60/40 Portfolio
The standard against which almost everything is measured - 60% in the S&P 500 and 40% in 7-10 year Treasury bonds, rebalanced once a year.
What it is
It is the best-known balanced portfolio: 60% equities and 40% fixed income. The logic is that stocks provide growth and bonds cushion declines. On this site we use the SPY (S&P 500) / IEF (7-10 year Treasury bonds) version, which is also the one the authors of HAA and BAA use as a reference in their papers.
Quick facts
- Author
- No single author (classic reference)
- Year
- n/a
- Origin
- Community
- Access
- Public and free
- Type
- Passive
- Assets
- 2
- Frequency
- Annual
- Difficulty
- Low
Who it is for
Anyone who wants a simple reference and a yardstick against which to measure any tactical strategy.
Who it is not for
Anyone who expects protection in years when stocks and bonds fall together, like 2022.
What it is for on this site
It is our passive benchmark. Any tactical strategy should offer something the 60/40 does not: smaller drawdowns, higher returns or both, and make up for the work and taxes of rotating. If it does not, the passive option is better.
Current signal
60/40 Portfolio
Calculated with the closes of September 30, 2026.
No portfolio changes from last month.
Rules, step by step
Once a year, at the end of December, the portfolio is returned to 60/40. Between rebalances the weights drift with the market.
Backtest and out-of-sample period
Since Sep 2002: 8.5% a year, maximum drawdown -26.8%, volatility 8.8%, Sharpe 0.84.
Its worst recent moment was 2022, when interest rates rose: stocks and bonds fell together, and the portfolio lost -17.0% over the year. It was the year that motivated Keller and Keuning to create HAA with its inflation canary.
Growth of $100 (logarithmic scale) since , with 0.1% costs per trade. Data: US-listed ETFs, total return (dividends reinvested), before taxes.
Drawdowns from peak
| Strategy | CAGR | Volatility | Max drawdown | Sharpe |
|---|
Year by year
| Year | 60/40 Portfolio | S&P 500 |
|---|---|---|
| 2026 (to Sep 2026) | +5.8% | +12.7% |
| 2025 | +13.8% | +17.7% |
| 2024 | +14.7% | +24.9% |
| 2023 | +17.2% | +26.2% |
| 2022 | -17.0% | -18.2% |
| 2021 | +15.9% | +28.7% |
| 2020 | +15.0% | +18.3% |
| 2019 | +21.9% | +31.2% |
| 2018 | -2.4% | -4.6% |
| 2017 | +14.0% | +21.7% |
| 2016 | +7.6% | +12.0% |
| 2015 | +1.3% | +1.2% |
| 2014 | +11.7% | +13.5% |
| 2013 | +16.9% | +32.3% |
| 2012 | +11.1% | +16.0% |
| 2011 | +7.4% | +1.9% |
| 2010 | +12.8% | +15.1% |
| 2009 | +13.1% | +26.4% |
| 2008 | -14.9% | -36.8% |
| 2007 | +7.2% | +5.1% |
| 2006 | +10.5% | +15.8% |
| 2005 | +3.9% | +4.8% |
| 2004 | +8.1% | +10.7% |
| 2003 | +19.0% | +28.2% |
| 2002 | -0.3% | -21.6% |
The first year may be partial. Returns are net of trading costs.
Taxes on rotating
The results above are before taxes. This portfolio is rebalanced once a year: historically it turns over only 6% of the portfolio a year on average, so it generates few sales.
In most countries each sale of an ETF in a taxable account realises a gain or loss that may be taxed, so rotating monthly is best done inside a tax-advantaged account (such as an IRA or 401(k) in the US, or an ISA or SIPP in the UK) where one is available. Rules vary by country and by account: check yours, or ask a tax adviser. See our methodology for how the results are calculated.
Criticisms and limits
It is a reference, not a strategy with a proven edge - in 2022 bonds and stocks fell together and diversification failed. The result depends heavily on the type of bonds used and the period you look at.
How to run it
- Pick a fixed date each year to rebalance and stick to it.
- Check the current portfolio in this page's signal.
- Work out the orders with the rebalancing calculator, which flags the tax effect.
- Place them with ETFs.
Similar strategies
Three-fund portfolio (Bogleheads)
US stocks, international stocks and bonds; annual rebalancing
Passive · AnnualGolden Butterfly
20% each in: stocks, small-cap value, long bonds, short bonds and gold; annual rebalancing
Passive · AnnualPermanent Portfolio
25% stocks, long bonds, gold and cash; annual rebalancing
Frequently asked questions
Why is the 60/40 said to be "dead"?
Because in 2022 bonds and stocks fell together and diversification failed. It remains, nonetheless, a reasonable long-term reference; history does not show it will not work.
Can a 60/40 be built with index funds?
Yes, and it is a very convenient option: a global equity index fund and a bond index fund, rebalanced once a year.
Which bonds should I use?
It depends on the risk you want to take: medium-duration bonds (like IEF) or shorter ones lose less when rates rise; long ones (like TLT) can give more in a recession but are more volatile.
Sources and review date
- Keller and Keuning, HAA, SSRN 4346906 (they use the 60/40 as a reference) · accessed October 10, 2026
Page last reviewed on October 8, 2026; figures and signal are recalculated at every monthly close (latest: September 30, 2026). How we work: editorial policy and methodology.
Educational and informational content. It is not investment advice or a personal recommendation. The results shown are historical simulations (backtests) using US-listed ETFs; past performance does not guarantee future results and you may lose some or all of the capital invested. Real returns will depend on your costs, taxes, currency and execution timing.