Are You Still in a 60/40 Portfolio?

60/40 portfolios served a generation of investors well. But your life may no longer fit that mold.

For decades, the 60/40 portfolio — allocating 60% to equities and 40% to fixed income — has been the gold standard of balanced investing. Financial institutions have relentlessly promoted it, advisors have recommended it, and market performance has seemingly validated it. The strategy has delivered consistent, if unspectacular, returns through numerous market cycles.

However, you may wonder if the 60/40 portfolio is still relevant in today’s market. Recent market volatility, unusual interest rate environments, and new investment options raise questions about this traditional approach. What worked for the average investor might fall short for those with substantial wealth and more nuanced financial goals.

The investment community has shifted its thinking about this long-trusted standard. Major endowments like Yale University’s now commit only a small fraction of their portfolios to the traditional stock-bond mix. Financial strategists warn that the 60/40 portfolio may underperform in coming years. Even Vanguard, long a champion of this balanced approach, admits that things are changing in modern portfolio management.

Let’s examine whether this time-tested strategy deserves to remain at the center of your financial plan — or if your circumstances call for something different.

Why the 60/40 Portfolio Worked

The 60/40 portfolio earned its place in investment strategy for good practical reasons. The logic is straightforward: stocks drive growth, bonds provide income and cushion downturns. This pairing has weathered multiple market cycles remarkably well.

During expansions, equities captured market gains, while in downturns, fixed income offered stability. Historically, stocks and bonds moved in different directions, creating a natural buffer. When stock markets tumbled, bonds often climbed as interest rates fell, reducing overall portfolio losses.

The math behind diversification is simple but powerful. Blending assets with different performance patterns allowed for smoother results without sacrificing too much growth. Over decades, this combination beat inflation while avoiding the jarring movements of stock-only portfolios.

The numbers back this up. Vanguard’s research shows the global 60/40 portfolio has delivered average yearly returns around 6.8% since 1997, with most 10-year stretches falling between 5.6% and 7.6%. This reliability made 60/40 the go-to recommendation for moderate investors seeking both growth and portfolio stability.

Why It Might Not Work Now

Despite its impressive history, there are signs that in 2025, the 60/40 approach may not fully serve sophisticated investors. Market developments suggest its previous advantages may be fading.

The Changing Relationship Between Stocks and Bonds

The core premise supporting the 60/40 portfolio—that stocks and bonds generally move in opposite directions during market stress—has begun to weaken. In 2022, both stocks and bonds fell together, causing a 16% drop in the global 60/40 portfolio. When bonds fail to offset stock declines, the diversification benefit that makes this strategy work becomes less dependable.

Historically Low Bond Yields

For years, bond yields hovered near historic lows, limiting both income and price appreciation from fixed income holdings. While yields have risen lately, the decade of minimal returns dragged down overall portfolio performance. Investors who followed the 60/40 model during the low-rate era likely saw poorer results than other allocation strategies might have delivered.

Longer Lifespans Mean Greater Wealth Needs

Today’s investors are living longer, meaning their portfolios must fund more years of spending. CFA Institute research reveals that retirees with median starting balances seeking comfortable lifestyles have just a 2% success rate over a 25-year retirement with a 60/40 portfolio. Even those with larger starting amounts face success rates of only 40-50% in maintaining the living standards you want throughout your retirement.

For affluent individuals, the conservative tilt of 60/40 may unnecessarily cap growth potential, especially considering extended lifespans, medical expenses, and legacy planning.

Sequence-of-Returns Risk

The CFA Institute highlights how sequence-of-returns risk—poor market returns early in retirement—profoundly impacts 60/40 portfolio durability. Their findings show that early negative returns can quickly drain retirement assets, even when long-term average returns look healthy on paper.

Missing Access to Private Markets

For high-net-worth investors, traditional 60/40 models lack exposure to private market opportunities that could strengthen portfolio outcomes. Investments in private equity, real estate, private credit, and even collectibles bring diversity and return sources not available through public markets alone.

Yale University’s endowment offers a telling example. This sophisticated investor allocates just 5% to stocks and 6% to standard bonds, with the remaining 89% in alternatives. While individual investors face different constraints than endowments, this allocation reveals how top-tier institutions view the traditional stock-bond framework.

Alternative to 60/40 Portfolios

For investors with portfolios of $5 million or more, options exist that can be better than 60/40 portfolio allocation. These approaches work best with careful execution and guidance.

Private Credit

As standard bonds have struggled to produce sufficient income, private credit has gained traction. This sector—covering direct lending, mezzanine financing, and specialized credit strategies—normally yields more than public bonds, often with stronger terms and reduced connection to public markets.

For larger investors, moving some bond allocation to private credit can improve returns while preserving income generation. The extra return for accepting illiquidity and complexity rewards those willing to commit for longer periods.

