The All-Weather Portfolio

In several other posts I've discussed stocks, the importance of building a strong portfolio, having a strong financial position and budgeting – all so you can invest in real estate. But sometimes stocks are slow. Sometimes you don't know what to do. Stocks can be complicated. They don't teach stocks in school. Maybe your mom and dad didn't teach you about the market (mine didn't!).

Fact is most people are kind of clueless. “What do I do? Oh, I've heard about this new stock tip, buy Apple and Google. Amazon's going up. There’s a new pot stock. What about Cryptos?!?!?”

I mean, all these things come up. So, what's a guy or gal to do? Well, I'll give you one answer and I didn't create this. I'm stealing this and the reason I'm stealing it is because it's brilliant.

Ray Dalio runs Bridgewater Associates. It's the most successful hedge fund in the world. Over the past 30 or 40 years Ray has only lost money twice. And those two years he lost money, the average loss was ~2%. To put that in perspective, the S&P 500 went down over 50% in the 2008-2009 recession and the infamous “flash crash” of 1987 saw a ~10% drop in one day! One Day!

Now do you agree Ray is brilliant? He has a lot of the research behind this strategy in Tony Robbins book Money Master the Game, which is where I first learned about Ray. That book is where you can go to get more information about the research if you’d like.

I’m going to share the portfolio Ray uses – he does some other things with options, but it’s essentially the same. He calls it the All-Weather Portfolio because it protects you, in all conditions – when equities are up or down, interest rates are up or down, inflation's up or down. This portfolio balances all market conditions out. Ray (and others) have tested this strategy over the past hundred years and it's out-performed other portfolios almost every time.

If you guys know anything about a guy, Warren Buffett, he says, “Rule #1 – don't lose money. Rule #2 – refer back to Rule #1.” This is a portfolio that you can utilize yourself to minimize times when you lose money, and simultaneously maximize your long-term gains. I even put on the stock symbols in the table below to make it easy for you.

Percentage of Portfolio

Fund Description

Ticker Symbol

40%

Long Term Bonds

TLT

30%

Total Stock Market

VTI

15%

Intermediate Term Bonds

IEF

7.5%

Gold

GLD

7.5%

Commodities

DBC

There you have it – that’s the All-Weather portfolio. Let's just walk through it briefly.

40% of your portfolio is in long term bonds via the iShares Barclays 20+ Year Treasury Bond, ticker symbol TLT. The next part of the portfolio is 30% stocks via the Vanguard Total Stock Market ETF, ticket symbol VTI. Then 15% in intermediate term bonds via the iShares Barclays 7-10 Year Treasury Bond Fund. The final two pieces of the portfolio are each 7.5% - Gold via the gold ETF GLD and commodities via PowerShares DB Commodities Index Tracking Fund DBC.

To make it even easier let’s hypothetically say you have $10,000 in your total portfolio and you want to implement this strategy. Your portfolio will look like the below:

• $4,000 in TLT
• $3,000 in VTI
• $1,500 in IEF
• $750 in GLD
• $750 in DBC

If you’re unsure about the ticker symbols, just look them up in your Vanguard account or on Google.

I’m writing this because most of us were never taught investing in school (I know I wasn't!) and don't know what to do, but don't let that be an excuse. I've heard it time and time again, “well, I just don't know how to get started. I don't know what to do.”

There's your portfolio. I just shared it with you. Now get started. Open a Vanguard account. If you don't know how to do it comment below or shoot me an email/DM. I'll walk you through it personally because you must get started early and use compound interest to your advantage – but only if you start early.

The guy or gal who starts his/her 20s has to save way less than the guy or gal in his/her 40s.

What do you think?

What portfolio are you utilizing right now? Do you even have a strategy?

I hope you guys know that when I write about finances, I'm not just picking numbers out of a hat. These are the strategies I utilize myself, that I've researched extensively, that experts utilize. This isn’t created in some backwoods place next to the meth in the bathtub. These are legitimate strategies that the wealthy use. And I know it's hard to believe. But there are people who want to make things much more complicated because they can sell you more complicated products. That's what the financial advisers want. Why would they give it to you simply when they can sell it to you in a complex package?