Ray Dalio: All Weather Portfolio - Does It Still Work?

Explore Ray Dalio's All-Weather Portfolio, its composition, performance, and how to build it using five ETFs for all economic environments.

Key Takeaways

The All-Weather Portfolio is designed to perform across all economic cycles by diversifying across asset classes.
Balancing volatility is key; bonds are weighted more heavily to offset stock market fluctuations.
Using five ETFs, investors can replicate the portfolio easily and globally by finding local equivalents.
While stocks may outperform in some periods, the portfolio reduces risk and drawdowns over time.
Recent market conditions have challenged traditional safe assets like long-term bonds, highlighting the importance of diversification.

What the video covers

Ray Dalio, a renowned investor, created the All-Weather Portfolio designed to perform well in all four economic environments: inflation, deflation, expansion, and contraction.
The portfolio consists of 30% stocks, 40% long-term US bonds, 15% intermediate US bonds, 7.5% gold, and 7.5% commodities.
It balances risk and volatility by weighting bonds more heavily to offset the higher volatility of stocks.
The video explains how to build the portfolio using five ETFs: VTI (stocks), TLT (long-term bonds), IEI (intermediate bonds), GLD (gold), and GSG (commodities).
Performance analysis covers one month, three months, one year, five years, and ten years, including during the COVID-19 pandemic.
Stocks have outperformed the portfolio in some short-term periods but come with higher volatility and drawdowns.
Long-term bonds, though considered safe, have experienced significant drops in recent periods.
Commodities have historically underperformed but recently showed strong positive returns.
The portfolio aims to provide balanced returns with lower volatility suitable for investors seeking risk mitigation.
The video concludes with insights on who the portfolio is suitable for and includes a bonus clip from Tony Robbins explaining the strategy.

Chapters

What is the All-Weather Portfolio?

The All-Weather Portfolio is an investment strategy created by Ray Dalio designed to perform well across all four economic environments by diversifying across stocks, bonds, gold, and commodities.

How can I build the All-Weather Portfolio using ETFs?

You can build the portfolio using five ETFs: Vanguard Total Stock Market (VTI) for stocks, iShares 20+ Year Treasury Bonds (TLT) for long-term bonds, iShares 3-7 Year Treasury Bonds (IEI) for intermediate bonds, SPDR Gold Trust (GLD) for gold, and iShares S&P Goldman Sachs Commodities Index (GSG) for commodities.

Does the All-Weather Portfolio still work in recent market conditions?

The portfolio continues to provide balanced risk and returns, although some asset classes like long-term bonds have experienced significant drops recently. It remains effective for risk mitigation and diversification across economic cycles.

Full Transcript — Download SRT & Markdown

Speaker A

Hey guys, welcome back. Now, Ray Dalio is a world-class investor. He has advised central banks and is most well known for building the world's largest hedge fund with assets under management of over 150 billion dollars. To get access to Ray, you would have needed over a hundred million dollars in assets. Ray Dalio is also well known for creating the infamous All-Weather Portfolio, which was made famous in Tony Robbins' book Money Master the Game. Now, the big idea behind the All-Weather Portfolio is this:

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would have needed over a hundred million dollars in assets ray dalio is also well known for creating the infamous all-weather portfolio which was made famous in tony robbins book money master the game now the big idea behind the all-weather portfolio is this

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Basically, there's only four economic environments. Number one, we have times of inflation. Number two, we have times of deflation. Number three, we have times of economic expansion. And number four, we have times of economic contraction. And the All-Weather Portfolio was

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specifically designed to be able to do well in all economic environments so in this video i'm going to show you exactly what the all-weather portfolio is i'll then show you how you can build it using only five etfs

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specifically designed to be able to do well in all economic environments. So in this video, I'm going to show you exactly what the All-Weather Portfolio is. I'll then show you how you can build it using only five ETFs.

