I have heard about the All-Weather investment strategy and how it helps diversify a portfolio. I want to know more about it. Can somebody help? - Seedly
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Anonymous

Asked on 02 Dec 2019

I have heard about the All-Weather investment strategy and how it helps diversify a portfolio. I want to know more about it. Can somebody help?

What would be the pros and cons for this strategy? is there anything that i should watch out for when it comes to this?

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Kelvin Seetoh
Kelvin Seetoh, Founder at Kelvestor.com
Level 6. Master
Answered on 03 Dec 2019

For ultra high net worth clients, they prefer something that is less volatile and steady growth. That's the pro of the strategy.

As for the con, you may scarifice a bit on the gains because you're equally hedged across certain assets classes. The gains may be lower. ​​​

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Arpita Mukherjee
Arpita Mukherjee, Community Evangelist at Kristal.AI
Level 6. Master
Answered on 03 Dec 2019

Hi Anon,

The benefits of investing in the All-Weather strategy are many. Not only does it provide you returns in favourable and unfavourable market conditions due to the balanced and asset allocation, but also provides exposure to diversified asset classes. The portfolio coined by the legendary investor, Ray Dalio, is a blueprint that many have used since to allocate assets in a manner crafted to help you make money in any kind of economic environment. In the last 10 years, Dalio’s portfolio showed a 7.65% compound annual return (last update: October 2019). From the period of 1984 to 2013, Dalio’s strategies earned him a positive return 26 out of 30 years, with an average annual return of 9.7%.

The portfolio has an asset allocation of:

  • 55% Fixed income (10% inflation-linked treasuries, 30% long-duration bonds, 15% 3-7yr duration bonds)

  • 30% Equity (Broad US market ETF, e.g. S&P 500, total stock market ETF, etc)

  • 15% Commodities (Gold, and/or broad commodity tracking ETF)

I work at Kristal.AI, and my mojo is to help people make the right financial decisions. If you think I helped you, do give me "Thumbs up". If you think my response was biased let me know, I will work on it.

I hope this helps you make the right decision.​​​

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Bjorn Ng
Bjorn Ng
Level 9. God of Wisdom
Answered on 02 Dec 2019

To quote Investopedia: An all weather fund is a fund that tends to perform reasonably well during both favorable and unfavorable economic and market conditions. Basically, it creates a balanced portfolio allocation for you. There are several types of investments in the market like stocks, bonds, commodities, fixed deposit etc.. Generally speaking, when market is good, stocks will go up. When market is bad, bonds will go up. This means you are "protected" from both upside and downsite. The cons (not really but technically considered) is that it limits your upside as well, that means investment return will be different from other tools of investing like value investing :)

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The famous Ray Dalio's All-Weather Portfolio is a conservative portfolio of 30% Equity, 55% Bonds, 7.5% Gold, 7.5% Other Commodities.

This is a portfolio I recommend clients, usually in their 50s, get on with option to receive dividends.

What questions do you have about this investment approach?​​​

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