The Death of the 60/40 Portfolio: Why Canadian Millennials Are Going 100% XEQT

I was twenty-four years old, sitting in a tiny office at my local TD branch, when a financial advisor in a navy suit told me the most important thing I could do with my money was build a “balanced portfolio.” He drew a pie chart on a piece of paper. Sixty percent stocks, forty percent bonds. “This,” he said, tapping the circle with his pen like it was a sacred document, “is the foundation of every good portfolio. It’s what the smartest investors in the world have been doing for decades.”

I nodded politely. I didn’t know enough to question it. My parents had told me the same thing. My university finance textbook had said the same thing. Every personal finance blog I’d ever read had said the same thing. Sixty-forty. The golden ratio. The investing equivalent of “eat your vegetables.”

So I bought a balanced mutual fund with a 2.1% MER and felt responsible about it.

That was over a decade ago. Today, my entire portfolio is in XEQT – 100% equities, zero bonds – and I have never been more confident in that decision. Not because I’m reckless. Not because I’m chasing returns. But because the world that made the 60/40 portfolio a smart idea has fundamentally changed, and the data backing the all-equity approach for young investors is now overwhelming.

If you’re a Canadian millennial or Gen Z investor who has been told you “need bonds” and something about that advice feels off, this post is for you. Let’s talk about why the 60/40 portfolio is dying, why that’s actually fine, and what you should be doing instead.

1. What Is the 60/40 Portfolio (and Where Did It Come From)?

The 60/40 portfolio is exactly what it sounds like: 60% of your money in stocks (equities) and 40% in bonds (fixed income). The idea is simple – stocks give you growth, bonds give you stability, and together they create a portfolio that delivers reasonable returns without gut-wrenching volatility.

This framework became the gold standard of investing in the second half of the twentieth century, popularized by Harry Markowitz’s Modern Portfolio Theory in the 1950s. The math showed that combining uncorrelated assets could deliver better risk-adjusted returns than holding either alone. Bonds would zig when stocks zagged. When equities crashed, your bond allocation would cushion the blow.

For a long time, this actually worked beautifully. From the early 1980s through the 2010s, bonds delivered strong real returns as interest rates spent four decades falling from double-digit highs to near zero. A 60/40 investor got the best of both worlds: equity growth plus bond returns that often exceeded 5-7% annually.

Here’s the key insight most people miss: the 60/40 portfolio was not some eternal truth discovered in the bedrock of financial physics. It was a product of a specific interest rate environment. It worked because bonds happened to be in a generational bull market. When your parents or that bank advisor told you to hold 40% bonds, they were – often without knowing it – extrapolating a four-decade trend and assuming it would continue forever.

It didn’t.

2. The Numbers That Changed Everything

Let’s look at the actual data. Here’s how a 60/40 portfolio has compared to 100% equities over various time periods for Canadian investors, using broad Canadian and global equity indices versus the FTSE Canada Universe Bond Index:

Read that last row again. Over 30 years, the difference on a single $100,000 investment is almost $187,000. That’s not a rounding error. That’s a house down payment. That’s years of retirement income. That’s the cost of “playing it safe.”

But the return drag is only half the story. The real blow to the 60/40 thesis came in 2022, when the entire foundation – the idea that bonds protect you when stocks fall – collapsed in real time.

The 2022 Bond Crash: The Year Everything Fell Together

In 2022, the Bank of Canada and the U.S. Federal Reserve began aggressively raising interest rates to fight inflation. Here’s what happened to Canadian investors:

• Canadian equities (S&P/TSX Composite): Down ~5.8%
• Global equities (MSCI World): Down ~12.9% in CAD terms
• Canadian bonds (FTSE Canada Universe Bond Index): Down ~11.7%

Let that sink in. Bonds – the asset that was supposed to be your portfolio’s airbag, the thing that was supposed to protect you in a downturn – fell almost as much as stocks. A 60/40 portfolio didn’t cushion the blow. It just gave you two sources of losses instead of one.

This wasn’t a one-off fluke. It was the predictable consequence of bond math. When you buy bonds at historically low yields (as most Canadian investors were doing pre-2022), those bonds have enormous interest rate sensitivity. When rates rise even modestly, bond prices crater. The 40% allocation that was supposed to stabilize your portfolio instead became an anchor dragging it down.

