All Weather Portfolio (ALL-WEATHER)
Developed by Ray Dalio · Static Benchmark · Low Risk
The All Weather Portfolio was developed by Ray Dalio at Bridgewater Associates, the world's largest hedge fund, and made public through Tony Robbins' 2014 book Money: Master the Game. The portfolio applies Dalio's macro framework — which divides economic environments into four quadrants based on whether growth and inflation are rising or falling — to construct a static allocation that performs acceptably across all four combinations. Unlike Browne's Permanent Portfolio, which uses equal weights, All Weather applies risk-based allocation that gives bonds substantially more weight than equities to equalize the risk contribution of each asset class.
Dalio's framework identifies four economic environments: rising growth with rising inflation, rising growth with falling inflation, falling growth with rising inflation (stagflation), and falling growth with falling inflation (deflation). Each environment favors different asset classes. Equities benefit from rising growth. Bonds benefit from falling inflation and falling growth. Commodities benefit from rising inflation. Gold benefits from falling growth and rising inflation. By holding assets that collectively cover all four quadrants, the portfolio aims to deliver positive real returns regardless of which macroeconomic regime materializes.
The specific allocation — approximately thirty percent US equities (SPY), forty percent long-term Treasuries (TLT), fifteen percent intermediate Treasuries (IEF), seven and a half percent gold (GLD), and seven and a half percent commodities (DBC) — reflects Dalio's risk parity insight: because bonds are substantially less volatile than equities, they require larger nominal allocations to contribute equivalent risk. The heavy bond weighting is not a bet on bonds but rather a mathematical necessity for risk equalization.
As a static benchmark strategy, All Weather provides a reference point that represents sophisticated institutional thinking about long-term asset allocation. Its inclusion on the platform allows investors to compare tactical strategies' risk-adjusted returns against what is achievable through a thoughtfully constructed but entirely passive approach — answering the fundamental question of whether active tactical management adds value above a well-designed static allocation.
How It Works
The Four Economic Quadrants
Dalio's framework decomposes all possible economic environments into four combinations of two variables: growth (rising or falling) and inflation (rising or falling). Rising growth with falling inflation is the most favorable environment for financial assets — equities rally on earnings growth while bonds benefit from contained inflation. Rising growth with rising inflation favors equities and commodities but hurts bonds. Falling growth with falling inflation (deflation) strongly favors bonds while equities and commodities decline. Falling growth with rising inflation (stagflation) is the most challenging — gold and inflation-linked assets provide the only reliable positive returns.
The portfolio is constructed to hold assets that perform well in each quadrant, with allocations sized to ensure each quadrant's beneficiary contributes meaningful positive performance when that environment materializes. The result is a portfolio whose returns are driven by whichever economic regime prevails, with losses in unfavored positions partially offset by gains in favored ones.
Risk-Based Allocation
The allocation weights reflect Dalio's risk parity approach. US equities receive approximately thirty percent of capital, but because equities are three to four times more volatile than bonds, this thirty percent allocation contributes roughly the same amount of risk as the combined fifty-five percent bond allocation (forty percent TLT plus fifteen percent IEF). Gold and commodities at seven and a half percent each contribute proportionally more risk per dollar than bonds but less than equities.
This risk-equalized construction means no single asset class dominates the portfolio's risk profile. During equity bear markets, the losses from the thirty percent equity allocation are substantially offset by the gains in the fifty-five percent bond allocation — which, despite being nominally larger, carries similar total risk. The portfolio's overall volatility is substantially lower than a traditional 60/40 portfolio because the bond-heavy allocation reduces the equity-dominated risk that characterizes most conventional balanced portfolios.
Static Allocation and Rebalancing
All Weather is a completely static strategy — the allocations do not change based on market conditions, momentum, or economic indicators. The portfolio is rebalanced periodically to restore target weights as asset prices cause the allocations to drift. This simplicity makes it accessible to any investor who can purchase five ETFs and execute an annual rebalancing check.
The portfolio's performance over decades has validated Dalio's thesis that risk-balanced diversification across economic environments produces consistent real returns with manageable drawdowns. The maximum drawdown has historically been moderate relative to equity-heavy portfolios, while compound returns have been sufficient to build wealth above inflation over long horizons. The primary trade-off is lower peak returns during strong equity bull markets, where the heavy bond allocation and modest equity weight limit upside participation compared to stock-heavy portfolios.
Explore All Weather Portfolio (ALL-WEATHER)
See the full backtest across 18 years of market data, or run your own what-if scenarios by adjusting all research parameters.