Disciplined Rebalancing

While basic rebalancing is a portfolio fundamental, more refined approaches may deliver better results. Rather than calendar-based adjustments, using rules-based or volatility-driven rebalancing can leverage current market movements or macro trends.

This method turns market swings from a threat into a source of return—though it demands discipline, defined processes, and consistency. For substantial portfolios, even modest rebalancing improvements can add meaningful value over time.

Portfolio Engineering

Traditional 60/40 portfolios typically employ broad market exposure without much focus on economic conditions, risk distribution, or tax implications. More advanced construction might incorporate:

Factor-based allocations targeting specific performance drivers
Risk parity methods that balance risk contributions more effectively
Tax-conscious trading that captures losses and postpones gains
Custom indexing tailored to individual investor circumstances

These approaches don’t discard the 60/40 framework—they refine it to better fit specific investor needs.

Alternative Investments Expand Your Options

Some investment professionals favor completely different allocation models. Alex Shahidi at Evoke Advisors proposes an “e-balanced” portfolio with 30% Treasury bonds, 30% Treasury Inflation-Protected Securities (TIPS), 20% equities, and 20% commodities. His analysis indicates this combination delivers returns similar to 60/40 but with reduced volatility by performing across varying economic cycles.

For those with access to quality alternative investments, allocations to private equity, real estate, infrastructure, and other private markets may boost returns while increasing diversification. These investments typically involve higher minimums and longer holding periods, but often reward investors with superior long-term performance.

Some investors also explore tangible assets such as art or fine wine. These investments, however, generally demand specialized insight and careful liquidity planning.

When the 60/40 Portfolio Still Makes Sense

Despite these alternatives, the traditional 60/40 approach isn’t obsolete. For certain investors and situations, it remains a valid foundation.

For Simplicity and Peace of Mind

The psychological value of a straightforward, easily understood portfolio shouldn’t be underestimated. Many investors appreciate the clarity and history of the 60/40 approach during market turmoil. If a simpler strategy helps you stay disciplined through volatility, that behavioral benefit may outweigh more sophisticated approaches.

For Those Without Access to Private Markets

Many advanced investment strategies require large minimums or access to limited-availability vehicles. Schwab notes that moderate investors in mid-career may still find the 60/40 allocation (or similar) appropriate for their risk profile and circumstances. Without access to institutional-quality alternatives, a well-executed 60/40 strategy remains sensible.

During Favorable Market Conditions

Every portfolio strategy performs differently depending on market conditions. When stocks and bonds maintain their historical negative correlation and interest rates provide reasonable income, the traditional 60/40 approach can deliver strong results. As Vanguard points out, even after the challenging 2022 environment, the global 60/40 portfolio bounced back significantly.

As a Starting Point for Customization

Rather than fully abandoning the 60/40 concept, many sophisticated investors use it as a foundation. By maintaining the balanced philosophy while adjusting specific weightings, security selection, and implementation, they preserve the core benefits while tailoring the portfolio to their personalized goals.

Making the Decision: Questions to Consider

If you’re weighing whether to stay with or move beyond a 60/40 allocation, consider:

Has your wealth grown beyond what public markets alone can properly serve? As your portfolio expands, the opportunity cost of avoiding private investments increases.
What is your actual time horizon? Many investors underestimate their investment timeframe, which often extends decades into retirement or beyond for legacy planning.
How much liquidity do you truly need? If you maintain sufficient cash reserves or reliable income streams, you might benefit from accepting some illiquidity for improved returns.
Do you value stability over long-term growth potential? Your preference should guide your allocation decisions.
Has your portfolio strategy evolved with your wealth? Approaches that worked at lower wealth levels might match your current financial position.
Are you maximizing tax advantages? Greater wealth often creates more layered tax situations that benefit from sophisticated portfolio structuring.

The Croak Capital Perspective

At Croak Capital, we believe portfolio construction must adapt to market developments, wealth growth, and changing life circumstances. While the 60/40 portfolio has served many investors admirably, we find that clients with substantial wealth generally get better results from more customized approaches.

Our investment philosophy rests on four key principles that build upon the traditional balanced portfolio:

Thoughtful diversification across both public and private markets
Disciplined rebalancing strategies to harness volatility
Tax efficiency is integrated throughout our process
Clear connection between portfolio structure and specific client goals

These principles don’t reject the balanced concept behind 60/40—they strengthen it through greater customization.

Taking the Next Step

The 60/40 portfolio isn’t fundamentally flawed—it simply might not be the best approach for your current wealth and objectives. Moving beyond this traditional allocation doesn’t mean abandoning time-tested investment fundamentals. It means applying those fundamentals in ways that enhance your specific situation.

If you’re wondering what to do next, consider reviewing whether your current strategy matches your goals. Examine not just your stock and bond allocation, but also your alternative asset exposure, rebalancing methodology, and the tax efficiency of your investments.

If your portfolio hasn’t changed in a decade, but your life has—maybe it’s time to take another look.