The core premise of the 60/40 portfolio – that stocks and bonds move in opposite directions during stress – was broken. And for many young Canadian investors, that was the moment the spell wore off.

3. Why Bonds Made Sense for Your Parents But Not for You

I want to be fair here. The 60/40 portfolio was not a scam. It was not bad advice in the context it was given. For your parents’ generation, it genuinely made sense. But the context has changed dramatically, and here’s why the same advice doesn’t apply to a 28-year-old in 2026.

Your time horizon is completely different. If you’re in your twenties or thirties, you likely have 25 to 40 years before you need this money for retirement. Over that kind of timeline, equities have never failed to outperform bonds in any developed market with a long enough track record. The volatility that bonds are supposed to protect you from is noise on a 30-year chart. It feels terrifying in real time, but it is statistically irrelevant to your outcome.

Your human capital is a bond. When you’re young, your largest asset isn’t your portfolio – it’s your future earning power. Decades of paycheques ahead of you function exactly like a bond in your total financial picture. As finance professors like Moshe Milevsky have argued, young workers are already “overweight bonds” when you account for human capital. Adding actual bonds to the portfolio just doubles down on an asset class you’re already implicitly holding.

Bond yields are still relatively low on a historical basis. Even after the rate hikes of 2022-2024, Canadian bond yields have settled in a range that, after inflation and taxes, offers real returns that are modest at best. When your parents were buying bonds in the 1980s and 1990s, they were locking in 8-12% coupons. Today’s environment is simply not the same, and the risk-reward tradeoff for bonds is nowhere near as attractive.

Many young Canadians have “pension equivalents” they don’t think about. If you’re paying into CPP, you already have a bond-like asset building in the background. CPP is essentially an inflation-indexed annuity – one of the most bond-like instruments that exists. Add OAS on top of that, and you have a significant fixed-income base already locked in for retirement. You don’t need to build a second one inside your TFSA.

4. The Case for 100% Equity With XEQT

So if not 60/40, then what? For most Canadian investors with a 10+ year time horizon, I believe the answer is remarkably simple: XEQT.

XEQT – the iShares Core Equity ETF Portfolio – holds over 9,000 stocks across 49 countries. It gives you exposure to the U.S., Canada, international developed markets, and emerging markets in a single ticker. You buy one ETF and you own a slice of the entire global economy.

Here’s why this works as a complete portfolio:

Automatic rebalancing within equities. XEQT holds four underlying iShares ETFs covering different geographic regions. iShares handles the rebalancing for you, keeping the allocations roughly in line with their targets (approximately 47% U.S., 25% Canadian, 23% international developed, and 5% emerging markets). You never need to think about whether you’re overweight Japan or underweight Canada. It’s done for you.

Global diversification IS your risk management. When people say “you need bonds for diversification,” they’re treating diversification as a binary – equities or bonds. But diversification within equities is enormously powerful on its own. Owning stocks in 49 countries means that when the Canadian market struggles, your U.S. or international holdings may be doing fine. When the U.S. has a down year, emerging markets might be having a great one. You’re not putting all your eggs in one basket – you’re spreading them across nearly every basket on the planet. I’ve written about this in more detail in my XEQT vs bond ETFs breakdown.

The cost of “safe” assets is enormous. Let’s put real numbers on this. Suppose you invest $500 per month for 30 years. At the historical return difference between 100% global equity (~8.5%) and a 60/40 portfolio (~6.2%):

• 100% equity: ~$734,000
• 60/40 portfolio: ~$522,000

That’s a difference of over $210,000 – money you gave up for the privilege of sleeping slightly better during bear markets that, statistically, didn’t matter to your long-term outcome anyway. The “safety” of bonds has a price tag, and for young investors, that price is shockingly high.

Simplicity is a superpower. With XEQT, you don’t need to decide how much to allocate to bonds, which bond ETF to buy, when to rebalance between stocks and bonds, or whether rising rates will hurt your fixed income holdings. You buy one fund. You keep buying it. You ignore the noise. The simplicity isn’t just convenient – it actively prevents the behavioural mistakes (panic selling, tinkering, chasing yield) that destroy returns for most retail investors.

