How the Wealthy Invest, Why 60/40 Is Dead, and Finding Your Perfect Mix

Jenny Heller, CIO at Brandywine Trust Group, explains how a small set of ultra wealthy families invest. The big theme: when money is taxable and meant to last for kids and grandkids, you slow portfolio turnover, accept boredom, and obsess over process and taxes.

If you sell a successful investment in a taxable account, you may be reinvesting only 60-75c on the dollar after taxes. That means the next idea must be far better just to catch up.

Implication: design your portfolio so you don’t need to trade much. Favor investment managers with low turnover and patient holding periods, or opportunities where you can keep patient capital compounding for years.

They treat low-cost index funds as the hurdle. Any active manager (or other investment opportunity) must clear that hurdle net of fees and taxes. The internal test is simple: what breakeven alpha does this manager need, after tax, to beat an index held for years? If you can’t explain that in one sentence, you probably should not allocate.

They like smaller, less competitive deals and long hold periods. The “buy a good business and keep it” idea works well for families with time and patience. For most investors who can’t do direct deals, the takeaway is still useful: avoid investments that require frequent exits to look good.

This is a masterclass in patience. Make fewer, better decisions. Let compounding work. Measure everything after fees and taxes. You will act less, earn more, and sleep better.

The 60/40 portfolio is an investment strategy that allocates 60% of its assets to stocks and 40% to bonds, aiming to balance growth potential from equities with the stability and income of fixed income. BUT because of stocks’ “mean reversion” this portfolio is too conservative and gives up too much upside without offering as much protection as you might think.

When stocks have a bad run, future returns tend to be better than average until things get back to normal. When they have a great run, future returns tend to cool. If you plan across decades, this pattern matters more than short-term noise. The punchline for retirement planning is counterintuitive: many investors should hold more stocks, not fewer, if they want to avoid running out of money.

Valuations in the S&P 500 look rich by long-term yardsticks like CAPE (think of CAPE as a 10-year, inflation-adjusted P/E that smooths out booms and busts). The guest flags better hunting grounds: international markets, value stocks, and U.S. small caps. The key is price paid. If an area is cheaper than normal, history suggests stronger future returns.

Bonds can suffer long stretches of weak real returns when inflation runs hot, and bond returns often “trend” rather than mean revert in those periods. That raises sequence-of-returns risk if you lean too hard on bonds. The surprising result in the data: portfolios that are too bond-heavy can have a higher chance of failing over a long retirement than stock-heavier portfolios paired with a cash buffer.

Many tools assume a “random walk,” which treats each year’s return as independent of the last. That misses mean reversion. The result is overly wide downside paths for stock-heavy portfolios and, in turn, advice to cut equity or cut withdrawals more than necessary. Plans that bake in mean reversion produce more realistic risk and often support higher, safer stock allocations.

The podcast is hosted by Benjamin Felix (CIO at PWL Capital) and Dan Bortolotti (Portfolio Manager at PWL Capital), and Cameron Passmore (CEO at PWL Capital).

Inflation erodes spending power. To keep up and get ahead, long-term money belongs in diversified stocks and bonds, not cash. Simple math from the show: since 1970, $1 in 100% bonds grew to ~$49, a 60/40 mix to ~$98, and 100% stocks to ~$130. 

Bigger upside comes with bigger drops, which you must be able to stomach. In 2008, 100% stocks fell 48% and took ~4 years to break even, while a 40/60 mix fell 19% and recovered in ~9 months.

Tolerance is your willingness to watch your account swing without bailing. 

Capacity is your ability to take risk given your real life. 

Factors affecting or demonstrating your tolerance and capacity:

Build a plan from point A (where you are) to point B (retirement), then test asset mixes inside it. For near-retirees and retirees, this often shows they can dial down equity and still meet goals. For accumulators, they identify the “floor” return needed, then decide how much extra equity risk is worth taking to improve retirement age, spending, or legacy.

Asset allocation is not a personality quiz. It is a planning decision that blends math, money habits, and psychology. The right mix is the one you will not abandon when markets get mean.

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