All Weather Portfolio
Balanced across economic environments
Philosophy
Every economic environment hurts some assets and helps others. By balancing risk across all four environments, the portfolio aims for steady returns.
Origin
2014 — Adapted from Bridgewater's internal risk-parity approach, shared through Tony Robbins' 2014 book.
Key Principles
- ✓ Four economic environments: rising/falling growth and rising/falling inflation
- ✓ Equal risk contribution from each environment
- ✓ Heavy bond allocation offsets higher volatility of stocks and commodities
- ✓ Gold and commodities provide inflation protection
Target Allocation
| Asset | Category | Weight |
|---|---|---|
| US Stocks (VTI) | Equity | 30% |
| Long-Term Treasuries (TLT) | Bonds | 40% |
| Intermediate Treasuries (IEF) | Bonds | 15% |
| Gold (GLD) | Gold | 8% |
| Commodities (DBC) | Commodities | 8% |
Advantages
- Designed to handle any economic environment
- Lower drawdowns than traditional stock-heavy portfolios
- Based on institutional risk-parity principles
- Truly diversified across asset classes
Considerations
- Lower expected returns due to heavy bond allocation
- Long-term bonds carry significant interest rate risk
- More complex to rebalance than simpler portfolios
- Commodity exposure adds tracking error
Best For
Investors who prioritize stability and want to avoid large drawdowns.
Annual rebalancing as recommended by Dalio.
About the Author
Ray Dalio founded Bridgewater Associates, the world's largest hedge fund. He developed the All Weather strategy to perform reasonably well across all economic environments.
Frequently Asked Questions
What is Ray Dalio's All Weather portfolio?
The All Weather portfolio is a risk-parity strategy designed to perform in any economic environment. It allocates 30% to stocks, 55% to bonds (40% long-term + 15% intermediate), 7.5% to gold, and 7.5% to commodities.
Why does the All Weather portfolio hold so many bonds?
The heavy bond allocation (55%) balances risk, not dollars. Stocks are roughly 3x more volatile than bonds, so you need more bonds to achieve equal risk contribution from each economic environment.
What are the four economic environments in the All Weather approach?
The four environments are: rising growth (good for stocks), falling growth (good for bonds), rising inflation (good for commodities and gold), and falling inflation (good for bonds). Each environment has assets that thrive in it.
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