60/40 Classic vs 100% Global Equities
The case for holding nothing but shares is that they have the highest expected return of any liquid asset, so anything else is a drag. The case against is that a portfolio is judged on return for the risk it takes, and a concentrated one takes a great deal. This page settles it the only way that is fair, by giving the diversified portfolio enough exposure to reach the same volatility as the all-equity one.
Set both to the same 16.8% volatility and 60/40 Classic comes out ahead, returning 7.31% against 100% Global Equities's 7.00%, a gap of 0.31 percentage points a year.
Side by side
| At its own risk level | 60/40 Classic | 100% Global Equities |
|---|---|---|
| Expected return | 5.95% | 7.00% |
| Volatility | 10.63% | 16.78% |
| Sharpe ratio | 0.27 | 0.23 |
Forward-looking estimates over a long horizon, not a measurement of any past period. Built from J.P. Morgan’s 2026 Long-Term Capital Market Assumptions, annualised and compounded, with a 3.10% risk-free rate.
The same comparison at matched risk
The table above compares two portfolios that take different amounts of risk, so part of any gap is just that. Below, the quieter portfolio is levered until both sit at 16.78% volatility. Exposure above one hundred percent is financed at cash plus 0.50 percentage points; anything under it earns the cash rate.
| Both at 16.78% volatility | Exposure | Expected return |
|---|---|---|
| 60/40 Classic | 158% | 7.31% |
| 100% Global Equities | 100% | 7.00% |
Leverage is applied to the whole portfolio and assumes it can be financed at the stated rate, which is closer to true for a futures-based implementation than for a margin account. It does not model the path, and a levered portfolio can be forced to sell at exactly the wrong moment.
What actually happened
Everything above is an expectation. This is the record. The window starts in May 1996 because that is the first month in which every asset class in both portfolios has data, and it runs to July 2026, which is 363 months. It is not a chosen period; a pair holding private equity or inflation-linked bonds simply cannot start earlier than those markets can be measured.
| May 1996 to July 2026 | 60/40 Classic | 100% Global Equities |
|---|---|---|
| Annualised return | 6.77% | 8.16% |
| Volatility | 9.43% | 15.66% |
| Sharpe ratio | 0.39 | 0.32 |
| Worst drawdown | -32.37% | -55.00% |
Rebalanced annually, with no fees or trading costs applied, so the figures compare the allocations rather than an implementation of them. Series are index and fund total returns, extended backwards before each ETF existed by the longer-running instrument tracking the same exposure.
The record at matched risk
| Both at 15.66% volatility | Exposure | Annualised return |
|---|---|---|
| 60/40 Classic | 166% | 8.33% |
| 100% Global Equities | 100% | 8.16% |
One window is one path. A record covering 30 years contains a particular sequence of regimes, and a portfolio that happened to hold the right asset through them will look better than it deserves. Read this next to the forward-looking figures rather than instead of them. Borrowing is charged at the cash rate plus 0.50 percentage points, the same terms as the forward-looking table.
What each one holds
| Asset class | 60/40 Classic | 100% Global Equities |
|---|---|---|
| AC World Equity | 60% | 100% |
| US Aggregate Bonds | 30% | — |
| Cash / Money Market | 10% | — |
Why the usual answer is incomplete
Compared as they are normally held, all-equity wins on return and loses on every risk measure, and readers pick whichever half suits the argument they already had.
Levering the balanced portfolio to the same volatility removes the choice. If the diversified portfolio still comes out behind, its diversification was not worth the financing. If it comes out ahead, the concentration was costing money rather than earning it.
This is not an argument for actually running leverage. Most investors should not. It is a measurement device that tells you which allocation uses risk better, which is the question underneath the argument.
What would change the answer
Bond expectations. The balanced portfolio's case rests on bonds paying enough to justify their share, so the comparison looked very different when yields were near zero than it does now.
The cost of leverage. Financing here is charged at cash plus a spread, which is realistic for a futures implementation and optimistic for a margin account. A wider spread erodes the levered portfolio's advantage directly.
Sequence. Neither figure captures the experience of holding the all-equity portfolio through a deep fall, and the investor who sells at the bottom earns neither number.
Frequently asked questions
Is 100% equities better than a 60/40 portfolio?
It has the higher raw expected return, but that is because it takes more risk rather than because it uses risk better. Given the same volatility, the balanced portfolio holds up well on both forward-looking assumptions and the historical record.
Should young investors hold 100% equities?
The usual argument is that a long horizon lets you wait out a drawdown, which is sound as far as it goes. It assumes you keep your job, keep contributing and do not sell, and the main risk to an all-equity plan is behavioural rather than mathematical.
Does this comparison assume I use leverage?
No. Leverage is applied only so both portfolios can be compared at the same level of risk. It is a measurement step rather than a recommendation, and the unlevered figures are shown alongside.