Imagine a financial strategy so robust it has weathered 150 years of market storms, yet recently faced an unprecedented test. This is the story of the 60/40 portfolio—a classic mix of 60% stocks and 40% bonds—that has long been a bastion for cautious investors seeking balance between growth and safety. Today, we dive into its track record and a rare stumble that’s got everyone talking.
According to Morningstar, over the past century and a half, the 60/40 portfolio has proven its mettle in mitigating losses during market crashes, though it faced a unique challenge from 2020 to 2025 when it lagged behind an all-equity portfolio in recovery speed for the first time.
Let’s start at the beginning with data stretching back to 1871. A hypothetical $1 invested in a U.S. stock index back then, adjusted for inflation, ballooned to $32,470 by July 2025. The same dollar in a 60/40 portfolio grew to a still-impressive $4,137.
History shows the 60/40 mix softens the blow of downturns. Across 19 stock bear markets and 3 bond bear markets over 150 years, the 60/40 portfolio endured only 11 bear markets. On average, it faced 45% less pain than an all-equity approach during crashes.
Take the Great Depression, where stocks plummeted 79%. The 60/40 portfolio? It dropped by 52.6%, a painful but far less devastating hit.
In the early 1970s, amid inflation and geopolitical strife, stocks fell 51.9%. The 60/40 portfolio cushioned the fall, declining just 39.4%. Diversification worked.
Fast forward to the 2000s, dubbed the Lost Decade, with the dot-com bust and Great Recession. Stocks cratered 54% by February 2009, while the 60/40 portfolio limited losses to 24.7% at its worst. The pain for stocks was eight times greater than for the balanced mix.
Even during the COVID crash of March 2020, the 60/40 portfolio held up. It declined a mere 8.5% compared to sharper stock losses. That’s the power of bonds as a buffer.
But not every story ends with bonds as the hero. From April 2020, the bond market entered a prolonged downturn, staying underwater through 2021. By 2022, it was one of the worst bond markets in history.
The period from 2020 to 2025 marked a historic anomaly. For the first time in 150 years, the 60/40 portfolio suffered more pain in terms of recovery time than an all-equity portfolio. Both entered bear territory by December 2021, driven by war, inflation, and supply woes.
In 2022 alone, the 60/40 portfolio dropped 25.1%. Bonds offered no diversification benefit that year—a rare failure. This was uncharted territory. Stocks clawed back to their previous high by September 2024. The 60/40 portfolio took longer, hitting its prior peak in June 2025. Bonds, meanwhile, still haven’t fully recovered.
Despite this recent hiccup, the 60/40 portfolio’s long-term track record remains compelling. Its upside is lower than pure stocks, but the depth of downturns is often halved. Bear markets hit stocks once a decade on average, yet the balanced approach consistently dulls the sting.
What’s the takeaway for wealth-builders? Diversification isn’t foolproof, as 2022 proved, but it’s a proven shield against catastrophe. Consider maintaining a 60/40 mix if you value sleep over speculative gains.
Markets are unpredictable—recovery times for bonds or balanced portfolios can’t be forecast. Yet history whispers a truth: stocks always rebound to new highs, and a 60/40 strategy usually softens the ride. Stay frugal, invest wisely, and let time work its magic.