Ray Dalio's all weather portfolio

ColdIron

sixpence. said:

Thrugelmir said:

AnotherJoe said:

sixpence. said:

Ray Dalio invented this portfolio called the all weather portfolio. It basically spreads risk via asset allocation by choosing asset classes which negatively correlate with each other. Seen a couple of interviews with him and he seems very gifted and like he genuinely cares about people. What do folk on here think Ray's all weather portfolio? 

I think its a shocker. I would be struggling financially if i had a portfolio like that especially the say last 10 years. Or from when i started investing, doesnt even bear thinking about I'd still be working.

Thought it was for those seeking capital preservation. Not as a "guide" portfolio. 

It's for growth and preservation, in all economic conditions. 

Sounds like the project manager's triangle

I can do it good, I can do it fast, I can do it cheap. Pick any two

Thrugelmir

sixpence. said:

Thrugelmir said:

AnotherJoe said:

sixpence. said:

Ray Dalio invented this portfolio called the all weather portfolio. It basically spreads risk via asset allocation by choosing asset classes which negatively correlate with each other. Seen a couple of interviews with him and he seems very gifted and like he genuinely cares about people. What do folk on here think Ray's all weather portfolio? 

I think its a shocker. I would be struggling financially if i had a portfolio like that especially the say last 10 years. Or from when i started investing, doesnt even bear thinking about I'd still be working.

Thought it was for those seeking capital preservation. Not as a "guide" portfolio. 

It's for growth and preservation, in all economic conditions. 

Using US historic data. Rather like the 60/40 portfolio. Times ahead may result in a very different outcome. 

aroominyork

sixpence. said:

aroominyork said:

sixpence. said:

What do people think of hedged vs unhedged with regards to GBP currency risk? 

There are two questions there. 1). Do 'we people' think Sterling will go up or go down? Answer: no one knows, so who cares what us few think. 2) Should you hedge to take out the currency risk? Answer: people are generally against hedging equities, although I see merit in hedging part of them so that your returns better reflect the underlying investments. For bond funds I always want to hedge (although my strategic sterling bond funds can leave 30% unhedged). 

To hedge or not to hedge? That is the question 

Well, it's one question, but even if you want to hedge it's not as straightforward as you might like. There aren't many hedged equity funds out there and if, for example, you want a global developed markets index ETF, iShares' IGWD charges 0.55%. Compare that to an unhedged equivalent and after 10 years you have paid something like 4% extra in fees. If you believe exchange rates revert to the mean (assuming you bought at the mean, which I sometimes think is the unspoken second half of that sentence) then you may be paying the extra fees more for comfort than for gain.

TBC15

sixpence. said:

@quirkydeptless Btw I am a bit suspicious of what the guy in the video is saying (although I've watched his other stuff and he seems cool). Basically. I don’t know enough about bonds to know if the application of U.K bonds is not exchangeable with USA bonds (his whole argument is that Dalio’s technique can’t be applied to a U.K investor) but it seems obvious to me that he should have just used a world equity tracker.

Did you use anything special to pick the bond ETFs you chose? What made you decide on them?

If you made a lump sum 100K investment in Jan 2019 then I think this is actually a really positive result. People might argue that you could have got the same with a VLS 100 but why hold a less diversified portfolio for no reason? Some might argue that you don’t have to rebalance it, but I think rebalancing can actually be a good strategy for accumulating wealth over time especially when your assets are negatively correlated (as they are in Dalio’s portfolio).

@Malthusian can you please explain what you mean by forex trade? I have this suspicion that UK bonds aren’t as diversified as US ones because the US represents such a large part of the market. 

Note: guys this is called an ALL WEATHER portfolio. So the point is not that it gets the best returns over the time but that it doesn’t drop so dramatically. We can all say no that we wouldn't mind if our investments dropped 50-70% but it would be a lot nicer if they only went down -8% or whatever. 

I also think that this may be the antidote to any psychological temptation to try and time the market. 

