The 60/40 Portfolio Is Dead. 3 Strategies Beating It Now

Why Traditional Allocation Models Are Struggling

For decades, the 60/40 portfolio—60% stocks, 40% bonds—was the gold standard of retirement investing. It provided growth from equities and stability from fixed income. Retirees relied on it. Financial advisors recommended it without hesitation.

Then came 2022. Stocks fell 18%. Bonds fell 13%. The supposed “safe” 40% didn’t protect anything. For the first time in decades, both asset classes declined together, leaving 60/40 investors down 16% in a single year.

The model isn’t dead, but it’s wounded. Here are three strategies outperforming it in today’s environment.

Strategy 1: The 70/20/10 Equity-Heavy Allocation

With interest rates now higher than the near-zero era of 2010-2021, bonds finally offer real yields. But a 40% allocation to bonds still drags returns during equity bull markets.

The allocation:

70% equities (split between U.S., international, and small-cap)
20% bonds (short-to-intermediate duration only)
10% alternatives (REITs, commodities, or TIPS)

Why it works: The equity overweight captures more upside. Shorter-duration bonds reduce interest rate sensitivity. Alternatives provide inflation protection and diversification beyond the stock/bond relationship.

2023-2024 performance: This allocation outperformed 60/40 by approximately 4% annually due to stronger equity returns and less bond drag.

Risk level: Higher volatility than 60/40. Not suitable for those within 5 years of retirement or with low risk tolerance.

Strategy 2: The All-Weather Portfolio (Ray Dalio-Inspired)

Bridgewater’s Ray Dalio popularized a portfolio designed to perform across economic environments—growth, recession, inflation, and deflation.

The allocation:

30% stocks
40% long-term bonds
15% intermediate bonds
7.5% gold
7.5% commodities

Why it works: Each asset class performs well in different environments. When stocks struggle, bonds or commodities typically provide ballast. The portfolio seeks consistent returns with lower drawdowns.

Historical performance: Lower long-term returns than 60/40 (approximately 7% vs. 8% annually), but significantly lower volatility and smaller maximum drawdowns. During 2022, this portfolio fell only 8% compared to 16% for 60/40.

Best for: Retirees prioritizing capital preservation over maximum growth. Those with shorter time horizons or lower risk tolerance.

Strategy 3: The Dynamic/Tactical Allocation

Rather than maintaining fixed allocations, dynamic strategies adjust based on market conditions, valuations, or momentum signals.

Common approaches:

Momentum-based: Overweight assets with positive recent performance, underweight or exit declining assets
Valuation-based: Reduce equity exposure when P/E ratios are extreme, increase when markets are cheap
Trend-following: Hold assets above their 200-day moving average, exit to cash when below

Implementation: Target-date funds from Fidelity and Vanguard now incorporate mild tactical adjustments. More aggressive tactical strategies are available through ETFs like MTUM (momentum) or actively managed allocation funds.

2022 example: A simple trend-following strategy that exited stocks when the S&P 500 fell below its 200-day moving average would have avoided much of the 2022 decline, re-entering in early 2023 to capture the recovery.

Caution: Tactical strategies require discipline and can underperform during choppy markets with many false signals. They also trigger more frequent trading and potential short-term capital gains in taxable accounts.

What the 60/40 Portfolio Got Right

Before abandoning 60/40 entirely, recognize its strengths:

Simplicity—easy to implement and maintain
Decades of proven long-term results
Automatic rebalancing forces buying low and selling high
Bonds are now yielding 4-5%, providing real income

The 60/40 portfolio had one terrible year. Over 50+ years, it has delivered approximately 8% annualized returns with moderate volatility. One year does not invalidate a strategy.

The Right Approach for Your Rollover

If you’re rolling over a 401(k) and choosing your new allocation, consider:

Time horizon over 15 years: The 70/20/10 equity-heavy approach may provide superior long-term returns
Time horizon under 10 years: All-Weather or modified 60/40 offers better downside protection
Comfort with active management: Tactical strategies can reduce drawdowns but require more attention

The 60/40 portfolio isn’t dead—but it’s no longer the only answer. Today’s investors have more tools and strategies available. Choose the approach that matches your goals, timeline, and ability to stay disciplined during market turbulence.