01 The mechanism
Zig, zag, and the maths of not-together
The whole idea rests on one word: correlation — do two things move together? Own two assets that both crash on the same news and you own one risk twice. Own two that respond to different forces — businesses' profits and lenders' interest rates, say — and something lovely happens: each keeps its own long-run return, but their bad days stop lining up. The combined ride smooths, while the destination barely moves.
That's the entire free lunch: returns average, but volatility doesn't — it partially cancels. You give up a little of the engine's pace and lose a lot of its shaking.
Correlations aren't laws. Stocks and bonds moved opposite ways for most of 1998–2021, then 2022 arrived and both fell together — the first such year since 1977. Diversification softens most storms; it abolishes none. That's why the plan also has time-matching underneath it, not just mixing.
02 The receipt
Fifty years of the humble 60/40
The classic 60% equities / 40% bonds mix, 1972–2021, against all-equities:
US data, 1972–2021. Worst peak-to-trough: −51% for stocks alone, −28% for the mix. Nine-tenths of the return for three-fifths of the storm — arithmetic, not magic.
For your money: the mix isn't there to maximise the average year — it's there to shrink the worst one, because the worst year is where investors break. A fall of 28% gets sat through; a fall of 51% gets sold. The "cost" of diversification buys the durability that lets compounding finish its work.
For your life: your own mix shouldn't be anyone's classic — it's set by your seasons: years to retirement, the buffer, the CPF floor you already stand on. That calibration, and re-doing it as life changes, is exactly the work you've handed me.
03 The counterfeit
Things that feel diversified but aren't
| Feels diversified | Actually is |
|---|---|
| "I own 15 different stocks" | One country, three sectors, one currency — a handful of stories |
| "I bought the STI ETF" | 30 companies in one small economy, ~half of it three banks |
| "I own my flat AND a REIT AND a rental unit" | Property, property, and property — one interest-rate bet, three times |
| "I use three different banks' funds" | Often the same global companies, wearing three logos |
| A global index fund — thousands of firms, dozens of countries | Actual diversification, in one line |
The test is never the number of holdings — it's the number of independent reasons your portfolio could fall. Singapore-heavy portfolios carry a quiet triple bet: job, flat and stocks all riding one small economy.
04 The maintenance
Rebalancing: the mix needs a gardener
Left alone, a 60/40 drifts — a good equity run quietly turns it into 75/25, and you're suddenly carrying more risk than you chose, at exactly the moment prices are highest. Rebalancing trims what grew and tops up what lagged, restoring the chosen mix.
- What it really does: risk control — keeping the portfolio the one you agreed to, not the one the market mood built. Any return "bonus" is a side effect, not the point.
- Why it feels wrong: it always means selling the thing that's been winning to buy the thing that's been losing — systematically doing what instinct hates. Which is precisely why it works better as someone's job than as a resolution.
Diversify across genuinely different things, size the mix to your life, rebalance it without emotion — that's the quiet machinery inside "we manage your portfolio." Now when you see it on a statement, you know exactly what it's doing there.
Sources & notes
Long-run figures, updated 2026. 60/40 vs all-equity (9.61% at ±9.51% vs 10.75% at ±15.25%, drawdowns −28% vs −51%, 1972–2021): Portfolio Visualizer data; Vanguard corroborates ~9.1% for 60/40 since 1926. Stock–bond correlation history (negative ~1998–2021; 2022 the first joint fall since 1977): Russell Investments / Callan. STI composition (30 constituents; three local banks ≈ half the weight — drifts over time): SGX/FTSE factsheets. The "free lunch" line is widely attributed to Harry Markowitz; the attribution is traditional rather than documented. Rebalancing as risk control (no reliable return bonus; frequency matters little): Vanguard research.
General information, not financial advice. Jonathan Wong is a licensed financial adviser representative in Singapore, currently between firms — during that period he is not able to provide financial advice. You can check his registration yourself on the MAS Financial Institution Representatives Register at eservices.mas.gov.sg/rr.