The 60/40 portfolio has been part of the investing conversation for decades. It’s often described as a kind of “starter” strategy. It's simple, balanced, and rooted in long-term thinking.

But with rising interest rates, changing market conditions, and new tools for everyday investors, you might be wondering: what does a 60/40 portfolio actually look like in 2025? And does it still make sense?

We're not here to convince you it is or isn't the right choice. This guide is all about explaining how it works, how others have approached it, and how you might go about building one using ETFs, index funds or similar tools.

What is a 60/40 portfolio, and why do people use it?

A 60/40 portfolio is an investment mix made up of 60% growth assets (typically shares ) and 40% defensive assets (usually bonds or cash). It’s one of the most commonly referenced structures in personal finance, especially in traditional advice models and retirement planning circles.

The logic behind it is straightforward: the growth side gives your money the potential to increase over time, while the defensive side may help smooth out the ride when markets get bumpy. The 60/40 model aims for a balance between risk and return. It's not maximum returns, nor maximum safety, but somewhere in between.

While the model is not a one-size-fits-all approach, it’s often used as a reference point when comparing portfolio options or understanding asset allocation.

What’s the idea behind that mix?

Investing involves trade-offs. A 100% shares portfolio might deliver higher long-term growth, but it also comes with much higher volatility. On the flip side, a portfolio full of cash and bonds is likely to be steadier, but may not keep up with inflation .

A 60/40 mix tries to strike a balance:

• The 60% in shares is there to capture growth through capital gains, dividends , or both.
• The 40% in defensive assets is there to act as a buffer, potentially cushioning the impact of market downturns and providing a bit of income along the way.

This approach has a behavioural angle, too. A smoother investment experience can make it easier to stay invested through good times and bad. This matters just as much (if not more) than picking the “right” asset class.

Over the decades, the 60/40 portfolio has delivered decent results across many market conditions. That said, it's also had its weak spots, particularly in years when both shares and bonds have dropped together, as we saw in 2022.

So, what does the “60” look like in 2025?

The growth side of the portfolio is usually built with equities, which, these days, many investors access through ETFs. These funds track share markets and are available in many different flavours: broad market, sector-based, global, local, large-cap, small-cap, and more.

Some commonly used equity ETFs include:

• VAS (Vanguard Australian Shares Index) : Tracks the ASX 300.
• A200 (Betashares Australia 200) : Covers the top 200 ASX-listed companies.
• IVV (iShares S&P 500) : Provides exposure to large-cap US companies, tracking the S&P 500 index.
• NDQ (Betashares NASDAQ 100) : Focused on US tech and growth stocks.
• VGS (Vanguard MSCI International) : Offers international developed market exposure.

(NOTE: these aren't recommendations, but are simply a few of the many popular ETFs available through Pearler.)

Many investors combine Australian and international equity ETFs to gain broader diversification. For instance, a split between VAS and VGS is a relatively common way to blend local and global exposure.

You might also consider the mix of company sizes (large vs small caps), sectors (tech, healthcare, finance, etc.), and whether to include thematic or ESG-focused funds . It all depends on what you’re trying to achieve and how much risk you're comfortable with.

The "60" can also include individual shares , particularly for investors who want to hand-pick companies they believe in or understand well. However, this can come with added risk and the need for more research.

And what about the “40”? Defensive assets in 2025

On the defensive side, things have shifted a bit in recent years. Bonds — once seen as the stable cornerstone of any diversified portfolio — changed in 2022 when interest rates jumped sharply. But now, with rates having risen and (in some cases) stabilised, the bond market looks different.

Yields are generally higher than they were five years ago, which has made bonds more attractive to some investors. But there's still some uncertainty about inflation and future rate movements, meaning bonds aren't completely risk-free.

Common fixed income ETFs (again, not recommendations) include:

• VAF (Vanguard Australian Fixed Interest) : Tracks a mix of investment-grade bonds.
• IAF (iShares Core Composite Bond) : Covers both government and corporate debt.
• VBND (Vanguard Global Aggregate Bond Index (Hedged)) : Adds international diversification.

Some investors also use cash or high-interest savings accounts as part of the “40”, especially if they want minimal volatility or quick access to funds.

Pros and cons of a 60/40 portfolio in the current climate

Like any investment approach, the 60/40 model has both upsides and trade-offs, and which ones matter most will depend on your goals and preferences.

