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Rethinking the 60/40 Portfolio

The 60/40 allocation is considered to be a relatively conservative approach, as it provides some exposure to the potential returns of stocks while also offering a degree of safety through the more stable bond investments.

By Dan Kern May 13, 2026

Working With an Adviser
Dan Kern
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Key Takeaways

  • Diversify beyond US equities into non-US markets (India, Brazil, South America) and seek quality companies trading at reasonable valuations, as regional diversification will become more valuable in a fragmented economic regime
  • Add inflation-protected investments including shorter-term TIPS, real estate/REITs, infrastructure assets (toll roads, airports, cell towers), and farmland/timberland that have cash flows adjusting upward with inflation
  • Rebalance fixed income to capitalize on higher bond yields now available after decades of low rates, using this income generation as a portfolio stabilizer rather than relying solely on price appreciation
  • When considering private equity and private credit allocations, conduct rigorous due diligence on governance structures, board independence, and valuation methodologies—avoid funds lacking strong oversight mechanisms that could enable conflicts of interest
  • Make incremental course adjustments rather than wholesale portfolio changes; the fundamentals of diversification and long-term investing remain sound, but tactical shifts are warranted to address a structurally different inflation environment

Rethinking the 60/40 Portfolio: A 60/40 investment strategy is a portfolio allocation method where 60% of the portfolio is invested in stocks and 40% is invested in bonds. The idea behind this strategy is to balance risk and return, as stocks have the potential for higher returns but also higher volatility, while bonds tend to be less volatile but also have lower returns. The 60/40 allocation is considered to be a relatively conservative approach, as it provides some exposure to the potential returns of stocks while also offering a degree of safety through the more stable bond investments.

2022 was a really bad year for the 60/40 portfolio and maybe it's time to rethink it. Dan Kern, CFA®, CFP®, Managing Director & Chief Investment Officer of TFC Financial Group talks with Robert Powell about rethinking the 60/40 portfolio based on recent events.

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