Can you build a portfolio that stands the test of time?

Even if things like leather bags, diamonds and Betty White can seem like it, nothing lasts forever. That is a particularly true sentiment in investing. The recent combination of tariff announcements, geopolitical fumbles and threats to central bank independence have caused a sizeable blip in an otherwise-solid bull market.

But given this won’t be the only blip you’ll ever experience as an investor, it’s a good time to ask if the foundations of your portfolio are set up for the long term.

In parts one and two of this series, we gave you some rules on how to assemble your ETF portfolio. In this third and final part of the series, we attempt to put these rules into practice by picking a portfolio of ETFs that we believe you can buy and hold for a very long time.

What is the ideal allocation of a ‘long-lasting’ ETF portfolio?

The answer to this question is that it really depends on your goals, your time horizon and your risk tolerance. But to get you started, let’s look at a couple of model portfolio allocations that professional investors often use.

One traditional approach is the 60/40 portfolio. That is, 60% stocks and 40% bonds in whatever currency you choose.

The premise for this strategy assumes that share prices and bond prices tend to move in opposite directions. When shares have a bad year, bonds can provide a buffer and vice versa. But that isn’t always true – as 2022 demonstrated, when both shares and bonds fell sharply in the same calendar year.

Historically the 60/40 portfolio has performed best when growth accelerates and inflation decelerates. However, it has tended to perform worse when inflation accelerates and economic growth declines at the same time. As the table from Morgan Stanley Investment Management below demonstrates, a traditional 60/40 US portfolio declines 5.5% in these situations.

A different potential allocation option is the 40-40-20 approach, championed by such hedge funds as AQR Capital Management and Guggenheim³.

This strategy involves an allocation of 40% in shares, 40% in fixed income and 20% in alternative investments. In Guggenheim’s case, that alternative allocation is commodities, but you can broaden this to include any other alternative assets of interest.

Alternative investments may serve as a hedge against moments when both shares and bonds are each flashing cautionary signals⁴. Alternatives have traditionally performed well during periods of high inflation and low growth⁵.

These are just two examples of an asset allocation model, of which there are many you could use to construct a very solid core portfolio. But again, your allocation should be aligned with your investing ambitions and personal circumstances as well as being mindful of the rules we mentioned in the earlier articles of this series.

A model portfolio of long-lasting ETFs

Let’s look now at six ETFs that could fit the brief we set ourselves at the beginning. For the purposes of this exercise, we are constructing a hypothetical model portfolio of ETFs which could be used by a beginner/novice investor. The model in this article will use the 40-40-20 allocation we just talked about but, again, the right allocation should be the one that works for you.

Source: Betashares, management fee and returns data is accurate as of 30 May 2025. All fund returns data is after fees. Past performance is not an indicator of future performance.

On this sample scenario using a 40-40-20 structure, your weighted average management fee would be 0.237% per annum and, over the past year, you would have seen a hypothetical 13.03% net return (that is, returns minus fees and costs).

Over the past five years, this portfolio would have returned approximately 6.9% p.a. (as at 30 May 2025). This contrasts with a standard Morningstar Australian Dollar denominated 60-40 portfolio, which has produced a 5-year net return of 7.28% p.a. (as at 31 May 2025)⁷ and the Morningstar Global 60-40 portfolio (USD-denominated) which has a 5-year trailing return of 7.26% p.a. (as at 10 Jun 2025)⁸.

All this is to say that a) a 40-40-20 portfolio allocation performs just as well as a 60-40 allocation and that b) a diversified portfolio backed by a strong core makes all the difference in setting your portfolio up for long term success.

Set up a strong core and insure your investing future today

While there are no certainties in financial markets, there are many ways to set up a strong core portfolio that gives you both solid returns as well as access to high quality asset classes and investments. Furthermore, whether you choose to apply a 60-40, a 40-40-20, or any other combination of assets, you can build a solid core portfolio as long as you follow the rules we’ve given you in this series.