Is The 60:40 Investment Rule Still Effective? Experts Weigh In Daily Kiran

For decades, the 60:40 investment formula—allocating 60% of a portfolio to equities and 40% to debt instruments—has been a go-to strategy for investors seeking a balance of growth and stability. It aims to combine the higher return potential of equities with the steady, lower-risk nature of bonds or fixed-income products.

But with rapidly evolving market dynamics and shifting investor preferences, especially among younger generations, many are questioning whether this formula is still relevant in 2025.

Why the 60:40 Rule Has Worked Historically

According to Prasanna Pathak, Managing Partner at The Wealth Company, the 60:40 model continues to hold value. He points out that bond yields have increased and equity valuations, especially abroad, have become more attractive, making a strong case for a balanced portfolio.

“This setup still provides the dual benefit of safety and growth, especially for medium-risk investors,” Pathak explains. “It’s not outdated—just under pressure from new investing trends.”

Young Investors Are Taking More Risks

However, today’s young investors seem less interested in traditional models. Rahul Singh, CIO (Equities) at Tata Asset Management, notes a clear trend: younger and middle-class investors are chasing performance-heavy assets like small-cap funds and thematic funds, including those focused on AI, green energy, and emerging technologies.

“While the returns can be exciting, the risks are equally intense,” Singh cautions. He advises investors looking for stable, long-term returns to consider flexi-cap or large-mid cap funds, which provide better diversification with lower volatility.

A Shift Towards Newer Themes and Global Exposure

Pathak further elaborates that even conservative investors are evolving. Many are turning toward international equity markets and defensive sectors such as healthcare and consumer staples to shield their portfolios from domestic volatility.

This growing diversification trend shows that while the 60:40 rule provides a strong foundation, investors are increasingly customizing their strategies to suit individual goals and risk profiles.

Should You Abandon the 60:40 Rule?

The simple answer: No—but it should be personalized.

Kaustubh Belapurkar, Research Director at Morningstar India, stresses that the 60:40 model can still serve as a useful baseline, especially for beginners or those with moderate risk tolerance. However, he warns against rigidly following it without assessing one’s financial goals, risk appetite, and market outlook.

“Young investors may feel more confident taking on risk, but many lack a financial safety net. Overexposing themselves to volatile assets like small caps can be disastrous if the market dips,” Belapurkar says.

His advice? Focus on a diversified and disciplined investment strategy, which adapts over time but is rooted in sound financial planning.

Conclusion

While the 60:40 rule may no longer be a one-size-fits-all solution, it remains a strong starting point—especially for those looking for long-term, balanced returns. Whether you choose to stick with it or tweak it for more aggressive or conservative outcomes, what matters most is a strategy aligned with your personal financial goals and risk capacity.

Author Profile

Kuldeep Singh Chundawat: My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.

Is the 60:40 Investment Rule Still Effective? Experts Weigh In