The 60/40 Investment Portfolio: Is It Still the Right Strategy for You — or Is There a Better Way?

For decades, the 60/40 portfolio (60% stocks and 40% bonds) has been the go-to investment formula for the average investor. It’s simple, it’s easy to manage, and for many people, it has delivered decades of reliable growth.

But here’s the reality: the 60/40 portfolio was built for the middle class, not for high-net-worth investors.

If you want to think and invest like the wealthy, you need to understand how the top 1% structure their portfolios. Spoiler: they don’t have most of their wealth in stocks and bonds.

What the 60/40 Portfolio Really Means for You

The idea is straightforward:

• 60% of your money in stocks (often broad index funds or ETFs) to capture growth.

• 40% in bonds (U.S. Treasuries or investment-grade corporate bonds) to help smooth out the ride.

It’s based on the assumption that when stocks drop, bonds often rise — giving you a built-in safety net. This balance worked well for decades, especially in low-inflation environments.

If you’re part of the main street investor crowd, this method has historically given you a hands-off, relatively low-stress way to invest.

Why the 60/40 Was a Middle-Class Staple

The 60/40 strategy fits investors who:

• Want a set-it-and-forget-it approach.

• Prefer publicly traded, highly liquid investments.

• Have a moderate risk tolerance.

• Aren’t actively seeking higher-return alternatives.

It works decently when you’re building retirement savings in a 401(k) or IRA — accounts designed for long-term, market-based investing.

But here’s the catch: it’s not how the wealthy build their fortunes.

How High-Net-Worth Investors Think Differently

If you look at the portfolios of high-net-worth individuals (HNWIs), you’ll notice something striking:

• Much less in stocks and bonds compared to the average investor.

• Much more in alternatives like private equity, private credit, real estate, infrastructure, and hedge funds.

  
  

Why? Because wealthy investors prioritize:

• Cash flow (monthly or quarterly income from assets like multifamily real estate or private lending deals).

• Tax efficiency (real estate depreciation, 1031 exchanges, and carried interest treatment).

• Lower correlation to public markets (so they’re not at the mercy of every stock market swing).

• Control over deal terms and asset performance (through private deals, not just Wall Street).

  
  

In other words, the wealthy don’t rely on a 60/40 mix because they know there’s a ceiling on its returns and a floor on its volatility. They use alternatives to tilt the odds in their favor.

A graph showing how ultra-high-net-worth individuals (with $20M+ net worth) allocate their investments, heavily favoring private equity and real estate over traditional stocks and bonds.

Real Estate & Private Equity: The Wealth Builder’s Edge

If you’ve ever wondered why the ultra-wealthy seem unaffected by stock market crashes, here’s one big reason:

• Real Estate – Multifamily apartments, self-storage, commercial properties, and other income-producing assets provide consistent cash flow, long-term appreciation, and significant tax benefits.

• Private Equity – Direct ownership stakes in companies or funds that aren’t publicly traded. This can deliver outsized returns compared to the public market, especially when coupled with experienced operators and a clear value-creation plan.

These assets aren’t just about returns — they’re about stability, control, and diversification away from the daily ups and downs of Wall Street.

Why the Classic 60/40 Is Struggling Now

Even if you’ve trusted this formula for years, recent events have exposed its weaknesses:

• 2022’s double decline in both stocks and bonds was the worst since at least 1937.

• High inflation breaks the traditional stock-bond hedge, causing both to fall together.

• Market concentration means your “diversified” stock allocation may actually rely heavily on a handful of tech giants.

If your goal is simply to track the market, 60/40 might still serve you. But if your goal is to outperform the market, protect wealth, and create multiple streams of income, you’ll need more than just stocks and bonds.

Your Takeaway

The 60/40 portfolio isn’t “dead” — but it’s not the best tool if you want to think like the wealthy.

If you’re building a middle-class retirement plan in public markets, it’s simple and effective. But if you’re aiming for financial freedom, legacy wealth, and insulation from public market chaos, you need to think beyond 60/40.

That means shifting more of your portfolio toward real estate and private equity — the kinds of assets that high-net-worth investors have relied on for decades.

Your choice comes down to this:

• Do you want to settle for the returns and volatility of the public markets?

• Or do you want the stability, cash flow, and tax advantages of assets the wealthy use to stay wealthy?

Your portfolio should reflect your ambitions. If your goal is to join the ranks of the financially elite, it might be time to stop playing by middle-class rules.