What Is a 60/40 Portfolio?
Quick Answer
A 60/40 portfolio consists of 60% stocks and 40% bonds. It’s considered a moderately conservative asset allocation that can help mitigate risk and provide stable returns. It may work well for some investors, but others may find it incompatible with their long-term financial goals.
When investing, you'll want a diversified portfolio that supports your risk tolerance and financial goals. That means every investor will have their own unique blend of holdings. A 60/40 portfolio consists of 60% stocks and 40% bonds, which is considered moderately conservative. That may or may not be aligned with your investment strategy. Here's how a 60/40 portfolio works so you can determine if it's the right asset allocation for you.
What Is a 60/40 Portfolio?
A 60/40 portfolio is a balanced investment strategy that allocates money toward assets for growth and stable income. A 60/40 portfolio is designed to:
- Use stocks to support growth: This can position you for long-term gains and help you keep up with inflation over time.
- Use bonds to provide stability: Bonds are low-risk investments that can provide steady, albeit lower, returns. That can help offset potential losses on the stock side.
60% Stocks
When you purchase a stock, you receive an ownership stake in the company that issued it. Public companies sell stock shares as a way of raising capital to fund their business goals. The stock market has historically produced an average annual return of around 10%, but market volatility comes with the territory. In other words, stocks carry more risk than bonds.
Instead of buying individual stock shares, many investors spread out the risk by buying into mutual funds or exchange-traded funds (ETFs). These allow you to buy and hold bundles of investments, which can help with diversification. Many mutual funds are actively managed by a fund manager.
40% Bonds
The federal government, corporations, and state and local governments sell bonds. When you buy one, you're loaning money to the organization that issued it. They're expected to pay you back with interest. That can provide steady income payments, and the risk of losing money is low. The caveat is that bond returns typically lag behind stocks. From 1950 to 2025, the annual average total return for bonds was 5.2%, according to J.P. Morgan.
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Pros and Cons of a 60/40 Portfolio
A 60/40 portfolio isn't for everyone, but it does have potential benefits that can be appealing to some investors. Below are the main pros and cons to consider before making a decision.
Pros
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It can help reduce investment risk. This asset allocation might make sense for risk-averse investors because it provides built-in diversification. If the stock side of your portfolio declines in value, consistent bond returns could help offset those losses.
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It has had historically steady returns. From 2000 to 2025, the average 10-year annualized rolling return of a 60/40 portfolio was 7.8%, according to an analysis by LPL Financial. Just be aware that future returns are never guaranteed.
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It's relatively straightforward. A financial advisor might manage your portfolio for you. Even if you do it yourself, most online brokerages and robo-advisors make it easy to set up a 60/40 portfolio and rebalance as needed.
Cons
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If you're younger, a 60/40 portfolio may be too conservative. When you're in your 20s and 30s, T. Rowe Price recommends holding 90% to 100% stocks and up to 10% bonds—then gradually getting more conservative as you age. Going too heavily on bonds when you're young might rob you of higher returns over time.
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Losses are still possible. This asset allocation isn't immune to market volatility. For example, the traditional 60/40 portfolio saw a 20% loss in 2022, according to investment research firm Morningstar.
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Interest rates can affect returns. Bond prices tend to drop in response to rising interest rates—and rates tend to go up during periods of inflation. That could affect the stability of a 60/40 portfolio.
Should I Use a 60/40 Portfolio?
Your ideal asset allocation will depend largely on your goals, risk tolerance and timeline. Here are some important things to consider before opting for a 60/40 portfolio:
- Your age: Younger investors are generally advised to invest heavier in stocks and lighter in bonds because they have more time to recover from periods of volatility. The rule of thumb is to gradually adjust your portfolio to become more conservative as you get closer to retirement.
- Your risk tolerance: If risk makes you uneasy, the stability and simplicity of a 60/40 portfolio might be appealing, especially if you tend to react emotionally to market dips. Otherwise, you may choose to carry more risk by holding alternative investments like real estate, digital assets or private equity.
- Your time horizon: If you're saving for a short-term goal, like buying a house in the near future, you could lose money with a 60/40 portfolio if the market declines. But this allocation might make sense if you have time to ride out market waves.
Learn more: Best Ways to Invest Your Money at Every Age
Alternatives to a 60/40 Portfolio
If a 60/40 portfolio doesn't feel like the right fit, you can consider the following age-based suggestions. Just remember that these are basic guidelines—your asset allocation should be personalized to you.
| Age | Suggested Asset Allocation |
|---|---|
| 20s and 30s | Stocks: 90% to 100% Bonds: Up to 10% |
| 40s | Stocks: 80% to 100% Bonds: Up to 20% |
| 50s | Stocks: 65% to 85% Bonds: 15% to 35% |
| 60s | Stocks: 45% to 65% Bonds: 30% to 50% Cash: Up to 10% |
| 70s | Stocks: 30% to 50% Bonds: 40% to 60% Cash: Up to 20% |
Source: T. Rowe Price
Frequently Asked Questions
The Bottom Line
A 60/40 portfolio is designed to balance growth and consistency, but it may be too conservative for some investors. Consider your risk appetite, goals and investing style before choosing this asset allocation. No matter what you choose, staying diversified is key. That can help spread out risk and protect you from bouts of market volatility.
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About the author
Marianne Hayes
Marianne Hayes is a longtime freelance writer who's been covering personal finance for nearly a decade. She specializes in everything from debt management and budgeting to investing and saving. Marianne has written for CNBC, Redbook, Cosmopolitan, Good Housekeeping and more.
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