The 60/40 Model Portfolio

The 60/40 (S&P 500/long-term government bonds) portfolio, rooted in modern portfolio theory, was first popularized in the late 1950s. Starting in the 1900s, the average annualized return of a 60/40 mix has ranged from 3% (1910s) to over 14% (1980s and 1990s) over the past 10 decades.

 

60/40 Portfolio: Average Annualized Return

 

1900s	6%		1960s	6%
1910s	3%		1970s	7%
1920s	12%		1980s	14%
1930s	4%		1990s	14%
1940s	8%		2000s	4%
1950s	10%

 

There are a number of variations of the 60/40 model that include alternatives such as commodities, currencies, real estate and private equity. Another approach was developed by the late Harry Browne; his model evenly splits money into four asset categories: U.S. stocks, long-term Treasuries, precious metals, and cash. Other advisors are advocates of the Norway model, based on how the country invests its pension fund: 60% stocks (½ U.S. and ½ foreign), 35% bonds, and 5% real estate. The Norway model emphasizes small and value stocks.