The 60/40 rule is a fundamental tenet of investing. It says you should aim to keep 60% of your holdings in stocks, and 40% in bonds.
Stocks can yield robust returns, but they are volatile. Bonds provide modest but stable income, and they serve as a buffer when stock prices fall.
The 60/40 rule is one of the most familiar principles in personal finance. Yet, not long ago, much of the investment community walked away from it.
A chorus of essays and think pieces in 2023 and early 2024 asked if the 60/40 portfolio was dead, explained why it might no longer be good enough to sustain a balanced portfolio, and offered up investment alternatives.
The reason: 2022. Bonds suffered one of their all-time worst years, buffeted by a one-two punch of spiraling inflation and rising interest rates.
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As 2024 draws to a close, however, investors are warming again to 60/40.
Should investors still follow the 60/40 rule?
In a recent report, the Vanguard investment firm reaffirmed 60/40 as “a great starting place for long-term investors, and that is as true today as any time in history.”
Other investment experts concur.
“Sixty-forty is still a good benchmark for a balanced portfolio,” said Jonathan Lee, senior portfolio manager at U.S. Bank.
And Todd Jablonski, global head of multi-asset investing for Principal Asset Management, considers the 60/40 rule “very much alive. I could make some Mark Twain jokes,” he…