@bowlhead99 Dalio basically says holding cash is dangerous because of inflation. Frankly, I agree. Have a 1-3 emergency fund and then fricking save + invest, lads. 

I am setting up a VLS watchlist now with something similar to what quirky has and another one with:

• 85% in a VLS 60
• 15% in a gold ETF

My reasoning behind this strategy is the following: 

• This portfolio is 34% bonds and these are a mix of UK long and short term and also global bonds
• It is 51% in world equities
• The gold will act as a diversifier and you could move it into the VLS 

I'm also going to copy quirky because I want to watch what happens in the drop, although there is a lot of statistical data to show that this is a good portfolio, I want to see it for myself. 

VLS100 did 20% before Covid it looks more like 14% now

Malthusian

If a portfolio is terrific but only if you have enough money that lagging a less conservative but still perfectly suitable portfolio (say the more usual 60% equities rather than 30%) won't have any effect on your lifestyle, then it's not very terrific.

Linton

I have entered something like the Dalio portfolio into Trustnet starting in 2015 with:
30% Fidelity World Index
40%  CM Blackrock 15 year Gilt Pension
15% Scottish widows Gilts
7.5% Ishares Physical Gold
7.5% L&G Long dated commodities ETF

As there is no rebalancing the allocations have varied so that currently they are at:
36.6 % Fidelity World Index
37.1%  CM Blackrock 15 year Gilt Pension
12.2% Scottish widows Gilts
9.5% Ishares Physical Gold
4.7% L&G Long dated commodities ETF
In the 5 years the portfolio has marginally beaten VLS80 - the graphs are surprisingly (to me) close:

Sailtheworld

Ray Dalio's portfolio has a capital allocation which differs from the market aggregate. Therefore he must be predicting a different future than the market. I suppose it depends whether someone following this approach thinks he's in a position to achieve this. I don't want to be mealy mouthed because he's obviously been a success but it seems to have been made from commissions on other people's trades.

The big warning sign is someone's name in a fund / portfolio plus the one size fits all approach.

Prism

Sailtheworld said:

Ray Dalio's portfolio has a capital allocation which differs from the market aggregate. Therefore he must be predicting a different future than the market. I suppose it depends whether someone following this approach thinks he's in a position to achieve this. I don't want to be mealy mouthed because he's obviously been a success but it seems to have been made from commissions on other people's trades.

The big warning sign is someone's name in a fund / portfolio plus the one size fits all approach.

Is there an aggregate though for asset allocation? Rather than predicting a possible future isn't this just based on what has happened in the past and therefore what might happen again going forwards?

Linton

Sailtheworld said:

Ray Dalio's portfolio has a capital allocation which differs from the market aggregate. Therefore he must be predicting a different future than the market. I suppose it depends whether someone following this approach thinks he's in a position to achieve this. I don't want to be mealy mouthed because he's obviously been a success but it seems to have been made from commissions on other people's trades.

The big warning sign is someone's name in a fund / portfolio plus the one size fits all approach.

Investing 100% in equities does not follow the market aggregate.  If we wanted to follow the market aggregate IIRC we should be investing mainly in Forex and Derivatives.  The bond market is rather larger than the equity market.  

Prism

Linton said:

Sailtheworld said:

Ray Dalio's portfolio has a capital allocation which differs from the market aggregate. Therefore he must be predicting a different future than the market. I suppose it depends whether someone following this approach thinks he's in a position to achieve this. I don't want to be mealy mouthed because he's obviously been a success but it seems to have been made from commissions on other people's trades.

The big warning sign is someone's name in a fund / portfolio plus the one size fits all approach.

Investing 100% in equities does not follow the market aggregate.  If we wanted to follow the market aggregate IIRC we should be investing mainly in Forex and Derivatives.  The bond market is rather larger than the equity market.  

https://www.visualcapitalist.com/all-of-the-worlds-money-and-markets-in-one-visualization-2020/