A 60/40 portfolio is the standard balanced mix. The name is the recipe: 60% shares, 40% bonds. The shares are there to grow. The bonds pay income. They are also meant to fall less when shares fall.
In 2022, both halves fell at once. Since the start of 2004 the mix has returned 7.99% a year. All shares returned 10.82%. The mix's worst fall was 34.0%, against 55.2% for all shares.
Is the 60/40 portfolio dead? Not on the record since 2004. It gave up 2.83 points of yearly return. It avoided 21.2 points of worst fall.
A 60/40 returned 7.99% a year against 10.82% for all shares. Its worst fall was 34.0% against 55.2%.
2022 was a bad year for it. 2008 was worse. The mix lost 16.0% in 2022 and 19.1% in 2008.
Both halves fell in 2022, yet the bonds still cushioned the year. Swap them for Treasuries of twenty years or more and the same mix lost 23.3%.
How we measured it
Shares are SPY (the S&P 500 ETF). Bonds are a fund tracking the broad US investment-grade bond market.
Where a section compares one kind of bond with another, we use US Treasury funds of three maturities. They are one to three years, seven to ten years and twenty years or longer.
The window is 2 January 2004 to 16 October 2026. It starts there because that is the first full calendar year the broad bond fund existed. That is twenty-three calendar years, the last of them running only to 16 October.
Worst fall means the deepest drop from a previous high, measured on the portfolio's daily value. The time to get back is counted from that high, so it includes the fall itself.
Every figure is a total return, so interest and dividends are counted. That matters most on the bond side, where income is most of the return. Each portfolio is rebalanced to its target weights on the first trading day of every year.
There are no fund fees, dealing costs or tax in these numbers. Nothing is adjusted for inflation, so every figure is in nominal US dollars.
Source: YX Insights price data (SPY, AGG)
On the broad index each step out of shares and into bonds lowers the return and shrinks the worst fall.
Shares / bonds | Return a year | Worst fall | Time to get back | 2008 | 2022 |
|---|---|---|---|---|---|
100/0 (all shares) | 10.82% | −55.2% | 4.85 years | −36.8% | −18.2% |
90/10 | 10.16% | −50.3% | 4.36 years | −32.4% | −17.6% |
80/20 | 9.46% | −45.2% | 3.55 years | −28.0% | −17.1% |
70/30 | 8.74% | −39.7% | 3.26 years | −23.5% | −16.6% |
60/40 | 7.99% | −34.0% | 3.07 years | −19.1% | −16.0% |
50/50 | 7.21% | −27.9% | 2.50 years | −14.6% | −15.5% |
Source: YX Insights price data (SPY, AGG)
Moving from all shares to a 60/40 costs 2.83 points of yearly return. It cuts the worst fall from 55.2% to 34.0%, a difference of 21.2 points. The wait to get back to the old high falls from 4.85 years to 3.07.
Volatility falls the same way, from 18.6% a year to 10.9%. Volatility here means how widely the portfolio's daily value swings, scaled to a year.
Is the 60/40 portfolio dead? The three losing years
Source: YX Insights price data (SPY, AGG)
Three of the twenty-three years lost money: 2008, 2018 and 2022. In all three the 60/40 lost less than all shares did.
2008 shows what the bonds are for. All shares lost 36.8%. The 60/40 lost 19.1%.
2022 is the year that put the question on the table. All shares lost 18.2%. The 60/40 lost 16.0%. The bonds helped by about two points. In 2008 they were worth nearly eighteen.
So 2022 was the thinner cushion. It was not the worse year. On this record the 60/40's deepest calendar loss is still 2008.
What changed in 2022 was the kind of bond
Source: YX Insights price data (SPY, AGG, TLT, IEF, SHY)
Duration is how much a bond's price moves when interest rates move. The longer a bond has left to run, the larger that swing.
The 40% is not one thing. In 2022 a broad bond index lost 13.0%. Treasuries of seven to ten years lost 15.2%. Treasuries of one to three years lost 3.9%. Treasuries of twenty years and longer lost 31.2%.
Feed those into the same 60/40 and the year comes out differently each time. With Treasuries of one to three years the loss was 12.4%, better than the 18.2% from holding only shares. With Treasuries of twenty years and longer it was 23.3%, worse than holding no bonds at all.
That last case is the only one in the whole record where adding bonds made a losing year deeper.
One more figure fixes the scale of it. A 50/50 split of shares and long-dated Treasuries fell 28.8% between December 2021 and October 2022. It took until September 2025 to get back. That is the only mix in this study whose worst moment was 2022 instead of the financial crisis.
60/40 against 70/30
A 70/30 returned 8.74% a year against 7.99% for the 60/40. It paid for that with a worst fall of 39.7% against 34.0%. Both use the broad bond index.
In 2022, the two were close, 16.6% against 16.0%. The extra ten points in shares showed up in 2008, where a 70/30 lost 23.5% against the 60/40's 19.1%. It did not show up in a year when bonds were the problem.
The 90/10 portfolio and what Buffett wrote
The Berkshire Hathaway shareholder letter for 2013 was published on 28 February 2014. In it Warren Buffett set out the instructions he left for the trustee of a cash bequest to his wife. The instruction was to put "10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund".
It is an instruction to one trustee about one bequest. The bonds are short-dated, which is the opposite end of the maturity range from the funds that struggled in 2022.
Run it that way, with Treasuries of one to three years, the 90/10 returned 10.06% a year over the window. Its worst fall was 50.2%, against 55.2% for all shares. An 80/20 on the same bonds returned 9.26% with a worst fall of 45.0%.
So a 90/10 keeps nearly all of the return of holding only shares. It keeps nearly all of the fall as well. The table above uses the broad bond index, so its 90/10 figures differ slightly.
What this does not settle
The window opens in 2004, so it misses the equity bear market of 2000 to 2002. Twenty-three calendar years is long enough to be useful. It is also brief enough that one bad year moves the averages.
Costs are not in these figures. Neither is tax or inflation. A UK investor holding dollar assets also carries the currency, which is not modelled here.
None of this says which mix suits any particular person. What it says is that the trade the 60/40 offered, less return for a shallower hole, was still there through 2022.
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Common questions about the 60/40 portfolio
Has the 60/40 portfolio stopped working?
Not on the record since 2004. A 60/40 of the S&P 500 and a broad bond index returned 7.99% a year against 10.82% for all shares, with a worst fall of 34.0% against 55.2%. Its deepest calendar loss was 19.1% in 2008.
What returns has a 60/40 portfolio made historically?
Using a broad bond index, 7.99% a year from 2 January 2004 to 16 October 2026, counting interest and dividends, before costs and tax. That is 476% in total. Three of the twenty-three years lost money: 2008, 2018 and 2022.
Is 60/40 or 70/30 better?
Neither, on this record. They buy different things. A 70/30 returned 8.74% a year against 7.99%, with a worst fall of 39.7% against 34.0%. Both figures use a broad bond index.
What is the Warren Buffett 90/10 portfolio?
An instruction in the 2013 Berkshire Hathaway shareholder letter, left for the trustee of a cash bequest to his wife. It puts 10% into short-dated government bonds. The other 90% goes into a low-cost S&P 500 index fund. Run with Treasuries of one to three years it returned 10.06% a year over this window, with a worst fall of 50.2%.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.