Ray Dalio's Simple Mantra for Building an All-Weather Portfolio
Billionaire investor Ray Dalio has revealed his straightforward investing approach to create an all-weather portfolio. This strategy aims to balance risk during turbulent equity markets. Dalio, the founder of Bridgewater Associates, emphasizes investing in 15 good uncorrelated return streams that are risk-balanced.
What Are Uncorrelated Assets?
Uncorrelated assets refer to investments with little or no connection to traditional classes like stocks and bonds. These assets help stabilize a portfolio when markets decline. Over time, Dalio has strongly favored safe-haven options such as gold to achieve this stability.
How Dalio Ensures Investment Returns
In a discussion with Caleb Silver on 'The Investopedia Express' in December 2024, Dalio explained his evaluation process for investment choices. He stated his mantra clearly: "15 good uncorrelated return streams, risk balanced." Dalio believes this method allows him to maintain average returns while reducing risk by up to 80%.
He acknowledged that investing always involves risk. His first step to secure returns is risk balancing, which he calls his "combination basket" or "all-weather portfolio."
Key Considerations for an All-Weather Portfolio
According to Dalio, today's equities market is unpredictable and filled with disruptors. Therefore, he advises building portfolios around all possible economic scenarios. These portfolios should withstand both rising and falling economic growth.
Dalio leans towards specific assets to manage overall risks. He suggests including gold and commodities, long-term bond investments, and a few short-term bonds. This mix helps create a balanced approach in volatile conditions.
Dalio's Recommendation on Gold Allocation
During a conversation with Zerodha co-founder Nikhil Kamath on the WTF podcast in December, Dalio expressed his bullish stance on gold. He recommends allocating 5-10% of a portfolio to gold, but not exceeding 15%. Dalio himself holds the yellow metal.
The 76-year-old investor notes that gold offers a low real annual return of about 1.2%. However, it provides high diversification benefits. Dalio explains, "Because when the other parts of the portfolio do very badly — due to factors like stagflation or debt issues — then gold performs very well."
Recent trends support Dalio's view. Gold and silver have been on a bull run since last year, continuing strongly into the new year. As of January 19, MCX gold prices hit a record high of ₹1,46,328 per 10 grams. Similarly, MCX silver rates surged to a fresh peak of ₹3,19,949 per kg.
Dalio's insights offer a practical framework for investors navigating uncertain markets. His focus on uncorrelated assets and risk balancing provides a clear path to building resilient portfolios.
