The Classic 60-40 Portfolio by John Bogle is a simple and effective asset allocation that follows the stock and bond markets with only two inexpensive index funds.
- 60% Total Stock Market
- 40% Intermediate Bonds
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As the godfather of index investing, John Bogle spoke eloquently about the importance of avoiding market timing, diversifying your portfolio, minimizing fees, and staying the course. At a time when common investing advice involved individual stock picking, he went a different direction and not only promoted buying the entire market but also created the first index funds that made it possible for people to do so. The Classic 60-40 portfolio is his default asset allocation suggestion for pretty much every investor, and has been a staple of portfolio discussions ever since.
The Classic 60-40 consists of two funds — a total stock market fund and an intermediate bond fund. The stocks are intended to drive returns, while the bonds are selected to reduce volatility and smooth out the ride. Bogle suggests that the percentage of stocks can be varied by the age of the investor, with young investors holding up to 80% and retirees holding as few as 50%. But he’s also a big fan of keeping it simple, and suggests that sticking with a 60-40 portfolio for life is really all you need.
One interesting note about the Classic 60-40 is that Bogle was never a fan of international markets because he believed that “the US is the most productive country in the world”. In fact, he chose to invest only in US funds with his own money. So while the concept can also be applied to other markets, it might rightfully be considered a US-centric portfolio philosophy.
Books about the Classic 60-40 Portfolio, and others by John Bogle
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THE LITTLE BOOK OF COMMON SENSE INVESTING: The Only Way to Guarantee Your Fair Share of Stock Market Returns
Insights that mention the Classic 60-40 Portfolio
Portfolios with a similar structure or design intent
Three-Fund Portfolio — The same idea with 20% of the stocks dedicated to international
Total Stock Market — A broad domestic stock index fund without the bonds
Core Four Portfolio — Four simple index funds to own the market and minimize risk
Change the home country to translate the portfolio to local assets, currency, and inflation.