I imagine you landed on this page because you read the Ray Dalio interview in the Tony Robbins book, Money: Master the Game, and you’re trying to remember what percentage (%) of stocks, treasury bonds, gold, and commodities are in the All Weather Portfolio – adapted for individual investors.
Here are my notes:
The investment hypothesis behind the All Weather Strategy is that the economy has different seasons. Those seasons are tied to the debt cycle. Ray put together a 30-minute animated film that explains these four seasons:
- Leveraging – Credit freely available. Borrowing increases. Spending & incomes rise.
- Deleveraging – Credit dries up. Debt repayments rise. Spending & incomes fall.
- Deflation – Creditors restructure debts. Asset values drop. Employment drops.
- Inflation – Central bank prints money to purchase government bonds & fuel stimulus. Spending increases.
Against the backdrop of the four economic seasons, here is the investment mix of the All Weather portfolio adapted to individual investors:
|30%||Stocks||Addresses leveraging season|
|15%||Intermediate-term Treasury Bonds (7-10 yr)||Addresses seasons of deleveraging & deflation|
|40%||Long-term Treasury Bonds (20 – 25 yr)|
|7.5%||Gold||Addresses inflation season|
The idea is to rebalance this portfolio annually so that investments fall back into this mix at least one a year.
According to Money: Master the Game, this asset allocation, when back tested all the way from 1927 until 2013, has resulted in sizable growth with less volatility.
- If you’d like to backtest the portfolio yourself, try this tool.
- Here is an interesting article about duplicating the All Weather portfolio using low-cost ETFs.
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