What Is the 60/40 Portfolio (And Should You Have One)?

The 60/40 portfolio refers to a common investment strategy that allocates 60% of a portfolio to stocks and 40% to bonds. It’s designed to balance growth potential with income and lower volatility, appealing to investors who want exposure to equities while still holding a meaningful cushion of fixed-income assets. While the 60/40 mix has been widely used in retirement planning, shifts in the market and personal preferences may affect its suitability.

Consider working with a financial advisor as you consider various asset allocations for your portfolio.

What Is a 60/40 Portfolio?

A 60/40 portfolio divides assets between equities and fixed income, but the mechanics of how it’s built go beyond the basic ratio. The stock portion typically includes a diversified mix of domestic and international equities across sectors and market capitalizations.

On the bond side, allocations may span government securities, investment-grade corporates and sometimes municipals or inflation-protected bonds, depending on the investor’s tax situation and risk profile.

A 60/40 mix helps maintain portfolio balance in both rising and falling markets. The strategy aims to reduce risk while generating a consistent rate of return over time, even during periods of volatility.

“The main advantage of a 60/40 portfolio is that the bond allocation moderates the risk of the portfolio,” said Robert R. Johnson, a professor of finance at Heider College of Business at Creighton University. “That is, it allows investors to sleep at night.”

How to Build a 60/40 Portfolio

How you go about adding investments to your portfolio with a 60/40 division depends on your investing style.

For example, DIY investors who are comfortable with a self-directed approach can construct a portfolio using low-cost exchange-traded funds (ETFs). ETFs are mutual funds that trade like stocks, so you get streamlined diversification while taking advantage of market movements. They’re also more tax-efficient than traditional mutual funds because the investments within the ETF don’t turn over as often.

“The simplest implementation of the strategy would involve buying the S&P 500 and U.S. Treasuries,” said Tom Desmond, chief financial officer at Ally Invest.

There are other investment options to consider as well. “An investor with a current income need may benefit from dividend-paying stocks and real estate investment trusts for their equity allocation,” Desmond added. On the fixed-income side, he says investors may also consider municipal bonds to benefit from tax-exempt interest. Another option is high-yield bonds, which can offer better yields but are riskier.

You could choose individual stocks. However, even historically well-performing stocks can have bad days. And if you put all your eggs in one stock basket, you could incur significant losses if the stock drops.

“The returns on the market have been driven by a small percentage of big winners,” Johnson said. “Trying to pick winners, for most, is a loser’s game. The solution is to invest in diversified funds instead.”

When using mutual funds or ETFs for equity exposure, pay attention to fees. Specifically, hone in on the expense ratio. This ratio tells you what percentage of a fund’s assets are used to cover its operating costs each year. The higher the fee, the more of your investment earnings you’ll hand over to own that fund.

Downsides of the 60/40 Portfolio

While a 60/40 strategy is an uncomplicated way to invest, there are some downsides to consider.

“The biggest disadvantage is that, over the long-term, a 60/40 portfolio will underperform an all-equity portfolio,” Johnson said. “And over very long time periods it will underperform by a significant amount because of the influence of compounding interest.”

In other words, you may be playing it safer with a 60/40 division of assets but you could be missing out on returns. Between its inception in 1957 through mid-April 2025, the S&P 500 averaged a 10.33% return per year. Meanwhile, the iShares Core U.S. Aggregate Bond ETF (which tracks the Bloomberg US Aggregate Index) has average 3.09% per year since its inception in 2003.

An investor who sticks with a straight 60/40 mix could see returns on both sides. However, they could potentially shortchange their portfolio’s growth by not owning a higher percentage of stocks.

Who Is a 60/40 Approach Right For?

The investor who stands to benefit most from a 60/40 portfolio may be the one whose risk tolerance doesn’t allow them to pursue a 100% equity allocation.

“A 35-year-old investing for retirement has the ability to bear risk because she has a longer time horizon but may not have the willingness to do so,” Johnson said. “That is—psychologically—she can’t bear the volatility in the equity market.”

The advantage of a 60/40 portfolio is that it is rules-based, Johnson said. “The allocations are fixed and one need not make allocation decisions during times of market instability.”

Desmond says this type of portfolio is likely better suited to someone who is towards the middle of their investing career. Someone in their 20s or 30s, for instance, who has several decades to go until they retire can take more risk and allocate more of their portfolio to stocks simply because they have longer to recover from any market declines. On the other hand, someone who’s closer to retirement would generally want to reduce exposure to stocks and increase bonds or fixed-income holdings, which tend to generate more stable returns.

If you’re on the fence about whether it makes sense for you, Johnson says it helps to lay some ground rules for how you want to invest. Those rules should cover not only your time frame, goals and risk tolerance but also things like liquidity and tax efficiency.

From there, you can shape a target asset allocation that you want to maintain and a plan for rebalancing your portfolio as you near retirement. It provides a clear plan and helps prevent emotional decisions during market swings.

The plan helps guide you through volatile conditions, Johnson said. Your plan shouldn’t change because of fluctuations in the market.

Alternatives to the 60/40 Portfolio

A 60/40 portfolio can offer a sense of stability where returns are concerned. On the other hand, it may not perform as well as other strategies. When you shape your asset allocation, it’s helpful to cast the net wider, then drill down to the approach that best fits your objectives.

For example, using your age to guide asset allocation is an alternative rule of thumb you might consider. You subtract your age from 110 to determine how much to allocate to equities and to bonds. So if you’re 40 years old, for example, you’d want to allocate 70% of your assets to stocks and the remaining 30% to bonds. If you’re comfortable with taking more risk, you could bump it up to 120 instead.

You also can use SmartAsset’s asset allocation calculator to determine the right asset allocation based on your risk tolerance. Talk to a professional if you need advice on your portfolio.

Bottom Line

In a 60/40 portfolio, you invest 60% of your assets in equities and the other 40% in bonds. The purpose of the 60/40 split is to minimize risk while producing returns, even during periods of market volatility. The potential downside is that it likely won’t produce as high of returns as an all-equity portfolio. But for investors who don’t have a high risk tolerance but still want growth potential, it’s a good option. Still, it’s important for each investor to examine their own situation and goals to determine their best asset allocation.

Tips for Investing

• If you’re starting to build an investment portfolio, you should think about consulting a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
• Curious about how much your investments will grow over time? SmartAsset’s investment calculator finds your project investment worth based on your rate of return and time horizon.

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