The 60/40 portfolio is often used as a balanced approach to investment, aiming to achieve a reasonable level of return while managing risk. The numbers 60 and 40 represent the percentage allocation between two primary asset classes: stocks and bonds. This allocation is designed to balance the potential for higher returns from stocks with the relative stability and income generation of bonds.
The idea is that the diversification across different asset classes helps mitigate the impact of market volatility. During periods of stock market decline, the bonds in the portfolio may provide a cushion, as they are generally less volatile.
For most long-term investors, a broad mix of stocks and bonds still makes sense. However today’s environment warrants a more flexible and dynamic approach to implementing hedges.
This article on the 60/40 portfolio from Zacks Investment Management may be of interest to some investors.
Here is a section:
For a long time, a balanced’ portfolio of 60% stocks and 40% bonds was a tried-and-true strategy for pursuing goals of growth and capital preservation at the same time. When stocks do well, the portfolio benefits from growth. When stocks do poorly, bonds are expected to mitigate the downside and reduce volatility.
2022 was a difficult year for both stocks and bonds, which also meant weak returns for 60/40 portfolios. Performance varies based on categories of stocks and bonds in a portfolio. To make matters harder for 60/40 investors, while stocks have staged a recovery in 2023, bonds continue to underperform as interest rates have been pressured higher by stronger-than-expected economic growth.

This dynamic has many investors wondering if the benefits of the 60/40 portfolio are gone for good. But I wouldn’t be so quick to leap to that conclusion. For most of history, bonds have been effective at mitigating equity market risk, and they have also helped portfolios generate positive returns during periods when equities sold off sharply. When it mattered most – i.e., during the 2008 Global Financial Crisis – bond prices soared in the wake of the ‘flight to safety’ into U.S. Treasuries.
During the past 20 years, there has been a consistently negative correlation between stocks and bonds, with basically the only exception being 2013’s “taper tantrum” when both declined in lockstep. Now to be fair, there have also been several periods – sometimes long ones – where bonds and stocks were positively correlated. Those periods also happened to be ones where there was high inflation uncertainty, i.e., the 1970s and 1980s.