Some potential upsides:

• Balance: Combines growth potential with a degree of downside protection.
• Simplicity: Easy to understand and build using a few core ETFs.
• Long-term performance: Has historically delivered steady returns with less volatility than a 100% equity portfolio.

Some potential downsides:

• May lag in bull markets: When shares are booming, a 60/40 portfolio might underperform more aggressive setups.
• Bond risks: Rising rates and inflation can hurt bond prices, as seen in recent years.
• Requires upkeep: Even though it’s simple, it may need occasional rebalancing to maintain the original split.

How you might build a 60/40 portfolio using ETFs

If you’re interested in seeing how this kind of portfolio comes together, here’s a general idea of how someone might approach it. Note this is a hypothetical example; for a tailored plan, speak with a financial adviser.

1. Choose the equity ETFs: For example, they might use VAS and VGS to get both Australian and global exposure.
2. Choose the bond or defensive ETFs : This could be VAF or VBND, depending on their preference.
3. Allocate funds : If they’re investing $10,000, they’d put $6,000 into equities and $4,000 into fixed income.
4. Maintain the portfolio: They’d check in periodically to see if the mix has drifted and rebalance if needed.

Some platforms (like Pearler) offer tools that make it easier to automate this process — including auto-investing and rebalancing — which can help maintain consistency over time.

Alternatives to DIY 60/40 portfolios

Not everyone wants to build and maintain their own portfolio. Luckily, there are other options out there that aim for similar results.

• Diversified ETFs : Funds like VDHG or DHHF package multiple asset classes into a single product. Their allocation won’t be exactly 60/40 — VDHG is closer to 90/10 — but they operate on the same principle of spreading risk.
• Managed funds : Some super funds and investment managers offer balanced or moderate-risk portfolios that resemble a 60/40 split.
• Robo-advisers: Some automated investment services build portfolios based on your time horizon and comfort with risk. These portfolios often resemble a 60/40 or 70/30 split, depending on the level of risk you're comfortable taking.
• Superannuation: Your super fund may already include a blend of growth and defensive assets. If that’s the case, your broader investing strategy might be adjusted to complement it.

Rebalancing: why it matters

Even if you start with a 60/40 split, market movements can shift that ratio over time. If equities perform strongly, they’ll start to take up a bigger share of the portfolio, which might push your risk level higher than intended.

Rebalancing is the process of realigning your portfolio with your original target. People tend to use one of two approaches:

• Calendar-based: Rebalance at certain intervals, like every 6 or 12 months.
• Threshold-based: Rebalance when the allocation drifts by more than a particular amount, say 5%.

Neither is perfect, and some investors prefer a more flexible approach. But the key idea is to stay in control of your asset mix and avoid unintended risk creep. You can learn more about rebalancing your portfolio here .

Things to think about before you decide on a mix

A 60/40 portfolio might sound neat on paper, but real-life investing is more personal. It helps to think through a few things first:

• Your time horizon: Are you investing for a home , retirement, or something else? A longer timeframe could support a higher allocation to growth assets, while shorter-term goals might call for more defensive investments.
• Your risk tolerance : How would you feel if your portfolio dropped 20% in a bad year? If that would make you anxious or lead to impulsive decisions, a more conservative allocation might be appropriate.
• Other assets: What’s your super invested in? Do you already own a home? What about cash savings? The rest of your financial picture can influence how aggressive or defensive your investment mix should be.
• Your investing style: Are you likely to stick with a plan, or chop and change when markets move? If you tend to react emotionally to market swings , a steadier portfolio could help you stay on track.

There’s no right answer here — just a chance to reflect before you lock in a strategy. A licensed financial adviser can also be a useful support here. They can help you establish an investing strategy and figure out what your ideal mix might look like.

So, is the 60/40 approach still useful, or outdated?

The 60/40 portfolio isn’t magic. It won’t protect you from every dip or guarantee strong returns. But it may be a helpful framework, especially if you’re looking for a simple, well-rounded way to start thinking about asset allocation.

Whether you build your own, use a diversified ETF, or invest through super, the key is understanding why you’re doing it. The split itself is just one piece of the puzzle.

In the end, the best portfolio is one you can stick with through ups, downs, and everything in between.

Happy investing!