AOR: The Passive Investor's Low-Cost, No-Maintenance Portfolio Solution

The iShares Core 60/40 Balanced Allocation ETF (AOR) is a diversified investment strategy for passive investors seeking a low-cost, core portfolio. AOR aims to replicate traditional target date funds without a fixed term date, providing investors with a long-term investment solution. By combining equity and fixed income assets, AOR offers a balanced approach to investing.

The iShares Core 60/40 Balanced Allocation ETF (AOR) is a diversified investment strategy designed to appeal to passive investors seeking a low-cost, core portfolio. AOR aims to replicate the traditional target date funds without a fixed term date, offering investors a long-term investment solution. By combining equity and fixed income assets, AOR provides a balanced approach to investing.

AOR is structured as a combination of multiple ETFs from iShares, including the iShares Core Total USD Bond Market (IUSB) and iShares Core International Aggregate Bond (IAGG) for fixed income, and the iShares Core S&P ETF Trust (IVV) for equities. This strategy offers a 60/40 equity/fixed income split, with the largest equity component being the IVV, accounting for 36.63% of the portfolio weight. The strategy also covers small-to-large-cap equities, emerging markets, and international exposures, providing substantial investment breadth across asset classes.

One of the key features of AOR is its autonomous rebalancing, which occurs semi-annually to bring allocations back to their respective target weights. This hands-off approach is particularly appealing to investors who may not have the time or inclination to manage their portfolios actively. The strategy is also regionally diversified, with 66% of the portfolio’s allocation in U.S. equities and fixed income, and smaller allocations to Japan and China.

Comparing AOR to a 60/40 blend of the S&P 500 (SPY) and the iShares Core US Aggregate Bond ETF (AGG) shows that AOR has outperformed this blend thus far in 2025. However, historically, AOR has underperformed the U.S.-based blend. A third strategy, a 60/40 blend of the Vanguard Total Stock Market ETF (VTI) and the Vanguard Total Bond Market ETF (BND), has outperformed the comparable strategies in most cases.

AOR's distribution payout is quarterly, with an annualized distribution of $1.60/share, yielding 2.61% on a trailing 12-month basis. This should be noted if AOR is to be used for financial planning or income purposes.

In terms of risks, AOR is a passive strategy spread across multiple index funds, providing a hands-off approach to managing investments. However, investors may be limited to realizing the returns of the broader index funds within the portfolio, limiting upside opportunity while potentially minimizing downside risk. Index funds are not actively managed, meaning they reflect the underlying index, providing investors with passive performance.

Investors have a handful of other managed strategies to choose from, including the SPDR SSgA Multi-Asset Real Return ETF (RLY) and the Vanguard Balanced Index Fund (VBAIX). VBAIX is the lowest cost strategy with a management fee of 6bps, while AOR is slightly more expensive at 15bps.

Given the lower cost structure and stronger performance, VBAIX may be a more optimal strategy when considering the cohort of funds. However, AOR can be an appealing investment strategy for those seeking a hands-off approach to managing their investment portfolio.

References:
[1] https://seekingalpha.com/article/4809108-aor-can-be-the-passive-investors-answer-to-no-maintenance-investing