The MER is tiny. At 0.20%, XEQT costs you $2 per year for every $1,000 invested. Compare that to the balanced mutual fund my bank advisor put me in a decade ago at 2.1%. On a $500,000 portfolio, that’s the difference between $1,000 and $10,500 per year in fees. Over decades, fee savings alone can add six figures to your net worth.

5. When the 60/40 Portfolio Still Makes Sense

I said I’d be fair, and I meant it. The 60/40 portfolio is not dead for everyone. There are real, legitimate situations where holding bonds makes sense – and if any of these describe you, I’d honestly steer you toward a more balanced approach.

You’re within 5 years of needing the money. If you’re saving for a home purchase, a career break, or any major expense that’s coming in the next 1-5 years, you cannot afford a 30-40% equity drawdown right before you need the cash. In that case, a mix of equities and short-term bonds or even a HISA is appropriate. This is about time horizon, not age.

You’re a retiree drawing down your portfolio. Once you’ve stopped earning and you’re withdrawing from your investments to live on, sequence-of-returns risk becomes real and dangerous. A bad first few years of withdrawals can permanently damage a 100% equity portfolio. Retirees generally benefit from a bond allocation that provides stable assets to draw from during equity downturns, letting their stocks recover before they sell.

You genuinely cannot handle volatility. This one is harder to assess, but it matters. If a 30% portfolio drop would cause you to panic sell and abandon your strategy, then the “optimal” all-equity portfolio is not actually optimal for you, because you won’t stick with it. The best portfolio is the one you can actually hold through the bad times. If that means you need bonds to sleep at night, that’s a valid choice – just understand the long-term cost.

For these situations, iShares offers excellent balanced alternatives. XGRO gives you 80% equity and 20% bonds – a lighter bond allocation that still provides some cushioning. XBAL is the 60/40 split in a single ETF. Both are well-constructed, low-cost, and far better than anything your bank will sell you. I’ve done a detailed XEQT vs XBAL comparison if you want to see exactly how they stack up.

But if you’re in your twenties, thirties, or even early forties, with a steady income, an emergency fund in place, and retirement decades away? I’d argue that paying the cost of bonds is like buying fire insurance on a house made of stone. Technically prudent, practically wasteful.

6. The Real Risk Isn’t Volatility – It’s Not Growing Enough

Here’s where I get genuinely frustrated with the traditional advice. The financial industry has spent decades training investors to think of “risk” as “short-term price swings.” Your portfolio dropped 15% this quarter? That’s risk. Your account balance is lower today than yesterday? That’s risk.

But for a 30-year-old, that definition of risk is almost entirely wrong. The real risks for young Canadian investors are:

Inflation risk. The cost of living in Canada has risen dramatically. Groceries, housing, childcare – everything is more expensive than it was even five years ago. If your portfolio is earning 4-5% in a 60/40 setup and inflation is running at 2.5-3%, your real (inflation-adjusted) return is barely moving the needle. You need your money to grow meaningfully faster than prices, and that requires equity-level returns.

Longevity risk. Canadians are living longer. A 30-year-old today has a reasonable chance of living into their 90s. That means your retirement savings don’t need to last 20 years – they might need to last 30 or 35. The difference between compounding at 6% and compounding at 8.5% over 35 years is staggering. An overly conservative portfolio that “works” for a 20-year retirement might leave you broke at 85.

Opportunity cost. Every dollar sitting in bonds earning 3-4% is a dollar not compounding at 8-10% in global equities. Over short periods, this difference feels trivial. Over decades, it’s the difference between retiring at 55 and retiring at 65. It’s the difference between leaving your kids an inheritance and needing them to support you. The opportunity cost of excessive conservatism is real, it’s large, and it’s almost never discussed by the advisors pushing you toward bonds.

The risk of tinkering. Complex portfolios invite complex decisions. When you hold stocks, bonds, REITs, and alternatives, you’re constantly tempted to “optimize.” Every rebalancing decision is a chance to make a mistake. XEQT eliminates that temptation entirely. One fund, one strategy, zero decisions. Simplicity protects you from yourself.

