What to do when magical 60:40 formula doesn't work

The idea behind a 60:40 portfolio is simple: allocate 60% to stocks and 40% to debt, thus giving your investments the kicker of equity returns and the safety of bonds. However, according to a recent Morgan Stanley report, till 30 June this year, a 60:40 portfolio of the US equities and the Aggregate Bond Index lost around 16% of its value, wiping out all 60:40 gains since September 2020. In the Indian context, a moderate investor who wants to beat inflation and doesn’t want to take a lot of risk bets on a 60:40 portfolio. Given the high inflation scenario, a 60:40 portfolio is on route to give net negative returns this year for the first time since 2018 in India.