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By Mags Heystek*
As we reflect on a rather disappointing year for investors, it’s definitely worth considering what 2023 will bring. The sad truth of it is that we can’t tell with any certainty what to expect.
Yes, the pace of inflation is expected to slow down after many developed economies reached record-high numbers. This slowing of inflation and possible lowering of interest rates should have knock-on effects on markets, hopefully bringing some cheer to beaten-down investors.
But we don’t know this for certain. Just as we didn’t know that Russia would invade Ukraine in February this year.
It’s because of these unknowables that wealth managers and advisors propose strategies that help you ride out market volatility. A popular strategy that’s been used for decades is the 60/40 method that aims to diversify your portfolio by holding 60% of your assets in listed equities, and the remainder in bonds.
As you’re probably aware, diversification of your risks is one of the fundamental building blocks of a successful portfolio. And this is the cornerstone of the 60/40 approach as stocks tend to rise when bond yields fall, and vice versa.
A typical 60/40 portfolio aims to produce long-term annualised returns of around 7%. Which has been shown to be accurate according to data from US investment manager Vanguard. This data shows an 8.8% annualised return of a 60% US stock and 40% US bond portfolio between January 1, 1926, and December 31, 2021.
Is the 60/40 approach right for you?
The best measure of whether this approach works is to look at the historical data. As already shown, long-term returns do match up with expectations.
Vanguard reports that although simultaneous declines in stocks and bonds are not unusual, over the past 46 years investors have never had three years of losses in both asset classes. In fact, the 60/40 portfolio isn’t expected to produce winning returns year on year. Rather, it relies on the market recovery that follows a bad year (like 2022).
We can look at recent returns to prove this point. Vanguard says that between 2019 and 2021, a 60/40 portfolio delivered an annualised return of 14.3%, meaning that losses of up to -12% for all of 2022 would simply bring the four-year annualised return to 7%.
So, the theory does appear to hold true. The question remains, though, is the 60/40 approach right for you?
Why have an individualised investment portfolio?
The answer to this question will differ from one person to the next. And that answer will depend on your personal goals, your life stage, available resources, and other factors.
If you’re starting to consider your options or want to change up your portfolio, then my first piece of advice would be to not base your decisions on returns over a short time frame. The numbers quoted by Vanguard are a great example of this: over 3 years, a 60/40 portfolio delivered 14.3%, but over 40+ years that’s closer to 7% or 8%.
A realistic expectation then, if this is your preferred investment strategy, is that your portfolio will grow at 7% or 8% a year if you’re invested in US stocks and bonds. If your portfolio was constructed of South African assets, then those returns would in all likelihood be different.
Understanding these nuances in popular investment philosophies is how advisors add value to your investment planning. Very few individual investors have the resources or inclination to follow markets and analyse data in the way that we do. What this means is that you’re not making guesses in your long-term investment decision-making.
The second lesson from the 60/40 example is that market highs and lows eventually even out your returns over the long run. The unspoken message here is that time in the market, not timing the market is the only way to achieve these long-term returns.
However, the truth is that a 60/40 portfolio is not appropriate for everyone. And nor is a 30/70 portfolio, or any other of the popular investment theme or current fad.
Your portfolio has to reflect your long-term goals, within your current context. So, if you’re in your early 20s or even 30s, then a 60/40 portfolio could be robbing you of the higher returns that an equity-only portfolio would provide. Because of the long time horizon, you can recover from market dips, crashes even, as long as you stay in the market long enough.
For this reason, I advise clients to ignore amazing-sounding investment phrases and philosophies. Even if they come from the likes of Warren Buffet. Rather focus on your own goals and how you can achieve that by applying sensible investment strategies.
And yes, it may come down to adopting the 60/40 approach, but only if that’s going to get you to your goals.
- Mags Heystek, CFP® is head of Brenthurst Wealth Sandton
Megan joined the Brenthurst Wealth team in March 2026 as an Administrative and Fiduciary Services Assistant at our Val de Vie Office in the Western Cape. Prior to joining Brenthurst, Megan gained three years of experience in the retail sector, where she developed management and client service skills.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Esmarelda Isaacs-Andreas joined the Brenthurst Wealth Stellenbosch office in October 2025, taking on the dual role of Receptionist and Fiduciary Administrator.
I obtained my National Diploma in Financial Information Systems from the Cape Peninsula University of Technology in 1999 and have worked in the wealth management industry since January 2000. Over the years, I have gained extensive experience in various roles, including Portfolio Manager Assistant, Planner Assistant, and Paraplanner.
Ashley joined Brenthurst Wealth in January 2025 as Office Administrative Assistant and Receptionist for the Stellenbosch Office.
René Heystek joined Brenthurst Wealth in November 2023, as receptionist and administrative assistant in the newly established George/Garden Route office.
Michelle Heystek has built a career in the financial services over the last two decades, after obtaining her B.Com degree in Financial Management in 2005. Once she joined Brenthurst in 2006, she continued her academic journey, obtaining her Certificate in Wealth Management from INSETA in 2007, followed by a Postgraduate Diploma in Financial Planning from the University of the Free State. In 2008, she earned the Certified Financial Planner (CFP®) designation.
Anelle joined Brenthurst Wealth as a Receptionist and Administrative Assistant to Brian Butchart in the Cape Town office in December 2023. She has a wealth of knowledge from working as a liaison between Financial Advisers and clients at TMA and Absa Investment Management Services (Aims) since 1998. She obtained her B. com degree from the University of Port Elizabeth in 1997.
ADMITTED ATTORNEY | FINANCIAL PLANNER & HEAD OF BRENTHURST FOURWAYS
Sanet was appointed in April 2020, joining our Cape Town team as an Executive Administration Assistant to Renee Eagar. She has been in the financial services industry since 1990. Her previous experience includes positions at Sanlam, BJM and ABSA. She spent her last 12 years working at Alexander Forbes Private Client Wealth as a Senior Wealth Management Assistant. She has received numerous accolades over the years which include but not limited to, Alexander Forbes Client Service Excellence – Silver award in 2014,2015 and 2017. Sanet has also obtained her Certificate in Wealth Management (NQF 5) in 2012 and achieved “Best Student of the Year” from Moonstone.
Maria Smit is a Certified Financial Planner® with over 10 years of experience in the financial planning industry.
