60/40 Portfolio
Created by Traditional / Industry Standard
The classic balanced benchmark that stocks-and-bonds investing is measured against.
What is it?
The 60/40 Portfolio is the most widely used benchmark in all of investing: 60% of the portfolio is held in stocks for growth, and 40% is held in bonds for stability. It is not attributed to a single inventor because it emerged gradually through decades of institutional practice, but it is the reference point every other allocation strategy on this site is implicitly compared against.
The philosophy
The idea comes directly out of modern portfolio theory: combine an asset that grows aggressively over time (equities) with an asset that is comparatively stable and, historically, has moved somewhat independently of stocks (high-quality bonds). When equities sell off during a recession, bonds often hold their value or even rise as interest rates fall, giving the portfolio a shock absorber precisely when it is needed most. The 60/40 split has endured because it captures most of the long-run return of a 100% stock portfolio while meaningfully reducing the depth and duration of drawdowns.
How it works
Sixty percent of the portfolio tracks a broad US large-cap index such as the S&P 500, which has historically delivered the bulk of long-term real returns among major asset classes. The remaining 40% sits in investment-grade bonds, typically a total bond market fund blending Treasuries, agency debt, and corporate credit. The bond sleeve exists less to generate high returns and more to reduce portfolio volatility and provide dry powder: when stocks crash, the bond allocation has usually declined far less (or gained), so periodic rebalancing effectively sells relatively expensive bonds to buy relatively cheap stocks.
Who is it for?
The 60/40 mix suits investors with a medium-to-long time horizon (roughly 10+ years), a moderate risk tolerance, and a preference for radical simplicity — it can be implemented with as few as two index funds. It works well as a default starting point for someone who does not want to think deeply about asset allocation but still wants meaningfully less volatility than an all-stock portfolio.
Key strengths & trade-offs
Its biggest strength is a multi-decade live track record and simplicity that is hard to beat with only two funds. Its main weakness is concentration: it holds no international equities, no inflation hedges like gold or commodities, and no real estate, so it is fully exposed to US-specific and inflation-driven risks. 2022 was a notable stress test — stocks and bonds fell together as interest rates spiked, showing that the historical negative correlation between the two assets is not guaranteed to hold in every environment, particularly one driven by inflation surprises.
Risk Level
Rebalancing
annual
Number of Assets
2
Best For
Long-term investors wanting a smoother ride than all-equity
Current Allocation
| US Large Cap | 60% |
| US Total Bond Market | 40% |
Performance: 29.8-Year Backtest
Data for US Large Cap starts 1993. Simulation covers 29.8 years.
$10,000 initial investment → $64,802
Annual Returns
| Strategy | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 60/40 Portfolio | -3.6% | +14.3% | +15.5% | +12.6% | -1.1% | -0.8% | -8.4% | +1.8% | +5.2% | +1.2% | +6.0% | -0.4% | -22.0% | +21.2% | +15.2% | +5.8% | +10.5% | +13.2% | +11.3% | -0.7% | +12.3% | +16.8% | -0.5% | +16.7% | +12.2% | +13.4% | -8.2% | +13.0% | +16.6% | +12.6% | +5.0% |
Key Metrics
ETFs in This Strategy
Based on historical data. Past performance does not guarantee future results. This site is for educational purposes only and does not constitute investment advice.