📊The Perfect Balance: AOR's 60/40 Strategy for All Markets

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This moment reminds us of the three key principles that successful investors rely on during market cycles:

1. Stay focused on the long term: Market disruptions are temporary, while wealth creation takes time. Patient investors are usually rewarded.

2. Diversify your portfolio: A well-diversified approach protects against sector or regional shocks.

3. Follow your investment rules: Avoid emotional reactions that lead to buying high and selling low. Trust your plan, and don’t panic.

With these principles in mind, we'd like to introduce you to an ETF that embodies these investment fundamentals—a potential cornerstone for navigating both calm and turbulent markets: the iShares Core 60/40 Balanced Allocation ETF $AOR ( ▲ 0.25% ) .

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What is AOR?

AOR is a straightforward and effective investment solution in the ETF market. Launched by iShares (BlackRock) in 2008, it offers a balanced portfolio that combines equity growth potential with fixed-income stability in a single fund.

For those seeking simplicity and diversification, AOR provides a professionally managed allocation strategy at a lower cost than traditional funds. Whether you’re starting your investment journey or optimising an existing portfolio, AOR is a valuable one-ticket solution to consider.

The 60/40 portfolio is a classic asset allocation strategy that invests approximately 60% in equities and 40% in fixed income. This approach aims to capture gains during bull markets while protecting during downturns.

• 📈Growth Component: The 60% equity allocation allows for participation in long-term economic and corporate profit growth.

• 💵Income and Stability: The 40% fixed income component generates income and offers stability during market declines.

• 🔁Automatic Rebalancing: The AOR management team handles rebalancing, maintaining the target allocation without investor involvement.

What makes AOR particularly interesting is its "fund of funds" structure. Rather than directly holding individual stocks and bonds, AOR invests in other iShares ETFs, creating a multi-layered diversification approach. The current major holdings are:

• 🎫iShares Core Total USD Bond Market ETF $IUSB ( ▼ 0.15% ) : Delivers broad U.S. bond market coverage

• 🎫iShares Core S&P 500 ETF $IVV ( ▲ 0.1% ) : Provides exposure to large-cap U.S. stocks

• 🎫iShares Core MSCI International Developed Markets ETF $IDEV ( ▲ 0.5% ) : Covers international developed markets

• 🎫iShares Core International Aggregate Bond ETF $IAGG ( ▲ 0.08% ) : Includes international bond exposure

• 🎫iShares Core MSCI Emerging Markets ETF $IEMG ( ▲ 0.89% ) : Adds emerging markets exposure

Through these underlying ETFs, AOR investors gain access to:

• Thousands of individual stocks across 40+ countries

• Multiple bond types, including government, corporate, and mortgage-backed securities

• Varied maturities from short-term to long-term fixed-income instruments

While investors could theoretically purchase the underlying ETFs individually to create their own 60/40 portfolio, AOR offers several practical advantages:

• Simplicity: One purchase gives you a complete portfolio, simplifying management and reducing administrative tasks.

• Professional Rebalancing: BlackRock's portfolio managers handle rebalancing, ensuring your asset allocation stays on target without manual adjustments.

• Cost Efficiency: With an expense ratio of just 0.15%, AOR offers professional management at a lower cost than many balanced mutual funds. The convenience often outweighs any minor savings from purchasing individual ETFs.

• Reduced Trading Costs: Investing in a single ETF means fewer transactions, leading to lower overall trading costs.

• Tax Efficiency: The "fund of funds" structure allows for more tax-efficient internal rebalancing compared to selling individual ETFs.

Investment Strategy💹

• 1️⃣AOR as a Complete Solution: For many investors—particularly those with smaller portfolios, those just starting their investment journey, or those seeking simplicity—AOR can be a complete, standalone investment solution. Its built-in diversification across asset classes, geographies, and sectors provides a solid foundation that requires minimal maintenance.

• 🏗️Portfolio Core: For more experienced investors with larger portfolios or specific investment preferences, AOR can serve as the stable core of a more customised strategy. AOR might represent 50-70% of the overall portfolio in this implementation, with satellite positions. This "core and satellite" approach maintains the benefits of AOR's diversification while allowing for personalised adjustments.

