The 60/40 portfolio consists of 60% equity and 40% bond and is the standard portfolio for MZ Capital Management. Because a majority of my clients use a variation of this portfolio, I want to demonstrate how this portfolio has performed in the past. 

For this study, I used the S&P 500 for the equity portion and 10-year US treasury bonds for the bond portion, using market data from 1928 to 2025. Note that this period includes both the Great Depression and the Great Recession.

The portfolio was rebalanced every year to maintain the 60/40 allocation. I then analyzed six return intervals: 1 year, 2 years, 5 years, 10 years, 20 years, and 30 years. For each return interval, I calculated the average, best and worst annualized returns.  

Here are my results: 

What can you learn from this data? 

1. The 60/40 portfolio can still be quite risky in the short term. Note that the worst returns for the 1-year and 2-year intervals are -27.55% and -20.6%, respectively. These are steep losses, which nobody likes.
2. The worst-performing 5-year interval showed a much smaller -5.37%. It’s clear that the longer the investment horizon, the better the risk/reward ratio. In fact, after 1941, there has never been a 5-year interval that this portfolio had a negative return. 
3. Never in history did this portfolio ever produce a negative return in the 10- and 20-year intervals including the periods cover the Great Depression. 
4. The worst 30-year annualized return was a respectable 6.58%. When one has a long enough investment horizon, the risk simply dissipates. 

Most people’s retirement investment horizon is 30 years. Even at the historical worst return your money will double every 12 years! But if you invest consistently throughout your lifetime, you will likely to get somewhere in between the best of 11.89% and the worst of 6.58%. I think we all can take this “risk”.

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