The 60/40 Portfolio: Returns, Drawdowns, and Whether It Still Works

Stocks and bonds usually don't move in lockstep. In a typical recession, stocks fall but high-quality bonds hold or rise as interest rates drop — so a 60/40 falls far less than an all-stock portfolio, and recovers faster. That smoother ride is the whole point: a portfolio you can actually hold through a downturn beats a “better” one you panic-sell.

Rough, approximate behavior — run the exact figures for your own dates in the backtester:

The 60/40's magic depends on stocks and bonds being uncorrelated. In 2022 that broke: surging inflation forced rapid rate hikes, which hit both stocks and bonds at the same time. It was a rare year where the ballast sank with the ship.

The lesson isn't that 60/40 is dead — it's that the stock/bond hedge isn't guaranteed in every regime, especially an inflationary one. That's exactly the kind of assumption worth testing rather than trusting.

A 60/40 suits investors who want meaningful growth but can't stomach the full swings of an all-stock portfolio — often those within ~10–15 years of needing the money. Younger investors with a long runway may want more in stocks; retirees drawing income may want to think about sequence-of-returns risk and cash buffers, not just the 60/40 split.

Instead of arguing about whether 60/40 is dead, run it. Backtest a 60/40 over the period that matters to you, stress-test it against 2008/2020/2022, and compare it to a 70/30 or an all-stock mix on the same chart. The point isn't the perfect allocation — it's one you understand well enough to hold.