Shelter from the Storm: The Ray Dalio “All Weather” Portfolio - A Guide for Investors

Ray Dalio, founder of Bridgewater Associates, designed the “All Weather” portfolio to perform across different economic environments—growth or recession, inflation or deflation. The core idea is diversification not just across asset classes, but across economic regimes, recognising that no one knows the future with certainty.

The Philosophy Behind All Weather

Dalio’s framework starts with two key uncertainties:

1. Economic growth (rising or falling)

2. Inflation (rising or falling)

That produces four economic “seasons”:

• Rising growth, falling inflation → equities thrive

• Rising growth, rising inflation → commodities & inflation-linked bonds shine

• Falling growth, rising inflation → inflation-linked bonds and gold do best

• Falling growth, falling inflation → government bonds deliver returns

The portfolio allocates across these asset classes in a risk-balanced way, rather than just splitting by capital. That means more exposure to lower-volatility assets like bonds, and less to higher-volatility ones like equities.

The Classic Allocation

Bridgewater has never published an official recipe, but a widely cited approximation of the All Weather mix is:

• 30% Equities – for growth upside

• 40% Long-term government bonds – for deflationary/recessionary periods

• 15% Intermediate-term government bonds – balancing interest rate risk

• 7.5% Commodities – inflation hedge

• 7.5% Gold – store of value in uncertainty

UCITS ETF Implementation for European Investors

For investors in the UK, UCITS-compliant ETFs provide an accessible way to approximate this approach. These are purely illustrative examples.

Equities (30%)

• iShares Core MSCI World UCITS ETF (SWDA) – broad developed markets exposure

• Vanguard FTSE All-World UCITS ETF (VWRA) – global equity, including emerging markets

Long-Term Government Bonds (40%)

• iShares $ Treasury Bond 20+yr UCITS ETF (IDTL) – exposure to US Treasuries with long duration

• SPDR Bloomberg 15+ Year Gilt UCITS ETF (GLTL) - exposure to longer duration UK debt

Intermediate-Term Government Bonds (15%)

• iShares $ Treasury Bond 7–10yr UCITS ETF (IBTM) – US Treasuries mid-duration

Commodities (7.5%)

• Invesco Bloomberg Commodity UCITS ETF (CMOD/CMOP) – diversified commodity basket

Gold (7.5%)

• Invesco Physical Gold ETC (SGLD) – physically backed gold exposure

• iShares Physical Gold ETC (SGLN) – another liquid UCITS option

(Both of these are classified as complex products, which may not be suitable for everyone. For an alternative, non-complex product, you could look at the miners, via the VanEck Gold Miners ETF (GDGB).)

Key Considerations

• Currency risk: Many bond ETFs are USD-denominated; hedged share classes are available if investors want to limit USD exposure.

• Interest rate sensitivity: With heavy weightings in long-duration bonds, the portfolio can underperform when yields rise.

• Rebalancing: The All Weather portfolio relies on regular rebalancing to maintain its risk balance.

• Not one-size-fits-all: This allocation was designed for US institutional investors. British investors may need to adapt based on their own tax rules, currency exposure, and risk appetite.

Bottom Line

The Ray Dalio All Weather portfolio embodies a simple principle: balance across economic outcomes. While no allocation guarantees success, UCITS-compliant ETFs make it possible for investors to replicate the core philosophy—creating a portfolio designed not for any one forecast, but for all seasons.