Elevate Your 60/40 Portfolio With These Simple Tweaks

The 60/40 portfolio has proved that it is here to stay, but it can benefit from a refresh like other classics.

Why it matters: The total portfolio approach refines the 60/40. It takes a closer look at the components of the plain-vanilla portfolio and considers how risky they are. The goal is to help investors stay disciplined as market conditions change for the better or worse.

Jason Kephart has written about the total portfolio approach. He’s a senior principal of multi-asset manager research for Morningstar.

10 Questions on the Total Portfolio Approach and 60/40 Portfolio

1. What is the total portfolio approach? And what makes it similar and different from a classic 60/40 portfolio?
2. This strategy splits the portfolio into two parts: growth and stability. How would you define these two, and which market environments are they suited for?
3. Let’s start with growth. Stocks are one of the investments that would appear here. What else?
4. High-yield bonds are generally in the “40” of the traditional 60/40. Yet you’ve written that would not be the case under the total portfolio approach. Why?
5. And then there’s the stability sleeve. Bonds would be an obvious choice here. What kinds of stocks might be better suited to stability than growth?
6. It’s time for a bit of show and tell. We have a chart on screen showing a 60% growth and 40% stability portfolio. US stocks are paired with high-yield bonds, and US core bonds with cash. How would this hypothetical portfolio generally behave in a market downturn and upswing?
7. The total portfolio approach comes with its own set of challenges. What are they?
8. California’s public pension fund recently adopted the total portfolio approach. What other plans are adopting this strategy, and could momentum build here?
9. How can everyday investors retool their investment portfolios to implement this strategy?
10. What’s the takeaway about the total portfolio approach versus the 60/40?

Key Quote on How the Total Portfolio Approach Refines the 60/40 Portfolio

I think it’s just about being much more mindful about the role something will play in a portfolio, why you’re adding it. Is it there to play offense? Is it there to play defense? Is it somewhere in the middle? And then allocate to it accordingly. Just following a strict 60/40 guideline without thinking about the risk involved, that’s probably not the ideal way to go about things.

The Takeaway: Ignore critics who claim the 60/40 portfolio is broken. According to Kephart, the classic investment strategy is not broken, but it could use some improvement. The total portfolio approach presents a different way of thinking about building a portfolio. The focus shifts from what the investments are to how they behave and the risks they carry. Morningstar’s senior principal of multi-asset manager research says embracing those concepts could help strengthen investors’ portfolios and motivate them to stay invested for the long term.

More From Morningstar on the 60/40 Portfolio and Diversification

Under the total portfolio approach, some investments would shift from one category to another because of their risk. For example, high-yield bonds would fall under growth, says Kephart. Their credit spreads have previously widened when stock markets have struggled, and losses came with the territory. Investors who allocate high-yield bonds in the “40” part of their portfolio might have to deal with a bigger drawdown than they’re comfortable with.

Balanced funds provide a meet-in-the-middle solution for investors seeking high returns but prefer lower volatility. Kephart highlights the best US-focused and global balanced funds. A popular deep dive examined what it took to make investing in a 60/40 portfolio more painful during a market crash than an all-equity portfolio. Bookmark Morningstar’s Guide to Portfolio Diversification, which includes expert analysis and investment ideas for this year.

In case you missed it: Morningstar portfolio strategist Amy Arnott explains how new retirees can spend more without risking their savings. And watch how to generate steady income in 2026 from this Investing Insights episode.