Costly signalling theory is based on the idea that individuals may signal their quality to potential mates and that the signal's costliness plays a crucial role in maintaining information content (‘honesty’) over evolutionary time. Whereas costly signals have traditionally been described as ‘handicaps’, here we present mathematical results that motivate an alternative interpretation. We show that under broad conditions, the multiplicative nature of fitness selects for roughly balanced investments in mating success and viability, thereby generating a positive correlation between signal size and quality. This balancing tendency occurs because selection for increased investment in a fitness component diminishes with the absolute level of investment in that component, such that excessively biased investments are penalised. The resulting interpretation of costly signals as balanced (albeit not necessarily equal) investments may be a widely applicable alternative to the traditional ‘handicap’ metaphor, which has been criticised for its non-Darwinian connotation of selection for ‘waste’ rather than efficiency. We predict that accelerating returns on viability are necessary to undermine honesty. This prediction depends crucially on the assumption that mating success and viability contribute multiplicatively (rather than additively) to an individual's fitness.