• 🪣Specific Portfolio Buckets: Another effective implementation is to use AOR for specific segments of your broader financial plan:

  • Medium-term goals: AOR's balanced approach makes it well-suited for goals with 5-10 years time horizons, like home down payments or college funding.

  • Transition strategy: Investors approaching retirement might gradually shift from growth-oriented portfolios to more conservative allocations.

  • Legacy planning: AOR can provide a simple yet effective solution for assets intended for heirs who may not have sophisticated investment knowledge.

AOR at a glance

ETF Issuer: iShares

Inception: 2008-11-04

Asset Class: Multi Asset

Underlying Index: S&P Target Risk Balanced Index

Geographical Focus: Global

Expense Ratio: 0.15% (with a Fee Waivers of 0.05%)

Dividend Yield: 2.89% (as of last data point)

Distribution Frequency: Quarterly

Historical Performance

Since its inception in 2008, coincidentally launched during the Global Financial Crisis, AOR has demonstrated its balanced approach through various market environments.

Over the past decade (2015-2025), AOR has delivered annualised returns that typically fall between pure equity and fixed-income strategies—exactly as designed. During strong bull markets, AOR has captured approximately 60-70% of the upside of the S&P 500, while during corrections, it has typically experienced only 50-60% of the downside.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Simplified Portfolio Management with Professional Oversight: AOR eliminates the complexity of building and maintaining a diversified portfolio. With one purchase, you gain exposure to thousands of securities across global markets, all professionally managed by BlackRock's experienced team.

2. Proven Strategy with Decades of Supporting Evidence: The 60/40 balanced approach has been a cornerstone of professional portfolio management for generations. Academic research and practical experience have repeatedly validated the effectiveness of this allocation for investors seeking growth with moderated risk. AOR packages this time-tested approach in an accessible, low-cost vehicle.

3. Cost-Effective Implementation with Tax Efficiency: With its modest 0.15% expense ratio, AOR delivers comprehensive portfolio management at a fraction of the cost of traditional balanced mutual funds, which often charge 1.00% or more. Additionally, as an ETF, AOR offers the potential tax advantages of the exchange-traded structure, including limited capital gains distributions, Tax-efficient internal rebalancing and Investor control over when to realise capital gains.

Top 3 Reasons Not to Invest

1. Limited Customization for Specific Investment Views: While AOR's broad diversification is a strength, it also means you can't easily overweight or underweight specific sectors, countries, or asset classes. Investors with strong convictions about particular market segments may find AOR too restrictive.

2. No Exposure to Alternative Asset Classes: AOR focuses exclusively on traditional stocks and bonds, omitting alternative asset classes like real estate investment trusts (REITs), commodities, precious metals, or infrastructure that might provide additional diversification benefits. Investors seeking exposure to these alternatives must supplement AOR with additional holdings.

3. Potentially Lower Returns: AOR sacrifices some upside potential to reduce volatility. During strong bull markets, especially those dominated by growth stocks, AOR will likely underperform compared to more aggressive allocation strategies.

🧩Simplify Your Investing: The AOR Advantage

The iShares Core 60/40 Balanced Allocation ETF represents a compelling solution for investors seeking a professionally managed, diversified portfolio in a single, cost-effective package. Its implementation of the time-tested 60/40 strategy provides a balance of growth potential and stability that has proven valuable through various market environments.

AOR may be particularly well-suited for:

• Investors who value simplicity and minimal portfolio maintenance

• Those who appreciate the historical resilience of balanced strategies

• Medium-term goals where both growth and capital preservation matter

• Investors who want professional management without high fees

We at ETF UNO are committed to helping you navigate the ever-expanding ETF landscape. Whether you choose AOR as your portfolio cornerstone or as one piece of a more customised strategy, we're here to provide ongoing insights and education to support your investment journey.

Join our growing community of thoughtful ETF investors by subscribing to our weekly newsletter. Together, we can build more resilient portfolios to weather market storms and capture long-term growth opportunities.

Happy investing!

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.