Rules-Based Strategy Update: All-Weather Portfolio Strategy May 2019
The All Weather Portfolio was introduced to the world by Tony Robbins in his book, MONEY Master the Game: 7 Simple Steps to Financial Freedom.
The intent behind the portfolio, as Dalio discusses in the book, is to be able to weather any market type including bulls, bears, trending, non-trending, etc.
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Assets in the All Weather Portfolio
The All Weather Portfolio holds five assets, each designed to provide diversification and both return potential as well as capital preservation.
The five assets in the portfolio include:
- 40% – Long-Term Bonds
- 30% – Equities
- 15% – Intermediate -Term Bonds
- 7.5% – Gold
- 7.5% – Commodities
According to Dalio, each asset type serves a specific purpose. There are four things that can affect the price of an asset, which leads to four different “seasons” the market can go through. By investing in each of the five different assets, the investor is set up to protect capital and capture gains when they are available.
So what are the four things that can impact asset prices, and the subsequent seasons? They are listed below:
The Four Things that Impact Asset Prices
- Rising Economic Growth
- Declining Economic Growth
The Four Seasons
- Higher than expect inflation (rising prices)
- Lower than expected inflation (deflation)
- Higher than expected economic growth
- Lower than expected economic growth
What is interesting about this portfolio is that it holds commodities. None of the other strategies tracked at Robotic Investing have that in place. I look forward to seeing what that does.
The All-Weather Portfolio Rules
This is a very easy portfolio to set up. There are only two rules / steps:
- Buy the required percentage of an ETF that tracks each of the five assets.
- Each year, rebalance the portfolio back to the target allocations
Robotic Investing has set up a portfolio going back to the start date of July 2, 2018 (similar to the other portfolios tracked on the site) to see how it performs.
The ETFs that will be used to track the portfolio include the following:
- 40% – Long-Term Bonds – TLT
- 30% – Equities – VTI
- 15% – Intermediate -Term Bonds – IEF
- 7.5% – Gold – GLD
- 7.5% – Commodities – DBC
Monthly Signals: All Weather Portfolio
As this is a buy and hold strategy, there are no signals or changes to the portfolio in May 2019.
Strategy Tracking & Performance: All Weather Portfolio
Here is the portfolio tracker and performance chart for the All Weather Portfolio. I use the Morningstar Portfolio Tracker to track all the systems at Robotic Investing.
This portfolio was started on July 2nd, 2018.
Note: When reviewing the performance chart, compare only the Total Return to the Index return. The personal return is inaccurate due to how Morningstar handles cash.
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