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Investors face some hard choices into the end of the first quarter

Traders work on the floor of the New York Stock Exchange (NYSE) on March 16, 2020 in New York City.
Spencer Platt | Getty Images

A year ago, the most painful move was the most profitable. It hurt in March 2020 to exercise time-tested prudence by using history's steepest selloff, in a fog of pandemic uncertainty, to add exposure to stocks.

With the S&P 500 rushing to an unprecedented 34% drop in five weeks as bond prices surged, the market was serving up an urgent yet hard-to-accept invitation to shift money from bonds into stocks.

This column the week the S&P 500 bottomed noted it was a rare moment, one of only a few times the traditional balanced stock-bond portfolio had dropped 20% from a high. And history showed at the time that adding equities in such moments had always proved a good bet, averaging better than a 20% return for the standard 60% stocks/40% bonds portfolio.

Since then, this 60/40 mix, as reflected in the Vanguard Balanced Index Fund, has delivered a total return of more than 40%, about quadruple its long-term annual average.

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