A 60/40 portfolio allocation aims to minimize risk and maximize returns during periods of high growth and low inflation. During bear markets, this type of portfolio has seen a decrease in returns. If you had a 60/40 portfolio of stocks and bonds during the first half of 2022, then you have likely seen the worst 6-month period for your investments since 2009.

Many choose to divide their portfolio between 50% stocks and 50% bonds. Even though there have been periods in which a 50/50 portfolio was down as much as -15%, they have also historically seen returns of 14% in certain environments. 

A diversified portfolio is a combined collection of different investments that reduce risk. Instead of investing simply in bonds and stocks, a well-diversified portfolio also includes international stocks, real estate investment trusts, and other assets that help reduce risks and maximize returns.