The classic 60/40 strategy makes sense for investors again
A classic investment strategy that has fallen out of favor is starting to stir some interest. The traditional 60/40 portfolio — a balanced fund that has a 60% allocation to stocks and 40% to bonds — has become less popular with retail investors after years of near-zero interest rates made fixed income less compelling. Investors especially soured on the portfolio in 2022, after the simultaneous fall in both the stock and bond markets eroded trust in what was supposed to be an uncorrelated, balanced strategy that gives investors an ideal blend of growth and risk mitigation. AGG 1Y mountain AGG, 1-year performance But now, some expect it could be time to adapt the strategy once more. In 2025, the iShares Core U.S. Aggregate Bond ETF (AGG) had a total return of 7.2%, its best performance going back to 2020. The results showed investors that the fixed income portion of their portfolios could start to play offense in addition to playing defense. “I think sometimes we’ve forgotten the opportunity that presents itself in fixed income when the Fed does go through a prolonged rate-cutting cycle,” said Philip Blancato, chief market strategist at Osaic. “So believe it or not, I’d argue that the old, boring 60/40 looks kind of sexy again, because what bonds can deliver.” In the new year thus far, the S & P 500 is up 1.8% on a price basis, while the AGG has risen 0.3%. The 40% The 2026 outlook is fairly compelling for bonds. A monetary easing cycle would lift bond prices. Further, the vulnerability in the stock market due to higher valuations and fears of an artificial intelligence bubble would mean that fixed income can play defense in a portfolio. Osaic’s Blancato said that investors can do really well by keeping it simple, sticking to bond market proxies such as the AGG ETF. He suggested going out six or seven years in duration. Duration is a measurement of a bond’s price sensitivity to rate fluctuations, and issues with longer maturities tend to have greater duration. Blancato said he prefers a 50-50 split between credit and Treasurys, while also saying that some mortgage-backed securities could also be added. “When the 60/40 worked for so long, there is this opportunity to be in that portfolio, get great return, and by the same token, not have to take a lot of risk to do it,” he said. To be sure, others expect there’s a case for other assets in the 40% allocation. Some say there’s an argument for alternatives like private credit , as well as for commodities such as gold. This would be in addition to government and corporate bonds. Commodities already are an area of strong interest. At the end of last year, retail traders adopted other assets such as gold to protect their portfolios while generating return. In 2026, metals have surged to start the year, with gold, silver and copper all rallying. In other words, there could be more nuance within the 40% allocation than there has been historically, according to Rick Pederson, chief strategy officer at Bow River Capital. “I’m thinking that 60/40 isn’t bad,” Pederson said. “But I would probably do the 40% differently than some others.” What’s clear, however, is that a 60/40 portfolio has become more compelling than it has in a while. “What’s old is new again,” Osaic’s Blancato said. — CNBC’s Sean Conlon contributed to this report.
Source – CNBC
