The minimal viable alternative to the 60/40 portfolio [Members]
For MAVENS and MOGULS by The Accumulator
on July 7, 2026
We’re on a quest to find the minimum viable alternative to the 60/40 portfolio. (That is, a conventional 60% equities/40% nominal bonds or cash asset allocation.)
What’s wrong with the standard 60/40 portfolio as featured in all your fave multi-asset fund ranges?
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A very interesting read thanks. I played around with a similar approach in portfolio charts recently and found unhedged long duration US dollar government treasuries were a better diversifier than UK gilts. I surmise this is due to dollar strength / flight to safety of treasuries during recessionary periods. Could this also play into part of commodities and gold strength in that they are priced in USD?
What the world needs is either a brokerage platform that can automatically rebalance based on a punters allocation/construction, or less flexibly, LS equivalent products for PP type portfolios. A 100% bond LS product with no home bias would also be useful, something with the flavour of VGGS, but with linkers in it. I think you can get euro LS ETFs that have no home bias right? But they have at least a 20% equity component? In practice I never get round to rebalancing, even though I know I should do. It’s not really a job that is suited to manual intervention, much better fully automated. That’s why, for all their other shortcomings, LS products are so good..
very impressive piece, thank you. one thing strikes me – you mention the key point of it’s important to buy low, sell high; how does this play into influencing the best defensive construction available to buy now? eg – I have a decent slug of commodities (sadly not quite enough to fulfil a truly defensive role) which I bought ages ago, which glancing at my portfolio seem to have done really well over the last few years. presumably that means buying more now – in order to construct some version of your above portfolio – wouldn’t actually be a good idea? Ditto maybe gold? So is there a version of this analysis that goes…. starting from today’s (rough) prices, the best options for defence over the next say 10 years might be ….. ? Or have I completely misunderstood? (Quite possibly so, very new to all this)
I am very much enjoying this series from a theoretical perspective.
But they’re a bit like telling someone that they live in a flat they’ve bought, with dodgy cladding. Anxiety rises, but they can’t move out. As you acknowledge, people simply won’t be able to sustain a 60/13/13/13 portfolio with frequent rebalancing and long periods of weird performance. And gold and commodities aren’t cheap right now.
And the idea that 30%ish of invested wealth should be put in short term linkers would be a very bold, very active bet, but anyone with a mainstream target date fund is vanillarissimo. Maybe living with the ugly realities of a trad 60/40 may be bold in its own way, but is definitionally passive in every sense.
Finally, I’m just not sure that we can make assumptions about the inflationary environment of the next 20 years. Sure, bonds had a tailwind of falling rates to 2021, but rising rates are also a headwind of a sort. And who could have predicted long term inflation in 2006, and short term inflation in February 2020?
Keynes always emphasised that risk and uncertainty are two separate things, but economists too often collapse uncertainty (we simply don’t know) into risk (a bad thing could happen on x probability at y cost). The future is partly risky, but partly simply uncertain.
Just when I think I have it all worked out and am ‘happy’ with my ‘passive’ portfolio’s defensive side.
Very thought provoking piece. Maybe it’s time for me to add in some GISG and split it 50/50 with VAGP.
I’m not ready to fully ditch my nominals and I own such a small % of Commodities and Gold (For now) that I’m not tweaking them for a good few years as I reduce my Equities %
Larger emergency cash pot for sequence risk for x number of years generally smaller than a defensive allocation, ie if you were withdrawing 4% a year, 4x is probably < 40%. And of course, if x was 10 or more, equities would probably be safer
It's also just the peace of mind that cash gives for sequence risk, if safety comes from a nominal amount to know you can ride it out rather than looking at the overall pot