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robbins as he explains a bit more about the portfolio strategy as always if you do find anything useful in the video be sure to drop a like that would be very much appreciated okay sit back and relax guys here is

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I'll show you the portfolio performance so you can see how it's actually done over a one year, three year, ten year, and also how well did it do during this pandemic. And we'll finish with a bit of a bonus clip from Tony

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okay so here it is guys the all-weather portfolio in all its glory and it's made up of stocks long-term us bonds intermediate us bonds gold and commodities we have 30 in stocks 40 in the long term us bonds

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Robbins as he explains a bit more about the portfolio strategy. As always, if you do find anything useful in the video, be sure to drop a like. That would be very much appreciated. Okay, sit back and relax, guys. Here is

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equally with money it's balanced equally with volatility and risk so as stocks are two to three times more volatile the way you can to balance that is with a larger position in bonds as these have a lot less volatility so

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everything you need to know about Ray Dalio's All-Weather Portfolio. When looking back through history, there is one thing we can see with absolute certainty: every investment has an ideal environment in which it flourishes. There is a season for everything.

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using only five etfs and the breakdown is this so for the stocks portion we'll be using the vanguard us total stock market ticker symbol vti for the long term bonds we have ishares 20 plus year treasury bonds tlt

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Okay, so here it is, guys, the All-Weather Portfolio in all its glory, and it's made up of stocks, long-term US bonds, intermediate US bonds, gold, and commodities. We have 30% in stocks, 40% in the long-term US bonds,

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this are probably from about 40 different countries so this is for the us which is the majority of people watching this now for your country all you need to do is find the equivalent etf for each of these categories and with a

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15% in the intermediate US bonds, 7.5% in gold, and 7.5% in commodities. And here is the idea behind this portfolio: as it looks like it's pretty heavy in bonds, but the idea is that it's not balanced

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and now moving on to performance now it's great to know what the all-weather is but it's probably even more important to know does it work how has it done over a one year five year ten year and also how did it

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equally with money; it's balanced equally with volatility and risk. So as stocks are two to three times more volatile, the way you can balance that is with a larger position in bonds, as these have a lot less volatility. So

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year and ten year and then what's really good is we have a breakdown for each category as well so we have the stock part the long-term bonds intermediate gold and commodities and this way we can actually see how

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basically, this is an equally weighted portfolio when it comes to volatility. There are only four environments or seasons that move the prices of assets: inflation, deflation, rising economic growth, and declining economic growth. And here is how you build the portfolio

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you can see how each segment counter balances and why this works for all economic environments so let's see how it did first of all let's look at the total portfolio so you can see this one month three month and

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using only five ETFs, and the breakdown is this. So for the stocks portion, we'll be using the Vanguard US Total Stock Market, ticker symbol VTI. For the long-term bonds, we have iShares 20+ Year Treasury Bonds, TLT.

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performance now an interesting point is that if you are just invested into stocks you can see just by investing into stocks on every time frame you would have got better returns it beat the portfolio in the one month

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Intermediate bonds, we have the iShares 3 to 7 Year Treasury Bonds, ticker IEI. For gold, we have the SPDR Gold Trust, GLD. And for commodities, the iShares S&P Goldman Sachs Commodities Index, GSG. Now just to note, because people watching

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long-term bonds has taken now bonds were meant to be super safe and super secure but look we've had double digit drops over a three and six month period so that to me was very surprising the intermediate bonds haven't done as

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this are probably from about 40 different countries, so this is for the US, which is the majority of people watching this. Now for your country, all you need to do is find the equivalent ETF for each of these categories, and with a

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and then the commodities piece is very interesting so commodities have been the lowest for many many years but you can see this trend has now reversed and you can see the six month performance plus 26 which is excellent the

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little bit of Googling, it's not too hard to do. On diversification, the problem is every single asset class that you love will have a day where it drops 50 to 75 percent. If it's later in life, you won't have time to make up for it.

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invest in vti and i'll show you the main reason now has to do with max drawdowns so what are drawdowns well drawdowns show the biggest drop from peak to trough in whatever you're measuring so we have vti here

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And now moving on to performance. Now it's great to know what the All-Weather is, but it's probably even more important to know: does it work? How has it done over a one year, five year, ten year, and also how did it

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volatility in the stock market now with the all-weather performance look at the different increments so vti this tables in 10 20 30 and with the old weather the increments are two percent four percent and six percent so you can see

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do during the big drop of the pandemic? Let's take a look. And this is a very, very useful table. So what does it show? We have the portfolio performance of one month, three months, six months. They have the one year, three year, five

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less volatile which is going to suit certain types of people and how did it do in the pandemic well if you can see vti this was the time when the stock market vti dropped over 20 in march 2020 and the

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year, and ten year. And then what's really good is we have a breakdown for each category as well. So we have the stock part, the long-term bonds, intermediate, gold, and commodities. And this way, we can actually see how

