The traditional 60/40 portfolio has been under attack for years, and recent active trading in precious metals and cryptocurrencies has further eroded the portfolio’s prominence. Several strategists and investors are steering toward a 60/20/20 market portfolio. While 60% of stocks will remain the same, bonds will lose half of their previous control over investor money, and 20% will be allocated to alternatives such as gold and Bitcoin.
They say stocks and bonds too often move in the same direction, while inflation, geopolitical risks, government spending and high debt burdens mean bonds no longer offer the protection they once did. “We’re seeing more adoption of non-equity, non-bond products,” Todd Rosenbluth, head of research at VettaFi, told CNBC.
In this new approach to building market exposure, gold becomes one of the portfolio’s core holdings rather than a margin hedge. Gold prices recently reached an all-time high of over $4,300. Gold has rallied more than 60% since the start of the year, driven by central bank demand, a weak dollar, geopolitical tensions and what’s known as the “down trade.”
“What’s really happening now is a shift towards acceptance of gold,” Steve Schofstall, director of ETF product management at precious metals and critical materials investment firm Sprott, told CNBC’s “ETF Edge” earlier this week. He said this is typically seen as a “fringe” allocation tool, adding: “But what we’re really seeing now is that some of the more prominent economists are proposing moving from 60/40 to something closer to 60/20/20.”
But Schoffstall also said: “We feel that for most people, if they have 5% to 15% allocated to physical gold, they’re probably in a good position.”
The performance and investor appeal of gold ETFs has soared, with SPDR Gold Shares (GLD) and iShares Gold Trust (IAU) up about 11% this month, but the influx of investor assets into gold funds dates back to earlier this year. Gold ETFs saw their biggest monthly inflows on record in September, with nearly $11 billion in inflows for the month, according to the World Gold Council. SPDR Gold Shares raised more than $4 billion last month alone, and another $1.3 billion from investors in mid-October, according to ETFAction.com. Investors have moved more than $38 billion into gold funds this year, Sprott said.
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Performance of SPDR Gold Shares ETF and iShares Bitcoin Trust in 2025.
Some investors are taking a similar 20% approach to investing in cryptocurrencies, specifically Bitcoin. Some financial advisors go even further than that, saying up to 40% of cryptocurrencies are defensible as an investment approach.
Bitcoin hit an all-time high of $126,000 on Oct. 6, and has been inundated with new money this month, with nearly $1 billion flowing into the iShares Bitcoin Trust ETF (IBIT) in a single day and more than $4 billion as of mid-October.
Rosenbluth said that while alternative buckets are no longer a single bet, but rather a combination of commodities, cryptocurrencies and private credit, all packaged into an ETF, investors need to understand that there are big differences between the bets. “Gold is more risk-off, while cryptocurrencies are more risk-on,” Rosenbluth said.
Silver is also gaining traction among investors, and unlike gold, silver reflects multiple global economic trends such as industrial demand, electrification, and automation. Prices recently rose to an all-time high of $53.59 an ounce, and some analysts expect prices to trend higher. “Silver has a very wide range of uses, about 10,000 uses,” Schoffstall said.
Rosenbluth warns that this is not about investors chasing the highest short-term returns as precious metals and cryptocurrencies continue to soar to record highs. Although there have been periods when these alternatives have increased the overall return of the portfolio, there is no guarantee that this will always be the case. Rosenbluth said the main reason to use hedging to restructure a portfolio is to add a lever that acts differently during ups and downs in the stock and bond markets, which helps smooth out returns over time.
This week was a great example of how these assets, which are considered popular hedges, can have very different market trends. Bitcoin has sold off sharply after hitting a high of more than $126,000 earlier this month and is down more than 8% for the week as of Friday morning, while gold and silver continue to rise, maintaining their weekly gains. Meanwhile, private credit has expanded in recent years, but it has also raised concerns that it could be creating a bubble, and has become a major concern in markets in the past week since the sudden collapse of auto parts company First Brands.