The financial industry defines risk in a way that benefits the financial industry. Volatility is scary, and scared people buy products. But if you reframe risk as “the probability that I won’t have enough money when I need it,” the 100% equity portfolio suddenly looks like the less risky option for anyone with a long time horizon.

7. How to Make the Switch

Alright, so you’re convinced – or at least curious enough to act. You’re currently in some version of a 60/40 portfolio (or a balanced mutual fund, which is basically the same thing with higher fees) and you want to move to 100% XEQT. Here’s how to do it without making a mess.

Step 1: Figure out what you currently own

Log into your brokerage account and look at your actual holdings. If you’re in a bank mutual fund, check the fund facts document for the asset allocation. Many “balanced” or “moderate” funds are some version of 60/40 or 70/30. If you’re in a robo-advisor portfolio, they’ll typically show you the split.

Step 2: Decide on your account order

Where you make the switch matters for taxes:

• TFSA: Switch freely. There are no tax consequences for selling inside a TFSA. Sell your balanced fund, buy XEQT, done.
• RRSP: Same as TFSA – no tax consequences for selling and buying within the account. Go ahead and switch.
• Non-registered (taxable) account: This is where it gets trickier. Selling your bonds or balanced fund in a non-registered account triggers a capital gains event. If the fund has appreciated, you’ll owe tax on the gain. If it has declined (as many bond funds have since 2022), you might actually be able to claim a capital loss, which can offset gains elsewhere. Run the numbers or talk to an accountant before selling in a taxable account.

Step 3: Sell and buy

In your TFSA and RRSP, this is straightforward. Place a sell order for your existing holdings, wait for the trade to settle (usually T+1 for ETFs, T+1 or T+2 for mutual funds), then place a buy order for XEQT. If you’re on Wealthsimple, there are no commissions for any of this.

Step 4: Set up automated contributions

The real power of XEQT is in the steady, automatic buying. Set up a recurring deposit and a recurring XEQT purchase (Wealthsimple lets you do this). The specific amount matters less than the consistency. Even $100 every two weeks will compound into something meaningful over decades.

Step 5: Stop looking at your account

Seriously. Once you’ve made the switch, the best thing you can do is check your portfolio as infrequently as possible. Set up your automation and let it run. The evidence is overwhelming that investors who check their portfolios less frequently earn higher returns – not because the market rewards ignorance, but because looking less means tinkering less.

I’ve written a much more detailed guide on switching from mutual funds to XEQT that covers the tax implications, timing considerations, and platform-specific steps. If you’re making this transition, it’s worth reading.

8. Burying the 60/40 for Good

Let me be clear about something: I don’t think the 60/40 portfolio is a scam. I don’t think everyone who holds bonds is making a mistake. And I don’t think the financial advisors who recommend balanced portfolios are all cynically selling products.

What I do think is this: the 60/40 portfolio became the default recommendation for an entire generation of investors during a period when it happened to work exceptionally well, and that period is over. The tailwinds that made bonds a reliable portfolio diversifier – four decades of falling interest rates, strong negative stock-bond correlation, generous yields – have largely exhausted themselves. The 2022 crash proved in real time what the math had been quietly suggesting for years: bonds are not the safe haven they once were.

For young Canadian investors – people in their twenties, thirties, and early forties with stable incomes, emergency funds, and decades before retirement – the 100% equity approach is not reckless. It is rational. It is supported by historical data across every developed market. It is endorsed by academic research on human capital and lifecycle investing. And it is now easier than ever to implement with a single, low-cost, globally diversified ETF like XEQT.

The TD advisor who drew me that pie chart a decade ago was doing his best with the conventional wisdom of his time. I don’t hold it against him. But I also stopped following that advice years ago, and my portfolio – and my peace of mind – have been better for it.

If you’re young, you’re investing for the long term, and you’ve been wondering whether you actually need bonds, here’s my honest answer: you probably don’t. Buy XEQT. Set up your automatic contributions. Stop trying to optimize for a crash that, even if it comes, won’t matter to you in 2055.

The 60/40 portfolio had a great run. But for our generation, the future is 100% equity. And that’s not something to be scared of – it’s something to be excited about.