Investing term

What is 60/40 portfolio?

The classic balanced portfolio: 60% global equities, 40% investment-grade bonds.

The 60/40 portfolio puts 60% in stocks for growth and 40% in high-quality bonds for stability, and rebalances back to that mix periodically. For decades it was the default "balanced" portfolio because the two halves often zig and zag at different times — bonds historically cushioning the stretches when stocks fall.

For example

In a year stocks drop 20% but bonds rise 5%, a 60/40 mix falls about 10% instead of 20% — the bond sleeve absorbing half the blow.

60/40 portfolio is taught hands-on in Stage 17 — Portfolio-Level Risk.

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Related terms

Asset mixThe split of the portfolio across asset classes — stocks, bonds, real estate, commodities, cash.Correlation trapThe phenomenon where assets that look uncorrelated in calm markets all crash together in a crisis.Headline noiseThe constant churn of financial news that moves prices intraday but is irrelevant to a multi-decade investor.HedgeAn asset held specifically because it tends to rise (or at least not fall) when something else in the portfolio falls.
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