Investing is a game, but getting the highest return is not the only way to win. In fact, when we consider things like time horizon and the purpose of investing, we see that chasing the highest returns is actual how you can lose.
Looking at how different portfolios perform over time tells us a lot about how to approach investing, especially when it comes to balancing risk and reward. The classic 60/40 portfolio—where 60% is in stocks (like the S&P 500) and 40% is in bonds—has long been seen as the go-to strategy for investors who want to keep things relatively stable. But the data suggests that its benefits might not last as long as we’d like to think, especially when you’re in it for the long haul.
If you’re focused on the short term—maybe saving up for a big purchase in the next year or two, or just wanting to keep your money safe in a volatile market—the 60/40 portfolio really shines. It starts with a 64% win rate over one month, climbing to 81% over a year. That’s a pretty decent buffer against the daily swings you see in an all-stock portfolio like the S&P 500, which has a much more unpredictable win rate in the short term. Adding bonds into the mix helps smooth things out, making the 60/40 a solid choice for short-term stability.
But when you’re looking further down the road—thinking about retirement or building wealth over decades—the picture changes. While the S&P 500 can be a bit of a rollercoaster in the short term, it becomes a powerhouse over time. After you pass that three-year mark, the win rate for the S&P 500 jumps to 91%, and it just keeps getting better. By the time you’re holding for ten years, the win rate is 97%, and if you hang on for fifteen years or more, you’re looking at a perfect 100%. That’s the power of compounding returns—a big reason why stocks have historically been the best bet for long-term growth.
So, while the 60/40 portfolio definitely has its place—especially if you’re planning for shorter-term needs—it might not be the best strategy for those who can afford to think longer term. If you’ve got the time and the patience to ride out the market’s ups and downs, leaning more heavily into stocks could be the way to go. The numbers make it clear: the longer you stay invested, the more likely it is that an equity-heavy approach will pay off.
In the end, it’s all about matching your investment strategy to your timeline. If you’re planning to be in the market for the long run, consider giving your portfolio more of an equity tilt. That way, you’re better positioned to make the most of those long-term gains.