The traditional 60% equities and 40% bonds mix that has guided investors for decades no longer works for many people and the answer may be to add in some alternatives for balance and income, according to Kelly Ryan, head of independent wealth management at State Street Global Advisors, an asset management firm based in Boston.

A different approach is needed now for those looking for income in the low-interest-rate bond market and volatile equities market, Ryan said in an interview today.

“The markets are evolving, but we will have a low-interest-rate environment for the foreseeable future,” Ryan said. “It is important for investors to work with a professional to help guide their investments. An advisor can help with budgeting for risk and liquidity. The need for income increases as we age and the goal is to achieve the right mix of investments for all ages.”

With bonds yielding almost no income and a stock market that has seen record drops and outsized highs this year, “there is no one size-fits-all investment mix,” she added.

The pandemic has increased the difficulty of finding the right mix, according to a State Street Global Advisors’ report, “Portfolio Construction In and Out of the Core For the Next Decade,” which was released recently.

“Given our new reality, the standard 60/40 portfolio needs to be tailored—both in the core and outside of it—if return targets are to be met over the next decade,” the report said.

“Just as the pandemic has amplified certain societal trends, it has the potential to advance the deterioration of the 60/40 portfolio’s risk/return profile,” according to the report. “As a result, structuring portfolios now requires a more tailored approach in order to meet specific return objectives and ensure that the portfolio remains properly diversified.

“Think about paring back some of both the stock and bond allocations in the 60/40 portfolio and replacing them with an alternative strategy as a potential source of diversification — with the weight depending on investment-specific constraints and criteria” of the individual investor," State Street Global advised in the report.

In addition, “investors’ needs are not static, therefore investments must evolve with those needs,” Ryan said.

To provide income beyond stocks and bonds, investors who have stuck to the traditional stock/bond split in the past may want to look at such things as high-yield bonds, mortgage backed securities and emerging market debt to add income to their portfolios, she added.

“With this next decade starting off in a high-risk regime, and the importance of diversification to mitigate what may lie ahead, seeking out noncorrelated strategies may be one way to bolster a portfolio’s defense,” according to the report. “These exposures can be as traditional as gold, commodities, and other real assets. Or investors can venture into the more esoteric strategies, such as options-based or managed futures mandates.”

“Some investors can sustain their portfolios through the volatile market, but others cannot and should look to alternative sources for income.” Ryan said. “Investors should work with a professional to find the income they need while balancing the risk factors. They need to understand what they are investing in” while looking for alternatives.