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The 60/40 Portfolio Is Outdated - Here's the Strategy That Actually Wins

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  //stocks-investing.news-articles.net/content/202 .. ated-here-s-the-strategy-that-actually-wins.html
  Published in Stocks and Investing on Wednesday, December 10th 2025 at 12:56 GMT by Business Insider

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The 60/40 Portfolio is Outdated – Here’s the Strategy That Actually Wins

For decades, the 60/40 mix—60 % equities, 40 % bonds—has been the benchmark for the “average” investor. It was promoted as a simple, low‑risk way to stay invested, and the narrative was that it would deliver a good return while smoothing out the roller‑coaster of the markets. The Business Insider piece “Best investments: The investing strategy that beats the 60/40 portfolio” takes a hard look at the evidence and shows that the classic split is no longer the gold standard. It also explains a new, data‑driven allocation that consistently outperforms 60/40 in both return and risk‑adjusted terms.

1. The 60/40 Legacy and Its Limits

The article opens by charting the 60/40 story. The mix was popularized in the 1980s and 1990s by a host of financial advisers, mutual funds, and robo‑advisors. It worked reasonably well during periods of strong bond‑price rallies and the early 2000s, but it struggled when bond yields spiked (the 2008‑2009 crisis, the 2020‑2021 inflation spike, and the 2022‑2023 yield‑rise). In the last decade, the 60/40 blend has delivered an average annualized return of roughly 6.5 % from 2013 to 2023, while the average volatility has hovered around 11 %.

The article also cites a Bloomberg infographic (link embedded in the piece) that compares 60/40 to several modern tilts. Bloomberg’s chart shows that a “value‑heavy” 70/30 (70 % equities, 30 % bonds) portfolio has yielded roughly 7.5 % CAGR over the same period. That’s a solid bump, but the real advantage appears when we look beyond a simple equity‑bond split.

2. New Evidence From BofA Global Research

A central pillar of the article is a 2024 BofA Global Research (BofA GR) analysis that the author links to. BofA GR used a proprietary dataset covering more than 30 years of U.S. market data and examined 15 different asset‑class combinations.

Key findings:

The takeaway is clear: adding a 10‑20 % slice of alternative assets—real‑estate, commodities, or infrastructure—generally produces higher returns and a better risk‑adjusted profile. The 60/20/20 combination, for example, is a 15 % higher CAGR than 60/40 while boosting the Sharpe ratio from 0.48 to 0.60.

The article notes that the performance advantage is not limited to the U.S.; BofA GR also ran a parallel European study. There, a 60/30/10 mix (U.S. equities, European bonds, and European real‑estate) delivered a 0.9 % higher CAGR than 60/40.

3. Factor‑Based Tilt Is Key

Another layer of the article digs into factor investing, citing Morningstar’s “Factor Investing 101” guide (link included). Morningstar’s research shows that value, momentum, and low‑volatility factors have historically outperformed the market. The author demonstrates that a “factor‑tilted” 60/40 portfolio that boosts exposure to these three factors can achieve a 0.5–0.7 % bump in the long run.

For example:

• Value tilt: Increase allocation to the MSCI World Value Index by 5 %.
• Momentum tilt: Add a small position in a momentum‑selective ETF like QQQ or SPY‑based funds.
• Low‑volatility tilt: Use a low‑volatility ETF such as TVIX or the Invesco S&P 500 Low Volatility ETF.

The article stresses that these tilts can be achieved without significantly increasing volatility, especially when combined with a small alternative slice.

4. Practical Implementation – ETFs and Index Funds

Business Insider goes from theory to practice by recommending a set of low‑cost ETFs that can recreate the superior allocation:

The author also provides a sample allocation for a 60/20/20 strategy: 60 % VTI + VTV (equities), 20 % BNDX (bonds), 20 % VNQ (real‑estate). He notes that investors can adjust the real‑estate share to match risk tolerance: a 10‑20 % slice is ideal for moderate risk.

5. Risk Considerations and Caveats

The article is careful to highlight potential downsides. The biggest risk is that the “alternative” assets—especially real‑estate and commodities—can be more illiquid and sensitive to interest‑rate swings. The author references a CNBC interview with a risk‑management analyst (link in the article) who points out that real‑estate ETFs can underperform during severe market downturns.

Another caveat is that factor tilts may need rebalancing. Morningstar’s data (link to the guide) indicates that maintaining a 5 % value tilt may require quarterly rebalancing. Without it, the tilt can erode, especially after strong equity rallies.

Finally, the article notes that the BofA GR study covers data only up to 2023. Future events—such as a prolonged low‑interest‑rate environment or a sudden commodity shock—could change the relative performance. Investors are advised to monitor economic indicators (Fed policy, inflation, commodity indexes) and adjust their portfolio accordingly.

6. Bottom Line – Why 60/40 Is Obsolete

In summary, the Business Insider article argues that the 60/40 portfolio is a relic of the past. It no longer delivers the best balance of return and risk in the modern market environment. The new winning formula is:

60 % equities (with a value and low‑vol tilt)
20 % bonds (diversified across U.S. and global)
20 % alternatives (real‑estate or commodities/infrastructure)

This structure consistently outperforms 60/40 by roughly 1–1.5 % in CAGR and improves the Sharpe ratio by about 0.10–0.15. The author cites BofA GR, Bloomberg, Morningstar, Vanguard, and CNBC as supporting evidence.

For everyday investors, the article provides actionable steps—choose the right low‑cost ETFs, allocate 10–20 % to alternatives, and periodically rebalance. The result is a modern, data‑driven portfolio that is better positioned to weather today's volatile economic landscape.

References (from the article)

1. BofA Global Research – “Re‑evaluating the 60/40 Portfolio” (2024).
2. Bloomberg infographic – “What Works Better Than 60/40?”
3. Morningstar – “Factor Investing 101.”
4. Vanguard – ETF expense ratios and performance reports.
5. CNBC – Interview with risk‑management analyst on alternative asset volatility.

By staying away from the simplistic 60/40 rule and embracing a diversified, factor‑tilted, alternative‑heavy mix, investors can achieve higher returns with an equal or lower level of risk—an insight the Business Insider article brings to light with clarity and data‑backed confidence.