be like really upset. But it is a fun puzzle. You mentioned twenty twenty two and we saw what we've seen really since COVID, what we've really seen since the worst inflation in forty years, is that some of these uh portfolio constructions that worked very well for a very long time, particularly s anything that sort of resembles that sixty forty thing. Which just worked so beautifully. In the twenty tenses, but even before it hasn't worked as well. So I think uh you're still uh doing fairly well. But yeah, so it gets you the question is like, well, I remember we asked Bill Gross, well I even own bonds at a time when He was
like, Well don't Yeah Yeah, he
told, he's like, I'm in I'm in pipelines. That's where that's where I'm getting my or I'm in whatever, MLP M MP M L Ps or whatever. Uh that's where I'm getting my yield. But yeah, I think there's some real question about like, why own treasuries? Why own whatever, et cetera.
Well, the other thing is timing. Like this is the thing that everyone has to consider, right? So in twenty twenty two, if you were about to take out a big chunk of your portfolio to buy a house, or if you were a retiree and you needed to make some chunky payment, you were really, really unlucky in twenty twenty two if you were if you had taken everyone's advice. And invested in a 6040 portfolio. So this is the other thing. Like you can try to smooth out returns, but your own spending is gonna go up and down quite a bit.
There's one other issue that I think a lot about with the very standard and it sort of relates exactly to this, with the sort of standard advice. So in theory, it's like we're not supposed to time the market, buy the highs, you buy the lows, et cetera. 2020 was a great time to buy. March 2020 would have been a fantastic time to buy. The problem is layoff surged, and there's this sort of phenomenon where often the best times to invest in the market are when you don't have a job and you don't have a money.
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Chapters
8 chapters
1
Why is the traditional 60/40 portfolio being questioned in today’s market?
0:00–7:00
2
What motivated Cullen Roche to write *Your Perfect Portfolio*?
7:00–13:44
3
How did the 60/40 allocation originate during the Great Depression?
13:44–21:04
4
What are the limitations of standard risk‑profiling questionnaires?
21:04–28:47
5
How should investors think about their income and job stability when building a portfolio?
28:47–35:05
6
What role do alternative assets like real estate, gold, and private credit play in a balanced portfolio?
35:05–42:50
7
Why might the 60/40 mix no longer provide true diversification in 2022‑2024?
42:50–50:19
8
What practical steps can listeners take to simplify and improve their own portfolio construction?
50:19–56:05
Speakers
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