I’ve focused here on the 60/40 portfolio because of its touchstone status. In our view, 60/40 is a sound benchmark for an investment strategy designed to pursue moderate growth.
Prominent and useful as a benchmark though it is, 60/40 is not magical. And talk of its demise is ultimately a distraction from the business of investing successfully over the long term.
The broader, more important issue is the effectiveness of a diversified portfolio, balanced across asset classes, in keeping with the investor’s risk tolerance and time horizon. In that sense, “60/40” is a sort of shorthand for an investor’s strategic asset allocation, whatever the target mix.
For some investors with a longer time horizon, the right strategic asset allocation mix may be more aggressive, 80/20 or even 90/10. For others, closer to retirement or more conservative-minded, 30/70 may do it. The suitability of alternative investments for a portfolio depends on the investor’s circumstances and preferences.
Whatever one calls a target asset mix and whatever one includes in the portfolio, successful investing over the long term demands perspective and long-term discipline. Stretches like the beginning of 2022—and some bear markets that have lasted much longer—test investors’ patience.
This isn’t the first time the 60/40 and the markets in general have faced difficulties—and it won’t be the last. Our models suggest that further economic travails lie ahead and that market returns will still be muted. But the 60/40 portfolio and its variations are not dead. Like the phoenix, the immortal bird of Greek mythology that regenerates from the ashes of its predecessor, the balanced portfolio will be reborn from the ashes of this market and continue rewarding those investors with the patience and discipline to stick with it.