MW This stock-and-bond blend made double-digit gains last year - investors still dismiss it
By Mark Hulbert
Why we should sing the praises of the tried-and-true 60/40 stocks-bonds portfolio
Investors dismiss the traditional 60/40 portfolio - but it keeps on delivering.
Reports of the 60/40 portfolio's death are greatly exaggerated.
I'm referring to the classic moderate-risk strategy for near-retirees and those in retirement that allocates 60% to stocks and 40% to bonds. I've lost track of how many analysts in recent years have declared this approach to be dead.
Yet the strategy keeps on delivering. Last year, for example, its return came close to doubling its historical average: The portfolio gained 12.1% in 2025, assuming the 60% stock portion was invested in the Vanguard Total Stock Market Index Fund ETF VTI and the bond portion was in the Vanguard Total Bond Market Index Fund ETF BND.
As far as I can tell, the primary argument against the 60/40 portfolio boils down to the claim that bonds no longer provide the diversification benefit that they used to. Stocks and bonds in recent years have supposedly become more highly correlated, because of which the 60/40 portfolio is now especially vulnerable to periods of higher inflation - such as in calendar-year 2022, when inflation spiked, the Fed raised intrest rates and the 60% VTI/40% BND portfolio lost 16.3%.
This argument is based on a faulty reading of history, however. The 60/40 strategy's return since 1793 is 7.1% annualized, according to the database of market history maintained by Edward McQuarrie of Santa Clara University. As you can see from the accompanying chart above, the stocks-bonds correlation over the past 20 years was actually lower than its historical average (as judged by the correlation coefficient between stocks' and bonds' annual returns over all rolling 20-year periods since 1793).
My hunch is that many who are making this false claim about the stocks-bonds correlation are overly fixated on the 60/40 portfolio's 2022 loss, believing that a loss that large sounded the portfolio's death knell. In fact, there have been a handful of other years since 1793 in which the portfolio lost more than it did in 2022.
If you have doubts, there's a way to modify the traditional 60/40 portfolio to address concerns about inflation: Invest the 40% bond portion in a 30-year TIPS ladder. TIPS are the U.S. Treasury's inflation-protected bonds. At current rates, according to TIPSLadder.com, such a ladder supports a guaranteed 4.7% annual inflation-adjusted withdrawal rate over 30 years. And because its payout is guaranteed, this bond portion would have virtually no correlation with the stock portion - thereby improving the 60/40 portfolio's risk-adjusted performance.
The bottom line? Be skeptical of those arguing that the 60/40 portfolio is dead.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.
-Mark Hulbert
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January 17, 2026 09:59 ET (14:59 GMT)
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