Have you ever wondered why the classic investment advice of splitting your money 60% into stocks and 40% into bonds feels a bit outdated these days? It’s a strategy that’s been around for decades, promising balance and protection. Yet, something fascinating is happening among everyday investors—they’re stepping away from these ready-made balanced funds and taking matters into their own hands.
In my experience watching market trends, shifts like this don’t happen overnight. They build quietly, driven by real changes in how assets behave and what people expect from their money. Lately, retail investors seem more confident than ever in crafting personalized portfolios, and the numbers back it up in surprising ways.
The Quiet Exodus from Balanced Funds
For over three years now, money has been steadily flowing out of multi-asset and balanced funds. That’s thirteen straight quarters of outflows, starting way back in early 2022. It’s not a small blip; it’s a consistent pattern that tells us investors are rethinking the old playbook.
Instead of handing their cash to fund managers for that automatic 60/40 split, people are choosing separate stock funds and bond funds on their own. And here’s where it gets interesting—they’re not just stopping at stocks and bonds. Many are adding gold as their go-to hedge, pushing longer-term bonds further to the sidelines.
Looking at the inflow data paints a clear picture. Bond funds alone pulled in massive amounts in recent years—over a trillion dollars in 2024, and nearly as much through the first three quarters of 2025. Equity funds weren’t far behind, with hundreds of billions pouring in during the same periods. Meanwhile, those all-in-one balanced options? They’re watching money walk out the door.
Why the Traditional Hedge Isn’t Working Anymore
One big reason for this change boils down to how stocks and bonds move together—or rather, how they don’t anymore. In the past, bonds often zigged when stocks zagged, providing that perfect counterbalance during rough patches. That negative correlation was the magic sauce behind the 60/40 appeal.
But these days? The correlation between equities and fixed income is hovering close to zero. They’re not strongly inverse, just loosely connected. When stocks drop, bonds might not rush in to save the day like they used to. That shift alone makes pre-packaged balanced funds feel less reliable for many investors.
The usefulness of bonds as a straightforward hedge has diminished in this new environment.
Performance tells a similar story. Over the last couple of years, typical balanced funds lagged behind simple benchmarks. While a standard 60/40 mix might have gained around 18% in 2023 and 16% in 2024, actual funds in that category averaged noticeably lower returns—closer to 14% and 11%. For investors chasing growth, that gap matters.
The Rise of Gold as the New Protector
So if bonds aren’t playing their traditional role, what’s filling the void? Gold has stepped into the spotlight in a big way. Retail investors have increasingly turned to the precious metal to protect their stock-heavy portfolios.
And honestly, it’s hard to blame them given recent results. With major stock indexes up solidly—think over 17% gains—and gold surging dramatically, close to 65% in some measures, the combination has delivered impressive returns for those who went this route.
This isn’t just a short-term fling either. The preference for gold over longer-dated bonds has been building steadily. Investors see it as a more effective shield against inflation, uncertainty, or market volatility in the current climate.
- Gold offers diversification without the interest rate sensitivity of bonds
- It tends to shine during periods of geopolitical tension or currency concerns
- Physical and ETF ownership makes it accessible for everyday portfolios
That said, gold’s behavior can be quite different from fixed income. It sometimes moves more like an equity—volatile and momentum-driven—rather than the steady anchor bonds traditionally provide.
Is the DIY Approach Really Better?
Building your own portfolio sounds empowering, and in many ways it is. You get full control over allocations, costs, and exact exposures. No more paying for underperformance in a one-size-fits-all fund.
Yet there’s a flip side that deserves attention. Not everyone has the time, knowledge, or discipline to manage allocations properly. Rebalancing, tax considerations, and emotional decisions during market swings can trip up even experienced investors.
Perhaps the most interesting aspect is how this trend reflects broader confidence among retail investors. With abundant information, low-cost tools, and direct access to markets, people feel ready to go solo. It’s a democratizing shift, but one that comes with real responsibilities.
Experts Sound a Note of Caution
While the stock-plus-gold combination worked wonders in 2025, portfolio strategists are urging caution heading into the new year. After such a strong run, gold’s risk profile looks different—potentially more downside than before.
Chasing performance by piling into an asset after massive gains can be dangerous. Investment-grade fixed income still offers meaningful risk reduction.
– Portfolio strategist insight
Sharp drops in precious metals, like the over 4% pullback seen recently for gold and even steeper for silver, serve as reminders. These assets can swing hard and fast.
The core principle of diversification hasn’t changed. Spreading risk across truly different assets remains one of the few free lunches in investing. Over-relying on any single hedge—whether bonds in the past or gold now—leaves portfolios vulnerable.
Smart Ways to Think About Diversification Today
So where does that leave investors looking for balance without defaulting to outdated formulas? A few ideas stand out based on current thinking.
- Reconsider quality fixed income: Even with changed correlations, investment-grade bonds provide stability and income.
- Expand globally: Many U.S. investors remain heavily domestic. Allocating 30% or more to international equities adds meaningful diversity.
- Incorporate value and small caps: If worried about concentrated tech strength, tilting toward undervalued segments helps.
- Add inflation protection selectively: TIPS or broader commodity exposure can guard against rising prices without full gold reliance.
These aren’t revolutionary ideas, but applying them thoughtfully matters more than ever. The goal isn’t to predict the next big winner—it’s to build resilience across different scenarios.
What This Means for Long-Term Planning
For anyone saving for retirement or major goals, these shifts highlight the importance of staying adaptable. Rigid adherence to past rules can cost opportunity or increase risk unnecessarily.
At the same time, abandoning structure entirely invites different problems. Successful DIY investing still requires clear guidelines, regular reviews, and honest self-assessment about emotional tendencies.
In my view, the healthiest approach blends the best of both worlds: using low-cost building blocks (individual funds or ETFs) while maintaining disciplined allocation targets. Whether that includes some gold, international stocks, or quality bonds depends on personal circumstances.
The bigger lesson? Markets evolve, asset relationships change, and investor tools improve. Staying informed and flexible positions you better than clinging to yesterday’s perfect portfolio.
Ultimately, the move away from traditional balanced funds reflects growing sophistication among retail investors. They’re asking tougher questions and demanding more from their strategies. That’s progress, even if it comes with new challenges.
As we head into another year of uncertainty—interest rates, inflation concerns, geopolitical tensions—the ability to adapt will separate resilient portfolios from fragile ones. Whether you manage your own mix or prefer professional guidance, understanding these dynamics puts you ahead.
After all, investing isn’t about finding a set-it-and-forget-it solution. It’s about making intentional choices that align with your goals, risk tolerance, and the world as it actually exists today. And right now, that world looks quite different from the one that made 60/40 the default answer.
So take a fresh look at your allocations. Question assumptions. And build something that truly fits the moment—because the most dangerous portfolio might just be the one that worked perfectly in the past.