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you don't want to be in that game and at the end of this video i will sum up and explain who i think this portfolio is for and not for but right now here's the bonus tony robbins explaining a little

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each individual slice has done. So you'll notice things where bonds are dropping, the commodities are picking up the slack. Where the bonds are looking a bit stronger, we can see commodities may have not done so well. So

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i said to ray i said listen i really want to help the average person so i got a question for you i did this with everyone i said if you couldn't give your money to your children any of it

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you can see how each segment counterbalances and why this works for all economic environments. So let's see how it did. First of all, let's look at the total portfolio. So you can see this one month, three month, and

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my money's already there my kids money is there my money for philanthropy when i'm gone is there because i'm not going to be here and i want something that will do well in the future and i don't know what the future

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six months, we've had a bit of a drop. It's one year at eight percent. We've got nine percent, eight, and seven. So we can see it's roughly about eight to nine percent when it comes to longer term

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because equities are three times more volatile so your risk is 95 five he said so that's why people get killed in 2008 he said i try to get this through to people he said but all of our people handle it you know you

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performance. Now an interesting point is that if you are just invested into stocks, you can see just by investing into stocks on every time frame you would have got better returns. It beat the portfolio in the one month,

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this fund in the 1970s it was the worst time for bonds it was an extraordinary time for all weather because it isn't it looks over balanced because in order to get the same level of risk you have to go for more long-term

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three months, six months, one, three, five, and ten. Now there's one big benefit that the All-Weather has over the U.S. stock market, which I'll show you in a second. Moving on, what's interesting as well is just how much of a hit

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saying you know this is this is never going to work because we're in the you know interest rates the only place to go if retreats go up it's a balanced fund the other areas kick in but here's what's interesting after you

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long-term bonds has taken. Now bonds were meant to be super safe and super secure, but look, we've had double-digit drops over a three and six month period. So that, to me, was very surprising. The intermediate bonds haven't done as

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it's been right 85 percent of the time what's even more extraordinary is the fifteen percent what it wasn't doing well or didn't do well its average loss was one point six percent not fifty forty thirty twenty think of the last

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bad. I guess it's three years pretty good, but then starts to drop down. Gold, so gold has had a really bad run at the minute. It's dropped double digits over six months, and even its long-term performance is not that good.

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things to grow is inflation or deflation in terms of price certain things do really well in inflation certain deflation growing economy shrinking economy and he's figured out which quadrant you need to put each to actually have equal risk so the the beauty of this is

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And then the commodities piece is very interesting. So commodities have been the lowest for many, many years, but you can see this trend has now reversed, and you can see the six month performance plus 26, which is excellent. The

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but do you know what the average mutual fund owner got investor 2.5 that's before tax why because we as investors always do the wrong thing emotionally that's right we sell we should hang on we buy when we shouldn't

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commodities piece has really helped this portfolio over the short term, but obviously longer term, a ten year performance of negative nine percent is not good. So the question I have is why would you use this portfolio when you could just

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biggest hit you've ever seen in 75 years i think you could stay in and you can do what jack talks about which is stay in that market through time so this means resetting each year it's a reset once a year that's the one

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invest in VTI? And I'll show you the main reason now. It has to do with max drawdowns. So what are drawdowns? Well, drawdowns show the biggest drop from peak to trough in whatever you're measuring. So we have VTI here,

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is this portfolio for and not for well personally i think this does make a really good retirement portfolio it's good for people who have a very large amount of money and it's good for people who just want consistent growth but with low

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and you can see this goes back over the last few decades, and you can see during the 2009 crisis, VTI did drop over 50 percent. It's had years where it's dropped over 40 percent, 45, 30. So you can see you get a lot of

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market index is going to give you better returns okay so hope you found this useful in fact just one favor to ask if you did find anything useful in the video if you wouldn't mind taking two seconds just to

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volatility in the stock market. Now with the All-Weather performance, look at the different increments. So VTI, this table's in 10, 20, 30, and with the All-Weather, the increments are two percent, four percent, and six percent. So you can see

Speaker A

okay cheers guys thanks for watching and i'll see you in the next video bye for now [Music] you

Topics:Ray DalioAll-Weather PortfolioETF portfolioinvestment strategydiversificationstocksbondsgoldcommoditiesportfolio performance

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