05 December 2022

The All-Weather Portfolio Strategy – Learn From Ray Dalio’s Investment Strategy


It’s not surprising to see Ray Dalio’s investment strategy receive widespread recognition. The billionaire and his team constructed the portfolio to withstand every economic environment. It’s also structured to survive unexpected financial events.

But what’s so special about this portfolio? What assets does it have, and how has it performed? Did it hold up against economic issues like the financial crisis of 2008 and the bear market of 2022? 

This article gives you insight into what this winning portfolio strategy offers and how you can implement it in your trading strategy. Let’s begin. 

What is the All Weather Portfolio?

As mentioned earlier, Ray Dalio’s portfolio was built to survive economic issues. This is regardless of the unfriendly nature of the investment climate, e.g., inflation. The portfolio is loaded with many assets because it prioritizes diversification. It aims to use diversification to achieve smooth returns and reduce drawdowns. 

If the assets don’t move the way you want, diversification helps you limit portfolio damage. The portfolio is built in this structure:

  • 55% bonds
  • 30% US stocks (These make up about 50% of the world market capitalization)
  • 15% hard assets and commodities like Gold & Silver. 

A deeper look at the assets included in the All-Weather Portfolio

Historically, stocks have been known to perform a lot better than bonds. So, why does this portfolio allocate so much to bonds? It’s because Ray Dalio isn’t looking to optimize total returns. 

Instead, he’s focused on building a portfolio with few drawdowns and good risk-adjusted returns. Here’s more insight into the portfolio’s assets:


Stock and bond market graphs for All-Weather Portfolio Strategy

Stocks are a part of the portfolio because they have a track record of producing good returns. In the last 100 years, stocks have risen by about 10% annually. This is with dividends reinvested and before inflation. It means that you can have a long-term inflation hedge.But, the issue with stocks is drawdowns. For example, the stock market fell by almost 90% from the top in 1929 and that’s not the only time. During the 2008/09 crisis, the S&P 500 dropped by 50%!


This is a loan given to a company or sovereign government. In exchange, the lender is paid a coupon at specific intervals. The price of the bond also changes over time as interest rates fluctuate. Bonds have similar drawdowns to stocks but with minimal effect on the portfolio. 


Commodities including gold and silver in All-Weather Portfolio Strategy

Commodities are rare and valuable materials, mostly found in the Earth. They are essential to humans and thus highly valued. Most commodities are used as fuels to power industries and vehicles, while others like Gold are used as a store of wealth. 

Commodities are in the portfolio thanks to their inverse relationship with stocks and bonds. When commodity prices rise, they become inflationary. This means lower prices for stocks and bonds. 

Pros of the All Weather Portfolio

You should never forget that this is a defensive portfolio. This means it’s not created to make you rich. You’re also bound to perform poorly if the stock market becomes bullish. So, why should you bother using this strategy? Here are some reasons:

It’s a defensive portfolio. This means you’re always guaranteed to outperform a failing market. 

By outperforming the failing market, you’ll have smaller drawdowns in stocks. This ensures you’ll make fewer investment mistakes.

It’s an intelligent portfolio for retirees and potential retirees to have. This is because it removes the need to make quick portfolio chances to protect your finances.

Other benefits include the following:

Low-risk portfolio structure

Diversified portfolio chart for All-Weather Portfolio Strategy

There is a high chance that the portfolio will retain money. If it does, you can rest assured that the losses will be minimal. This is because the portfolio is heavily invested in defensive assets. 

These do not correlate with other investments and go up when the stock goes down. For example, treasury bonds almost always go up when the stock price falls. Commodities like Gold share the same attribute.

Easy to Implement Investment Strategy

The strategy is simple to set up for your portfolio. You can buy the ETFs and balance them to the asset class percentages yearly. You can easily do it in your brokerage account. 

Diversification in defensive instruments

The strategy focuses on defensive instruments that go up when the stock falls. Its diversification level might appeal to investors who want to manage risk from the stock market. 

Cons of the All Weather portfolio

This portfolio strategy is excellent, but here are some reasons why it may not work for you → 

Underperformance during bullish market periods

The All-Weather Portfolio has only 30% of its assets as stocks, all in the US. This means it will perform poorly when the market turns negative. 

Minimal returns

In truth, the returns from the All Weather Portfolio could be more impressive. This is to be expected with a defensive portfolio. They perform poorly during periods of economic expansion. But, they perform well in a bear market. This means you have limited opportunities for huge profits.

Increased exposure to inflation

The portfolio has a very high allocation to bonds which is heavily affected by inflation. This is challenging for bond investors because they are locked into low-interest rates. The position remains the same despite the rising cost of living due to inflation.

Bond investors are affected in two ways. First, the income value falls due to inflation. Secondly, the value of bonds drops during high inflation. This is because investors can obtain higher-yielding bonds.

How do you make an All Weather Portfolio yourself?

Investor balancing a portfolio using All-Weather Portfolio Strategy

Thanks to a wide range of mutual funds and ETFs, it’s a lot easier to put together a portfolio. For the All Weather Portfolio, you can pick these five different ETFs:

  • 40% TLT (long-term Treasuries)
  • 30% SPY (US stocks, S&P 500)
  • 15% IEI (intermediate-term U.S. Bonds)
  • 7.5% GLD (Gold)
  • 7.5% DBC (commodities, commodity index tracking fund)

You can use these to compose your portfolio and rebalance it whenever you want. The components can be changed, but you must understand the ETF holdings first.

When should you rebalance the All Weather Portfolio?

There is no definite answer to this. But you can rebalance it once or twice a year. The rebalancing also depends on your tax situation. 

You have fewer things to worry about if you have a tax-deferred account. This means you can rebalance as much as you want. But it would be best if you do it quarterly.

Build your investment portfolio with ISA Bullion

Ray Dalio’s portfolio strategy offers a high level of protection from economic uncertainty. The point to understand here is that, whenever you’re thinking of investments, you must always include Gold and Silver in your portfolio.

After all, you never know when a crisis will pop up and where people will lose a lot of money. For instance, many people consider the Real Estate market to be safe but in the 2008 financial crisis, real estate investors suffered heavy losses in the USA as the housing market crashed. 

This is why you should always make sure that at least a part of your portfolio is in Gold and Silver. Although there are many reasons to have them in your portfolio, the main one is that they tend to hold their value no matter what’s happening around them. 

In other words, they are a lot more reliable in all kinds of economic situations than most other assets available today.

To start trading Gold and Silver as part of your trading strategy, download the ISA Bullion app for Android or iPhone today! 

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