Cautious Income
A capital preservation portfolio with an income focus. Heavy in bonds, TIPS, and cash, with modest equity and REIT exposure for growth and inflation protection.
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, annualized and compounded, with a 3.10% risk-free rate. The figures are in US dollars. J.P. Morgan publishes the same assumptions in 5 base currencies and the numbers differ between them, since the expected move in the currency is part of the forecast. This page is built once, on the dollar edition; the full app runs on whichever one you choose.
Allocation
What if you add Bitcoin?
These are forward-looking estimates rather than a backtest. Nothing below is what Bitcoin did; it is what the portfolio would return if every asset delivered its expected return from here. Each row funds Bitcoin by reducing the other positions proportionally.
The assumption doing the work is Bitcoin at 15.00% a year with 42.5% volatility. That is far below its history and deliberately so: a forward estimate for an asset this young is a judgment, not an extrapolation. It also explains why the returns below move less than people expect. A 10% position in a 15% asset can only add about a point a year to a portfolio, because it is 10% of the portfolio. What changes more than the return is the Sharpe ratio, which is the column worth reading.
| Portfolio | Return | Volatility | Sharpe |
|---|---|---|---|
| Base (Cautious Income) | 5.39% | 6.38% | 0.39 |
| With 3% Bitcoin | 5.87% | 6.71% | 0.44 |
| With 5% Bitcoin | 6.17% | 7.04% | 0.47 |
Returns are geometric (compound), forward-looking and in US dollars, built from J.P. Morgan’s 2026 Long-Term Capital Market Assumptions with Bitcoin at 15.00% (our own estimate). Sharpe ratio uses a 3.10% risk-free rate. No time period is involved: these are expectations for a long horizon rather than a measurement of any past window. For what this portfolio actually did, month by month, see the historical record back to 1970.
Capital preservation first
The Cautious Income portfolio is the most conservative model on this site. Its goal is plainly stated: protect the capital you have and generate steady income, accepting modest growth as the price. Around 70% sits in cash, Treasuries, corporate bonds, global government bonds, and TIPS; the remaining 30% in equities and REITs provides just enough growth and inflation sensitivity to keep the portfolio from going backwards in real terms.
This is a portfolio for money you can't afford to lose much of: a near-term goal, a conservative retiree's core, or the stability sleeve of a larger plan.
What to expect from it
Forward-looking return is the lowest of these models, by design, and so is volatility. The numbers above reflect a portfolio that should rarely suffer a large drawdown and will not compound wealth quickly either. With 20% in cash alone, a meaningful share of the portfolio is doing little more than waiting.
The trade is explicit: you're buying stability and liquidity, and paying for it in foregone growth. Over a long horizon that cost compounds, which is why this allocation only makes sense when preservation genuinely outranks growth.
The quiet risk: inflation
A cautious portfolio feels safe, but safety from market volatility is not the same as safety from inflation. A mix dominated by nominal bonds and cash steadily loses purchasing power when prices rise: the dollars are intact, but they buy less each year. That is the central, under-appreciated risk of conservative portfolios.
This version pushes back with 10% TIPS and 10% REITs, both of which tend to hold real value better than nominal bonds. It's partial protection, not a cure. For investors who want a small, asymmetric hedge against both inflation and low forward returns, the table above shows a 3-5% Bitcoin allocation, sized so that even a severe Bitcoin drawdown is a minor dent in an otherwise stable portfolio.
Who the Cautious Income portfolio is for
It fits an investor whose first priority is not losing money: someone close to a spending goal, a conservative retiree, or anyone parking capital they'll need within a few years. It's also a sensible safe component within a larger, more aggressive plan.
It's the wrong portfolio for long-horizon growth, where the low return and inflation drag make it costly to hold for decades, and equally wrong for anyone who can tolerate volatility in pursuit of higher returns. If preservation is the goal but inflation is the worry, the TIPS, REIT, and optional Bitcoin elements are where this portfolio earns its keep.
How these numbers are calculated
Expected returns and volatilities come from J.P. Morgan's 2026 Long-Term Capital Market Assumptions (30th edition), in US dollars. Portfolio risk is computed using the full 57×57 correlation matrix, measured from the assets' own monthly returns, not simple weighted averages. The Sharpe ratio uses 3.10% (US Cash) as the risk-free rate.
For full methodology details, see the methodology page.
Customize this portfolio
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Frequently asked questions
What is a cautious income portfolio?
A cautious income portfolio prioritizes capital preservation and steady income over growth. It typically allocates 60-70% to bonds and cash, with 20-30% in equities and income-generating alternatives like REITs. The goal is to protect capital while generating enough return to offset inflation.
Is a cautious portfolio safe from inflation?
Not automatically. A portfolio heavy in nominal bonds and cash loses purchasing power during inflation. Including TIPS (Treasury Inflation-Protected Securities) and REITs provides some inflation protection. This portfolio includes 10% TIPS and 10% REITs for that purpose.