The 60/40 Portfolio is Dead: Here's What's Replacing It

The traditional balanced portfolio—60% stocks for growth and 40% bonds for income and stability—has been the bedrock of retirement planning for half a century. But in 2022, both asset classes fell in tandem, leaving investors with nowhere to hide.

Why the Old Rules Failed

The negative correlation between stocks and bonds (when one goes down, the other goes up) was a persistent feature of the low-inflation era. However, when inflation spikes, central banks raise rates, hurting both equity valuations and bond prices simultaneously.

The New Alternatives

Sophisticated investors are now looking beyond public markets.

1. Private Credit

With banks pulling back from lending, private credit funds are stepping in, offering yields that often exceed high-yield bonds with potentially lower volatility.

2. Real Assets

Infrastructure, commodities, and farmland provide an inflation hedge that paper assets simply cannot match.

3. Absolute Return Strategies

Hedge fund-style strategies that aim for positive returns regardless of market direction are becoming accessible to retail investors via liquid alternatives (ETFs).

Conclusion

Diversification is still the only free lunch in investing, but the menu has changed. A modern portfolio might look more like 50/30/20—50% stocks, 30% bonds, and 20% alternatives.