The 60/40 Portfolio: How It Works, Rules & Example
The 60/40 portfolio holds about 60% in stocks for growth and 40% in bonds for stability. It is a classic balanced approach designed to smooth the ride while still aiming for long-term growth.
How it works
- Put roughly 60% of your investment money into a diversified stock fund.
- Put roughly 40% into a diversified bond fund.
- Let each side do its job: stocks for growth, bonds for cushioning.
- Rebalance back to 60/40 once a year or when the mix drifts by more than about 5 percentage points.
- Adjust the ratio over time if your goals or age change.
The rules
👍 Pros
- Smoother ride than an all-stock portfolio.
- Simple to understand and maintain.
- Built-in discipline through rebalancing.
- Bonds can provide income and dry powder during stock declines.
👎 Cons
- Lower long-term growth potential than an all-stock portfolio.
- Stocks and bonds sometimes fall together, especially when interest rates rise quickly.
- Bond returns may struggle to beat inflation in some periods.
Worked example
Common mistakes
- Never rebalancing, so the portfolio drifts into much higher risk.
- Assuming bonds can never lose value.
- Abandoning the plan after one bad year for either side.
Tools for this strategy
Advertise with usYour brand hereLearning library sponsor · Native bannerReach investors & traders →FAQ
Is 60/40 still a good idea?
It remains a widely used starting point for balanced investors, but the right mix depends on your goals, time horizon and risk tolerance.
What kind of bonds go in the 40%?
Many investors use a broad, high-quality bond fund that holds government and investment-grade corporate bonds.
Can I change the ratio?
Yes. Younger investors often hold more stocks, such as 80/20, and people near retirement often hold more bonds.
Similar strategies
Dollar-Cost Averaging
Dollar-cost averaging means investing the same amount of money on a regular schedule, no matter what the market is doing. It takes the guesswork out of timing and turns investing into a calm, repeatable habit.
🧺Buy and Hold Index Investing
Buy and hold index investing means owning low-cost funds that track a whole market and keeping them for the long run. Instead of hunting for winners, you own a slice of everything and let broad economic growth do the heavy lifting.
🪐Core-Satellite Investing
Core-satellite investing keeps most of your money in a steady, diversified core while a smaller slice goes into satellite ideas you are excited about. It blends the reliability of index investing with room for personal conviction.