American Balanced Fund Defies 60/40 Portfolio Criticism with Strong Returns

The American Balanced Fund (ABALX) has shown impressive performance, returning 18.29% over the past year and 156.02% over the last decade. This performance counters the narrative that the 60/40 portfolio strategy is no longer effective. Over a five-year period, ABALX returned 55.08%, while the SPDR S&P 500 ETF Trust (SPY) returned 73.24% and the iShares Core U.S. Aggregate Bond ETF (AGG) saw a decline of 1.04%. This indicates that ABALX has successfully captured much of the equity market's upside while mitigating losses from the bond market.

The fund, which is part of Capital Group’s American Funds lineup, combines U.S. and foreign large-cap stocks with a substantial allocation to investment-grade bonds and cash. This strategy aims for long-term growth, current income, and capital preservation. Notably, ABALX is typically sold through advisors and carries a front-end sales load, although cheaper share classes are available for retail investors.

The fund's performance highlights its ability to cushion the volatility of the stock market while still providing competitive returns. The recent yield on the 10-year Treasury, which stands at 4.70%, supports the case for balanced portfolios by generating real income, a key argument against the 60/40 strategy in recent years.

ABALX has also provided consistent income to shareholders, with quarterly distributions and a significant year-end distribution in 2025. However, potential investors should be aware of the traditional sales charges associated with the fund, which can impact initial investments.

For those nearing retirement who prioritize income and risk management over maximum growth, ABALX may be worth considering. Conversely, younger investors or those who prefer a more hands-on approach might benefit from lower-cost index funds that allow for a customized stock and bond allocation.