Will an All-Weather Asset Plan Keep You Safe? 

Ray Dalio's portfolio plan is one that can be replicated with ETFs

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Jul 18, 2022
Summary
  • Dalio designed the All-Weather portfolio to reduce risk and perform in a variety of economic climates.
  • All-weather can be scalable, making it an option for portfolios of all sizes.
  • All-weather is low-maintenance and can be a bear market performer.
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With a volatile market, inflation and more than a little anxiety over the possibility of a recession, interest in the All-Weather Portfolio originated by

Ray Dalio (Trades, Portfolio) is up.

Dalio, the billionaire hedge fund manager and founder of Bridgewater Associates, created the All-Weather Portfolio to perform well in all kinds of market conditions. During times of inflation or deflation, economic growth or decline, the asset allocation formula will create a portfolio that will steadily grow in profitability with a low amount of risk.

The formula is simple:

  • 30% Stocks
  • 40% Long-term treasuries
  • 15% Intermediate-term treasuries
  • 7.5% Commodities, diversified
  • 7.5% Gold

Rebalancing is key to keeping an all-weather portfolio on track. Rebalance any time a sector of your portfolio grows by 10% to 15%, or you can check changes in percentages once or twice a year and rebalance as needed.

An all-weather asset allocation plan can include exchange-traded funds, making it easy to diversify within sectors. Since the plan is in percentages and many ETFs can be bought in fractional shares, the all-weather plan is scalable for basis amounts of all sizes. These ETFs could be good additions to your all-weather portfolio.

Stocks

Value investors will want that 30% of stocks to be shares from profitable companies that would qualify as value stocks. One of the easiest ways to pick up value shares by investing in a value ETF such as the EA Series Trust Guru Favorite Stocks ETF (

GFGF, Financial) or the Vanguard Value ETF (VTV, Financial). One with a larger exposure to the U.S. stock market is Vanguard Total Stock Market ETF (VTI, Financial).

Long-term treasuries

Bonds may have you reconsidering this portfolio right now, but the all-weather portfolio is a long-term plan that has offered more than 7% growth over decades. Forty percent of your all-weather portfolio can be Vanguard Long-Term Treasury Index Fund ETF (

VGLT, Financial).

Intermediate-term treasuries

An intermediate-term treasury ETF is one that invests in a selection of government bonds that mature in about five to 10 years. An ETF to cover this sector is Vanguard Intermediate-Term Treasury ETF (

VGIT, Financial).

Commodities

There are all sorts of commodities ETFs that focus on one sector, but for an all-weather portfolio, you will want a diversified commodities ETF such as Invesco DB Commodity Index Tracking Fund (

DBC, Financial).

Gold

To cover the 7.5% of the all-weather portfolio, consider a gold ETF such as iShares Gold Trust (

IAU, Financial).

The bottom line

The positives of an all-weather asset allocation, such as performing well during bear markets, low risk and income, can make the plan one to consider for long-term growth.

All-weather still has moderate upside potential without large risks. Other than rebalancing after growth or dividends to keep the all-weather proportions intact, it is a low-maintenance investing strategy. For value investors, an all-weather asset allocation could be a plan for the ages.

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Disclosures

I am/we currently own positions in the stocks mentioned, and have NO plans to sell some or all of the positions in the stocks mentioned over the next 72 hours. Click for the complete disclosure
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