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Your Risk Dial: 100% Stocks vs 60/40
A simple test of an all-stock portfolio versus a classic 60/40 stock–bond mix over the same period. How much return do you give up for a smoother ride?
Educational content only. Not personalized investment advice.
TL;DR
- 100% stocks aim for higher long-run growth but with sharper swings.
- 60/40 cuts volatility and drawdowns by mixing stocks and bonds.
- The real decision is risk tolerance and time horizon, not small differences in backtest numbers.
Method
We compare two simple portfolios built from US ETFs:
- 100% Stocks: 100% SPY (US large-cap stock index).
- 60/40 Mix: 60% SPY + 40% AGG (US aggregate bond index), rebalanced once per year back to target weights.
Data is modeled using monthly total returns (price + dividends), ignoring fund expense ratios and taxes.
The path is a stylized example based on Jan 2021 to Dec 2024 and rounded for clarity. It is meant to show the trade-off in growth and drawdowns, not to reproduce a precise historical backtest or any specific account.
Notes
- Both portfolios start at 1.00× and evolve using monthly total returns.
- The 60/40 mix is rebalanced once per year back to its target weights (60% stocks, 40% bonds).
- The chart and table use the same stylized return paths for the Jan 2021–Dec 2024 window. Change the window and the exact numbers move, but the growth vs stability trade-off stays similar.
- Educational illustration only. Not personalized investment advice and not a guarantee of future results.
Key chart
Normalized growth of 100% stocks versus a 60/40 mix. Both start at 1.00×; the gap shows what you “pay” or “save” in risk and return by turning the dial.
Stylized chart for intuition. Real outcomes depend on the exact period and instruments used.
What the data says
In this stylized example, the all-stock portfolio compounds faster but swings more. The 60/40 mix trades some growth for a smoother ride by holding bonds alongside stocks.
The exact gap between the lines changes with different start/end dates. What doesn’t change is the trade-off: more stocks = more potential growth and deeper drawdowns; more bonds = slower growth and shallower drawdowns.
The summary table below uses the same paths as the chart: simple rules, not curve-fitting.
When 100% stocks may fit you
- You have a long time horizon (10+ years) and can tolerate big swings.
- You hold broad, low-cost stock index funds or ETFs.
- You don’t expect to sell in the middle of a typical bear market.
- You care more about maximizing long-run growth than smoothing the ride.
When 60/40 may be a better dial
- You’re closer to using the money (retirement or large purchases).
- Sharp drawdowns make you want to “do something” with your portfolio.
- You prefer a smoother equity curve even if long-run returns are lower.
- You want a simple default you can automate and leave alone.
The mix doesn’t have to be exactly 60/40. The real question is where you set your dial: 80/20, 70/30, 60/40, etc.
Summary
| Series | CAGR | Max DD | Worst 12-mo |
|---|---|---|---|
| 100% Stocks | 3.1% | −9.2% | −7.4% |
| 60/40 Mix | 1.7% | −8.8% | −7.5% |
Numbers are illustrative and rounded, based on the same stylized paths used in the chart. The point is the growth vs stability trade-off, not the exact decimals.
Bottom line
You don’t have to guess which mix is “right.” The chart and table show how two simple dials behave. Your real edge is picking a risk level you can live with and sticking to it long enough for compounding to matter.
Go back to the Learn path →CLUSTER
Next steps: portfolio structure (why 60/40 behaves differently)
Bonds reduce volatility, but duration/credit/FX still matter.
A practical long-term structure where the bond sleeve has a job.
Why mixing assets can reduce drawdowns even if returns are similar.
For bonds, FX can dominate. Hedging often matters more here than for equities.
CLUSTER
Next steps: rebalancing and implementation (how 60/40 stays 60/40)
What changes when you rebalance yearly vs letting allocations drift.
A practical trigger-based approach that reduces unnecessary trading.
Simple rules: when to rebalance and how to keep it boring.
Rebalancing too often adds spread/FX costs. Control the frictions.
FAQ
Is a 100% stock portfolio always too risky?
Not automatically. For someone with a very long horizon and high tolerance for drawdowns, 100% stocks can be workable. The cost is deeper and more frequent crashes that you have to sit through without bailing out.
Who is a 60/40 portfolio usually for?
A 60/40 is a classic middle-ground allocation: meaningful growth from stocks plus some drawdown cushion from bonds. It often suits people closer to using the money or those who get tempted to tinker during large crashes.
Should I change my allocation after a big crash or rally?
Constantly reacting to headlines is usually worse than useless. A better approach is to pick a target allocation you can live with and use simple rebalancing rules instead of reinventing the plan.
Can I build a 60/40 mix with just a few ETFs?
Yes. Many investors use one broad stock ETF and one broad bond ETF, or a single balanced fund that maintains the split internally. The key is broad diversification and low costs.
See Index Funds 101 and US vs Global.
Ready to choose your own mix? You can implement 100% stocks or a 60/40 dial with just a few low-cost funds.
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Want to test other mixes? Use TradingView to inspect different stock/bond ETFs and see how they moved through past drawdowns.
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Educational content only. Not personalized investment or tax advice.
Investments can lose value and past performance does not guarantee future results. You are responsible for your own decisions and for confirming tax and legal rules in your country.