Running the Numbers: Will 60/40 Split of Stocks, Bonds Still Yield Retirement Security?

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high-risk, high-return assets with low-risk, low-return assets. For his work on reducing investor exposure to risk through diversification, which was acclaimed for its “algebraic simplicity,” he won the 1990 Nobel Prize in Economics.By the early 1990s, the 60/40 portfolio had become a go-to interpretation of modern portfolio theory, and Markowitz’s work was widely embraced by individual and institutional investors alike.The idea is simple: Divide your asset portfolio into 60% equities and 40% fixed-income securities like government bonds, gaining exposure to the high returns of stock market booms while at the same time keeping a foothold in more stable bonds, whose lower but reliable returns can protect your wealth from bear markets.READ ALSO: ChatGPT Chases Retail Revenue with One-Stop Shopping and McDonald’s Plans to ‘Do It All for You’ (Again) With Massive Restaurant ExpansionDistant and recent history make a direct case for the 60/40 approach. By measuring past market declines and the amount of time it took to recover from them, Morningstar calculated that the Great Depression was four times more painful for the stock market than it was for a 60/40 portfolio. The Lost Decade of the 2000s, which kicked off with the bursting of the dot-com bubble and ended with the Great Recession, was over seven times as painful for equities.In other words, even as the 60/40 portfolio has posted less overall growth than the stock market over the course of decades, it has proven more resilient in times of crisis, making it particularly attractive for individual retirement portfolios or pensions designed for stability.However, 2022 changed the arithmetic. Equities and bonds experienced a simultaneous decline amid two crises: Russia’s full-scale invasion of Ukraine reorganized much of the global economy and energy markets along geopolitical lines, and a supply-chain crisis triggered by the COVID-19 pandemic disrupted global commerce. Both contributed to spiking inflation that has yet to fully subside.The stock market regained its 2022 high well over a year ago, in September 2024. But the bond market has been a totally different story: It remains underwater. That’s because of the Federal Reserve’s sustained and aggressive interest-rate hikes, which began in March 2022 and have been pared only marginally in the past year.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,776.75 -12.00 (-0.18%)Dow Futures46,888.00 -70.00 (-0.15%)Nasdaq Futures25,129.75 -55.00 (-0.22%)Russell 2000 Futures2,493.80 -7.20 (-0.29%)VIX16.37 -0.28 (-1.68%)Gold3,986.00 +9.70 (+0.24%)PortfolioSign in to access your portfolioSign inTop gainersORBS Eightco Holdings Inc. 11.07 +2.83 (+34.34%)AMD Advanced Micro Devices, Inc. 203.71 +39.04 (+23.71%)SANM Sanmina Corporation 140.00 +25.92 (+22.72%)MFH Mercurity Fintech Holding Inc. 35.79 +6.38 (+21.69%)AAOI Applied Optoelectronics, Inc. 33.79 +5.86 (+20.98%)Top losersAPP AppLovin Corporation 587.00 -95.76 (-14.03%)CVCO Cavco Industries, Inc. 498.60 -71.83 (-12.59%)QUBT Quantum Computing Inc. 22.16 -2.46 (-9.99%)SKY Champion Homes, Inc. 69.50 -6.85 (-8.97%)FRMI Fermi Inc. 26.35 -2.25 (-7.87%)Most activePLUG Plug Power Inc. 4.1300 +0.3299 (+8.68%)OPEN Opendoor Technologies Inc. 9.28 +1.17 (+14.43%)AMD Advanced Micro Devices, Inc. 203.71 +39.04 (+23.71%)NVDA NVIDIA Corporation 185.54 -2.08 (-1.11%)ACHR Archer Aviation Inc. 13.64 +2.07 (+17.89%)Earnings eventsMy earnings eventsEarnings eventsTrending tickersAMD Advanced Micro Devices, Inc. 203.71 +39.04 (+23.71%)APP AppLovin Corporation 587.00 -95.76 (-14.03%)SPRB Spruce Biosciences, Inc. 130.40 +121.58 (+1,378.46%)TMQ Trilogy Metals Inc. 2.0900 +0.0100 (+0.48%)VZ Verizon Communications Inc. 41.44 -2.23 (-5.11%)Top economic events