Investors are leaving the 60/40 model behind!

A survey conducted by Charles Schwab revealed that American investors are redefining what it means to succeed in today’s market environment. Two-thirds of investors are turning to alternative assets to diversify and customize their portfolios beyond traditional stocks and bonds.

This situation shows a significant shift away from the traditional stock and bond-focused investment approach. %42 of respondents believe that the classic %60 stock and %40 bond model, often recommended by financial advisors, is outdated.

Jonathan Craig, head of retail investing at Charles Schwab, stated, “There has never been a better time for retail investors.”

The results indicate that the survey, published in October, offers insights into how investing and market environments have changed. %52 of investors noted that today’s investing involves taking more short-term risks compared to the past, while trading encompasses a larger portion of their investment processes. After investing, %43 of respondents increased their trading because:

• They have better platforms and tools (%51)
• They want to capitalize on market opportunities (%51)
• They have more experience and confidence (%48)

This data also includes generally faster gain-seeking Generation Y and Generation Z investors. In the survey, %62 of Generation Z investors and %72 of Generation Y indicated they have become more patient.

Craig added, “In a world where instant gratification is pursued, it is encouraging that so many investors are embracing the importance of a long-term perspective.”

The classic %60/40 portfolio is not completely over, but analysts have begun to formulate a series of arguments about why investors are now less inclined to favor this model. Investors are moving away from this model for reasons such as low bond yields, high market volatility, changes in the relationship between stocks and bonds, interest rate pressures, and longer lifespans.

Gregory Poapst, Managing Partner at Fundviews Capital, noted that alternative investments are at the center of modern portfolios. Poapst stated that alternative assets offer a return stream less dependent on public markets, provide opportunities to capture liquidity and complexity premiums, and highlight specialized strategies that can offer strong risk-adjusted returns.

In a Schwab statement, Craig remarked, “With greater access to quality platforms and tools, comprehensive education resources, a broader range of products than ever, and 24/7 professional support, investors can diversify and tailor their portfolios to fit their goals.”

Former Edelman Financial Engines executive Ric Edelman stated in an interview with CNBC that the classic %60/40 investment approach can no longer be sustainable in today’s world where people live longer.

Nearly %75 believe that wealthy investors under 43 cannot achieve above-average returns using a traditional stock and bond portfolio, and %93 plan to allocate more of their portfolios to alternatives. This data is derived from the 2024 Bank of America Private Bank Study.

The Schwab survey does not serve as a call for investors to immediately reassess their portfolios. However, it can prompt you to question where you stand in creating a portfolio suitable for today’s environment.

Rob Williams, head of the Wealth Management Research department within Schwab Financial Research, stated, “With more options and strategies — including cryptocurrencies, alternatives, and more frequent trading — advising can help investors explore possibilities and make informed decisions.”