The 60/40 Strategy Portfolio – Is It Dead? Backtests, Alternatives, And Substitutes Analysis

Determining the right mix of assets to help you reach your short-term and long-term financial goals is the key to building a winning investment portfolio. For many years, financial advisors and experts recommend the 60/40 portfolio because of its simplicity and favorable risk-adjusted returns. But given the changing economic situations in 2022 and the 60/40 portfolio’s 16.1% decline in the first half of the year 2022, one might wonder whether the 60/40 portfolio is out of season or simply dead! Are you wondering what the 60/40 portfolio strategy is?

The 60/40 portfolio strategy is one that allocates 60% of capital to equities and 40% to bonds. It consists of a diversified portfolio of stocks and bonds. In its simplest form, it could be achieved by investing in the S&P 500 ETF and U.S. Treasuries, which give a US-only portfolio.

However, by including international stocks and bonds, one can construct a globally diversified 60/40 portfolio.

In this post, we take a look at the 60/40 portfolio and its performance, and at the end of the article, we look at ways you can improve the 60/40 strategy.