Key Takeaways
- A new National Bureau of Economic Research (NBER) study shows that the old 60/40 rule can cost the average investor significantly more over their lifetime than newer, tailored strategies.
- Static 60/40 portfolios ignore differences like age, job security, income, and savings rates that shape how much risk you can take.
- Your career matters: if your paycheck tends to rise and fall with the stock market, you may need less stock in your portfolio.
For decades, the 60/40 portfolio—60% stocks for growth, 40% bonds for safety—was treated like a golden rule. But new research shows it may actually be draining your wealth. A new NBER study found that sticking with 60/40 could cut your lifetime spending power by nearly 4% compared with using a simple, personalized formula. That point that has also been made by experts like analysts at the fund giant BlackRock, Inc. (BLK), who argued recently that “heightened fiscal, trade, and policy dynamics challenge the performance, stability, and diversification potential of 60/40 portfolios.”
The key point is that your job, income, age, and savings habits matter far more than a one-size-fits-all rule.
Why 60/40 Is Costing You More Than You Think
The simplicity of a 60/40 allocation makes it popular, but it can be costly for those with unique circumstances. A major disadvantage of this fixed rule is that it treats every investor the same, no matter your age, income, or how much you save. Younger investors with steady incomes and high savings rates can often take on more risk, while retirees typically need less.
Another reason is that bonds often underperform when inflation runs hot. If your portfolio sticks to the old 40% bond rule, your purchasing power may erode faster than you expect.
Why Custom Beats Cookie-Cutter Portfolios
NBER researchers suggest it’s time to stop using one-size-fits-all formulas like 60/40. Instead, they built easy-to-use spreadsheet tools to make it clear that they’re not suggesting replacing a straightforward principle with one that would be too onerous for an advisor or anyone familiar with Excel to apply. By plugging in details such as your age, income, savings rate, and comfort with risk, the formulas create a portfolio that better matches your situation.
The surprise is how much of a difference this makes. They tested thousands of scenarios, and their method came within a fraction of a percent of the “perfect” investment plan that only supercomputers can calculate while beating traditional rules of thumb almost every time. For example, the study shows the following:
- A 60/40 mix left investors with about 3.75% less over time.
- The investment rule that asks you to subtract your age from 100 to find your stock and bond mix costs about 2%.
In plain terms, the NBER team found that most people can do far better by treating their paycheck, career path, and savings habits as part of their overall wealth picture. That means a young worker with a steady income might safely own more stocks than traditional formulas would suggest, while someone whose job income tends to rise and fall with the market, like tech workers and real estate agents, might need to hold back.
Warning
While the NBER study suggests that younger people might wish to invest more in stocks, it also makes clear that having all your investments in stocks was the worst option they studied—down about 12% compared with their more personalized approach.
Bottom Line
Building wealth in 2025 isn’t about clinging to old formulas. Research shows that the classic 60/40 mix might drain thousands from your lifetime spending power, while a simple, personalized approach keeps you far more on track. The key point: a portfolio that reflects your age, income, and job is far more reliable than one-size-fits-all advice.