We’re halfway through 2026. How are your investments doing?

Stocks are doing well after a rocky start to the year. The S&P 500 is up 10%.

A traditional 60/40 portfolio is doing okay, up roughly 6%.

Today, I (Chris Reilly) want to check in on a RiskHedge strategy that’s doubling the market’s return while taking less risk.

Most of us were taught that you must take bigger risks to earn higher returns. Prepare to have that assumption challenged as you read my conversation with Cornerstone Club creator and RiskHedge publisher Dan Steinhart.

Chris Reilly: Dan, Cornerstone is up 20% this year while the S&P is up about 10%. How is it doubling the market’s return?

Dan Steinhart: Cornerstone uses dynamic asset allocation. That means the portfolio adapts to changing market conditions.

Contrast it to a traditional 60/40 portfolio. The 60/40 always owns stocks and bonds, regardless of how those assets are performing.

Cornerstone only owns assets that are currently producing good returns. We've owned no bonds of any sort all year because they've been dead money. Instead, we've owned the assets that have been leading the market.

Chris: Such as?

Dan: International stocks. They've returned 60% more than US stocks this year.

We also owned commodities from January through May. That gave us positive returns during a pretty rocky stretch for stocks. It's easy to forget now, but the S&P 500 was actually down 5% year-to-date in March.

Until recently, we owned gold too, profiting from its run from $2,300/oz to $4,600/oz. But Cornerstone gave the signal to sell gold in March.

Chris: Most investors hear "diversification" and think it means they should own everything—bonds, gold, stocks, real estate. Do you disagree with diversification?

Dan: Not at all. Cornerstone is built on the concept of diversification. It follows 13 ETFs that represent the whole “world” of investable assets—including bonds, gold, commodities, stocks, and real estate.

The difference is you don’t need to own all assets all the time—and this principal is reflected in Cornerstone’s DNA.

There are times to own gold, like when it doubled from 2024 to early 2026. There are times not to own bonds, and we’re living through one. Long-term Treasuries are actually the only asset in our universe that Cornerstone has never owned since the start of 2024.

Chris: You mention that Cornerstone produced higher returns with lower risk than the market this year. That’s a big claim that challenges a core assumption in finance that risk and return are inversely correlated.

Dan: There are many ways to define risk. In the context of an asset allocation strategy like Cornerstone, I think the best one is: How much does this strategy lose in rough times?

Cornerstone tends to perform best, relative to the market, in rough times like 2008 and 2022. The markets struggled a bit to start 2026, and Cornerstone did its job.

Here’s a chart showing the growth of $100,000 in Cornerstone vs. the S&P 500 vs. a 60/40 portfolio since the start of 2026.

As you can see, not only did Cornerstone end this period with double the return of the S&P 500 and over triple the return of the 60/40 portfolio. It did so while never “going negative” for the year, as both the S&P 500 and 60/40 did in March.

This is what I mean by higher returns with less risk.

Chris: Sounds almost too good to be true. Does Cornerstone have a weakness?

Dan: Yes. It tends to underperform in strong US stock-led bull markets. That’s because Cornerstone is diversified. Even when it is 100% allocated to stocks, this allocation will include non-US stocks like European and emerging market stocks.

So if the S&P 500 is beating all of those, and the S&P 500 is your benchmark, Cornerstone will lag it. This last happened in 2024.

Chris: One last question. Let's say the people calling this an artificial intelligence (AI) bubble end up being right. How would Cornerstone respond?

Dan: For the record, I do not think we’re in an AI bubble. Look at the “Magnificent Seven” (AAPL, MSFT, GOOGL, AMZN, META, NVDA, and TSLA) this year. They are collectively down 3%. Those companies make up about one-third of the S&P 500. Yet the S&P is still up around 10%.

This kills the false narrative that only a few giant AI-related tech stocks are propping up the market. The gains this year are coming from elsewhere.

Imagine you knew for certain that the Mag 7 would decline through the first half of the year. Most people would reasonably expect stocks as a whole to be down, and they’d reduce their stock exposure. They’d have missed the opportunity to make 10% to 20%.

This is exactly why I prefer systematic, rules-based investing. The market often makes no sense when you approach it from a narrative perspective. I trust data over stories.

But you asked what happens if we’re in an AI bubble, and it pops. Equities would surely take a hit. International stocks would get hit because a lot of their outperformance has come from South Korean memory-chip companies tied to AI. Maybe bonds would finally perk up after being dead money since 2022.

But the important part is it doesn’t matter what I think. Cornerstone adjusts automatically. If equities begin to weaken, we'll gradually reduce exposure. If leadership changes, we'll own the new leaders.

There's no sign of that today. But when the evidence changes, the portfolio changes with it.

Chris: Thanks, Dan. Reader, if you've been curious about Cornerstone Club, now’s a good opportunity to consider joining. For today only, the doors are open at a special discount for new members.

If you've been waiting for the right time to see how a disciplined, rules-based investing system can work for you, go here. On that page, Dan answers more questions you may have, including back tests and more details.

Chris Reilly Executive Editor, RiskHedge