The 60:40 rule is a traditional investment strategy that recommends allocating 60% of a portfolio to equities (stocks) and 40% to fixed-income instruments (bonds or debt). The idea is to balance growth and stability — equities provide capital appreciation, while debt offers lower risk and income stability.
This model has long been considered a benchmark for moderate-risk investors seeking steady long-term returns.
But, is the 60:40 rule relevant today?
Experts say the 60:40 model still has value, but it requires customisation to meet current market realities and investor behaviour.
Prasanna Pathak, Managing Partner at The Wealth Company, pointed out that higher bond yields and relatively attractive international equity valuations continue to support the model.
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However, many investors today are moving beyond traditional strategies.
How investor behaviour is changing the game?
There is a shift in how different segments of investors approach risk and asset allocation.
“There has been a growing tendency among younger and mass affluent investors to chase performance, resulting in higher equity allocations,” said Rahul Singh, CIO–Equities at Tata Asset Management.
He noted that younger investors are gravitating toward small-cap and thematic funds, which come with their own cycles of volatility.
He suggested a more balanced exposure through categories like flexi-cap and large- & mid-cap.
Pathak also observed that younger investors are backing high-conviction themes like artificial intelligence (AI), green energy, and emerging technologies. Meanwhile, more conservative investors are leaning towards global diversification and defensive sectors.
Does the 60:40 model need to change?
Experts believe the framework should serve as a base, not a strict rule.
Customisation is key.
“The 60:40 is not a one-size-fits-all solution,” said Kaustubh Belapurkar, Director–Manager Research at Morningstar India. “Investors must align portfolios with their risk-return objectives and investment horizons.”
Belapurkar cautioned that many young investors may have the willingness — but not the financial ability — to take high risks. Overexposure to small caps or a few stocks can hurt long-term performance.
“A disciplined, diversified approach is more effective,” he said.
How to reset your portfolio for the next 5-10 years?
As macroeconomic conditions evolve, experts recommend reviewing and rebalancing portfolios regularly.
“Asset allocation is still the key driver of portfolio returns,” said Belapurkar. He suggested going back to the drawing board and realigning if portfolios have drifted — especially after the COVID-era bull run.
Singh recommended that investors look beyond just equity and debt. “Gold is emerging as an important asset class for the next 3-5 years,” he said.
He also advised including multi-asset funds for a balanced and resilient portfolio.
Pathak added that investors should watch for sectors with strong earnings visibility and long-term tailwinds, including technology, financials, and infrastructure.
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