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Two-Fund Portfolio: backtest, returns and drawdowns

One fund for the whole world’s stocks and one for bonds, 60/40.

Data updated October 2026

Created by: Bogleheads

Allocation

Asset classETF used in the backtestWeight
World stocksACWI60%
US aggregate bondsBND40%
  • Stocks 60%
  • Bonds 40%

From October 2011 to October 2026 the Two-Fund Portfolio returned 7.7% a year on average, with annual volatility of 10.1%. Its deepest fall was 22.3%, from November 2021 to October 2022, recovered in about 28 months.

Its best year was 2019 (+19.5%) and its worst 2022 (−16.3%).

Over the same period 100% US stocks returned 14.3% a year with a maximum fall of 35.0%.

Key figures

Annual return (CAGR)
+7.7%
Annual volatility
10.1%
Maximum drawdown
−22.3%
Recovery time
28 months
Sharpe
0.64
Sortino
0.89
Worst year
2022: −16.3%
Positive years
11/14

Growth of $10,000

$20,000$40,000$60,00020122014201620182020202220242026
Two-Fund Portfolio60/40 Portfolio100% Stocks

Drawdowns

-20%-10%0%20122014201620182020202220242026

Returns by calendar year

YearTwo-Fund Portfolio60/40 Portfolio100% Stocks
2026(partial)+6.8%+6.9%+12.7%
2025+16.3%+13.0%+17.0%
2024+11.0%+14.8%+23.8%
2023+15.6%+17.9%+26.1%
2022−16.3%−16.9%−19.5%
2021+10.4%+14.6%+25.7%
2020+12.8%+15.4%+20.7%
2019+19.5%+21.9%+30.7%
2018−5.4%−3.1%−5.3%
2017+16.0%+14.2%+21.4%
2016+6.0%+8.3%+12.1%
2015−1.1%+0.2%−0.1%
2014+4.6%+9.7%+12.2%
2013+12.6%+18.2%+31.8%
2012+11.6%+10.4%+14.7%
2011(partial)+1.5%+3.1%+4.1%

History

Created by
Bogleheads community
Who
Followers of Vanguard founder John Bogle
Year
2008
Source
Bogleheads forum and wiki
Funds in the backtest
2

Once a single fund covering the whole world’s stock market became available – Vanguard Total World Stock (VT) launched in 2008 – the Bogleheads’ three-fund idea could shrink to two: one global stock fund and one bond fund.

The global fund holds companies in proportion to their market value, so the US weight follows the market (around 60% in recent years) without the investor having to choose it. The 60/40 split tested here is a common balanced version.

Strengths and weaknesses

Strengths

  • Two funds for the whole world
  • Country weights adjust automatically with the market
  • Very low cost

Weaknesses

  • US bonds only on the bond side
  • Stocks and bonds can fall together, as in 2022
  • No real assets

How it works

Let a global fund set the country weights, and choose only the split between stocks and bonds.

Backtest with total-return ETF prices (dividends reinvested), rebalanced to target weights on the first trading day of each year. Where a Vanguard fund has a short price history in our data, an iShares fund on the same market is used (for example ITOT for VTI, IVV for VOO). No fees, taxes or currency effects; first and last years are partial. Past results do not predict future returns.

Questions

Who created the Two-Fund Portfolio?

Bogleheads community (followers of Vanguard founder John Bogle), 2008. Source: Bogleheads forum and wiki.

What is the Two-Fund Portfolio?

One fund for the whole world’s stocks and one for bonds, 60/40. Allocation: 60% world stocks, 40% us aggregate bonds. Created by: Bogleheads.

What is the Two-Fund Portfolio return?

In the backtest from October 2011 to October 2026 it returned 7.7% a year on average, with a maximum drawdown of 22.3%. US dollars, before fees and taxes.

How often should it be rebalanced?

The backtest rebalances once a year back to the target weights. Rebalancing more often changes little and adds costs; some investors rebalance only when a weight drifts beyond a threshold.

What was the worst drawdown of the Two-Fund Portfolio?

22.3%, from November 2021 to October 2022; it took about 28 months to get back to the previous high.

Other lazy portfolios

Source: MarketStack end-of-day prices. Historical and educational content: not a forecast and not investment advice. MEDGE Capital does not recommend buying or selling any instrument. Risk disclaimer.