Ray Dalio's all weather portfolio

sixpence.

Thrugelmir said:

sixpence. 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.

He has studied the market for years and come up with this. He does seem to know what he's talking about in interviews. This can't be simplistically opposed with the "historical gains does not indicate future gains" argument as he has done lots of conscientious research into what leads to economic growth / decline. I am inclined to adopt some methods, at least, from his approach. These are my current feelings. 

Investors in the US have only needed to hold the S&P 500 to achieve a 10% return on equities. No need as a consequence to expose themselves to additional risk.

I dont understand what you're arguing here... that the Dalio portfolio is better suited to US investors? Or that US investors are better off 100% in equity?  

Thrugelmir

sixpence. said:

Thrugelmir said:

sixpence. 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.

He has studied the market for years and come up with this. He does seem to know what he's talking about in interviews. This can't be simplistically opposed with the "historical gains does not indicate future gains" argument as he has done lots of conscientious research into what leads to economic growth / decline. I am inclined to adopt some methods, at least, from his approach. These are my current feelings. 

Investors in the US have only needed to hold the S&P 500 to achieve a 10% return on equities. No need as a consequence to expose themselves to additional risk.

I dont understand what you're arguing here... that the Dalio portfolio is better suited to US investors? Or that US investors are better off 100% in equity?  

Not arguing anything. Simply remaining factual. 

Why would the suggested portfolio apply to anybody else other than US investors? 

My comment above answers why 100% exposure to equities for US investors wasn't considered a neccessity. 

Sailtheworld

sixpence. 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.

He has studied the market for years and come up with this. He does seem to know what he's talking about in interviews. This can't be simplistically opposed with the "historical gains does not indicate future gains" argument as he has done lots of conscientious research into what leads to economic growth / decline. I am inclined to adopt some methods, at least, from his approach. These are my current feelings. 

Maybe I just don't understand what he's trying to achieve. Take the 25% allocation to equities for example - for a 20 year old looking to retire in 50 years that seems far too low. They don't need to weather a downturn by holding bonds - they need to keep buying equities and be grateful they've so much human capital left in the bank. A 20 year old needs absolutely zero gold I would've thought.

A 20 year old spending decades investing like a 70 year old is going to find that's pretty bad for their wealth. A 20 year old and 70 year old want different things from investing - doesn't it seem unlikely that both of them doing the same thing is going to achieve that?

sixpence.

Thrugelmir said:

Why would the suggested portfolio apply to anybody else other than US investors? 

Why wouldn't it though? 

sixpence.

Sailtheworld said:

Maybe I just don't understand what he's trying to achieve. Take the 25% allocation to equities for example - for a 20 year old looking to retire in 50 years that seems far too low. They don't need to weather a downturn by holding bonds - they need to keep buying equities and be grateful they've so much human capital left in the bank. A 20 year old needs absolutely zero gold I would've thought.

A 20 year old spending decades investing like a 70 year old is going to find that's pretty bad for their wealth. A 20 year old and 70 year old want different things from investing - doesn't it seem unlikely that both of them doing the same thing is going to achieve that?

He is trying to achieve almost constant growth, I think, whilst avoiding downturns. There's a lot of youtube videos with investors discussing how Dalio's portfolio basically always goes up because of the asset allocation. And when it goes down, it's not by much. The example quirky showed a few posts back illustrates this as true. 
It doesn't directly consider age allocation. I suppose a 20 year old go up higher in equity and lower in bonds or commodities, but the ideology behind the portfolio remains the same. 

Sailtheworld

sixpence. said:

Sailtheworld said:

Maybe I just don't understand what he's trying to achieve. Take the 25% allocation to equities for example - for a 20 year old looking to retire in 50 years that seems far too low. They don't need to weather a downturn by holding bonds - they need to keep buying equities and be grateful they've so much human capital left in the bank. A 20 year old needs absolutely zero gold I would've thought.

A 20 year old spending decades investing like a 70 year old is going to find that's pretty bad for their wealth. A 20 year old and 70 year old want different things from investing - doesn't it seem unlikely that both of them doing the same thing is going to achieve that?

He is trying to achieve almost constant growth, I think, whilst avoiding downturns. There's a lot of youtube videos with investors discussing how Dalio's portfolio basically always goes up because of the asset allocation. And when it goes down, it's not by much. The example quirky showed a few posts back illustrates this as true. 
It doesn't directly consider age allocation. I suppose a 20 year old go up higher in equity and lower in bonds or commodities, but the ideology behind the portfolio remains the same. 

A twenty year old 100% in equities might expect/ hope for a 4% annualised  real return over 50 years with, say, a 10% standard deviation. The all-weather portfolio might achieve 2% year in year out. Made up numbers to make a point but a 20 year old would be crackers to trade return for reduced volatility. A 70 year old would be delighted with the all-weather portfolio.

I'd go with the Lifestrategy wording rather than all-weather i.e. this product is suitable for people wishing to hold 25% equities, 7.5% gold etc. Ray doesn't know what weather people are trying to shelter from because it changes from person to person.

thegentleway

Sailtheworld said:

He's cleverer than I thought. He know where my other assets are housed and how these might change with the 'seasons', he knows how many investment seasons I have ahead and he even knows my appetite for risk.

I don't particularly have a view on the components but all-weather implies a generic suitability which is just nonsense.

I don't think all weather implies generic suitability. An all weather fund is a fund that tends to perform reasonably well during both favorable and unfavorable economic and market conditions. It's suitable for people who are looking for their investments to be able to weather a downturn.

sixpence.

I think if you look at the data, you'll find Dalio's returns are a bit better than that. 
Also you talk about a 10% standard deviation but equities can drop 50-70% during a recession. At one point, Dalio's portfolio only dropped -3%. 
I agree that it differs from person to person! That's a good point. I like the principle behind his strategy though. 

Sailtheworld

thegentleway said:

Sailtheworld said:

He's cleverer than I thought. He know where my other assets are housed and how these might change with the 'seasons', he knows how many investment seasons I have ahead and he even knows my appetite for risk.

I don't particularly have a view on the components but all-weather implies a generic suitability which is just nonsense.

I don't think all weather implies generic suitability. An all weather fund is a fund that tends to perform reasonably well during both favorable and unfavorable economic and market conditions. It's suitable for people who are looking for their investments to be able to weather a downturn.

More for older people then?

Thrugelmir

sixpence. said:

Thrugelmir said:

Why would the suggested portfolio apply to anybody else other than US investors? 

Why wouldn't it though? 

I'll leave that to you to figure out.