Ray Dalio's All-Weather Portfolio

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jerseyjammer
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Ray Dalio's All-Weather Portfolio

Post by jerseyjammer » Tue Nov 18, 2014 12:23 pm

Hi,

Thought I’d share this with you guys as I look forward to Tony Robbin’s new financial book and interview with Bogle.

Just read the below article and was surprised to see Dalio recommend 65% Fixed Income allocation in his All Weather Portfolio and the article claims an annual net 10% return over the last 30 years.

http://finance.yahoo.com/news/tony-robb ... 19133.html

30% Stock
15% Intermediate Bond
40% Long Term Bond
7.5% Gold
7.5% Commodities

Do you think Dalio made these picks with actively managed funds in mind? Or indexes such as Vanguard? Not sure what was used in the backtesting data.

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Re: Ray Dalio's All-Weather Portfolio

Post by pkcrafter » Tue Nov 18, 2014 1:06 pm

Thanks, interesting portfolio. This from the linked article...

Ray said, we need 30% in Stocks (for instance, the S&P 500 or other indexes for further diversification in this basket).


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

Ignatious P. Daily
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Re: Ray Dalio's All-Weather Portfolio

Post by Ignatious P. Daily » Tue Nov 18, 2014 1:10 pm

jerseyjammer wrote:Hi,

Thought I’d share this with you guys as I look forward to Tony Robbin’s new financial book and interview with Bogle.

Just read the below article and was surprised to see Dalio recommend 65% Fixed Income allocation in his All Weather Portfolio and the article claims an annual net 10% return over the last 30 years.

http://finance.yahoo.com/news/tony-robb ... 19133.html

30% Stock
15% Intermediate Bond
40% Long Term Bond
7.5% Gold
7.5% Commodities

Do you think Dalio made these picks with actively managed funds in mind? Or indexes such as Vanguard? Not sure what was used in the backtesting data.


40% in long term bonds during a 30-year bull market in long term bonds. Its pretty easy to see that the future returns of this portfolio have almost no chance of living up to the last 30-years, even without the principle hit of rising rates.

209south
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Re: Ray Dalio's All-Weather Portfolio

Post by 209south » Tue Nov 18, 2014 1:43 pm

As someone who is at the 'approaching retirement / protecting what I've earned' phase of my investing life, Ray Dalio's comments have been among the more influential. At the end of last year I shifted from `60/40 equities to my current allocation of '25% equities + 10% REITs + 7.5% gold + 2.5% high yield + 50% investment grade bonds (1/2 total bond and munis/ the other half TIPs and international) - while I am presumably sacrificing upside, I sleep better at night and am happy with my version of the 'all-weather' approach.

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Re: Ray Dalio's All-Weather Portfolio

Post by Grt2bOutdoors » Tue Nov 18, 2014 2:49 pm

209south wrote:As someone who is at the 'approaching retirement / protecting what I've earned' phase of my investing life, Ray Dalio's comments have been among the more influential. At the end of last year I shifted from `60/40 equities to my current allocation of '25% equities + 10% REITs + 7.5% gold + 2.5% high yield + 50% investment grade bonds (1/2 total bond and munis/ the other half TIPs and international) - while I am presumably sacrificing upside, I sleep better at night and am happy with my version of the 'all-weather' approach.


You do realize that Ray Dalio advocates holding long duration zero coupon nominal bonds to maturity - there is no principal risk if held to maturity. He also advocates holding inflation linked bonds. His take is just an offshoot of the Larry Portfolio, taking risk on the equities side and holding enough fixed income to tide you over during those rollercoaster rides. I'm not a fan of gold nor international bonds (I might be wrong here, who knows?).
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Re: Ray Dalio's All-Weather Portfolio

Post by Grt2bOutdoors » Tue Nov 18, 2014 2:51 pm

Ignatious P. Daily wrote:
jerseyjammer wrote:Hi,

Thought I’d share this with you guys as I look forward to Tony Robbin’s new financial book and interview with Bogle.

Just read the below article and was surprised to see Dalio recommend 65% Fixed Income allocation in his All Weather Portfolio and the article claims an annual net 10% return over the last 30 years.

http://finance.yahoo.com/news/tony-robb ... 19133.html

30% Stock
15% Intermediate Bond
40% Long Term Bond
7.5% Gold
7.5% Commodities

Do you think Dalio made these picks with actively managed funds in mind? Or indexes such as Vanguard? Not sure what was used in the backtesting data.


40% in long term bonds during a 30-year bull market in long term bonds. Its pretty easy to see that the future returns of this portfolio have almost no chance of living up to the last 30-years, even without the principle hit of rising rates.


If you hold zero coupon nominal to maturity, you know what the nominal return will be from the outset. Investing in equities is always a crapshoot as there is no known return, there is only expected return and even under the best of conditions the actual versus expected can produce quite different outcomes.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Ray Dalio's All-Weather Portfolio

Post by Fixmen » Tue Nov 18, 2014 3:28 pm

His take is just an offshoot of the Larry Portfolio, taking risk on the equities side and holding enough fixed income to tide you over during those rollercoaster rides. I'm not a fan of gold nor international bonds (I might be wrong here, who knows?).


This isn't really a good way of characterizing it. All Weather is just a risk parity portfolio. The theory being that the typical 60/40 portfolio takes on lots of market risk (aka equity risk) and relatively small interest rate and inflation risk since (i.e. a large part of "bonds risk"). This is due to the inherent volatility difference between stocks and bonds. The idea of risk parity is that you shouldn't constrain yourself to these inherent volatilities of the different asset classes. Since most investors are typically comfortable with around a ~10% return, risk parity levers up bonds until they have an approriate volatility profile and use fewer equities. (note: you can construct a risk parity that targets 5% return on 20% return if you wanted to). If implemented correctly, the portfolio should have equal exposure to all different types of risks (e.g. credit, market, inflation, interest rate, commodity, etc) in roughly equal proportions.

This isn't really the same as "taking the risk on the equity side". Also, note that risk parity is pretty difficult to implement as a retail investor since it requires using cheap leverage and a thorough understanding and monitoring of the underlying risk of different asset classes.

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Re: Ray Dalio's All-Weather Portfolio

Post by Howard Donnelly » Tue Nov 18, 2014 6:34 pm

From Tony Robbins' new book, "Money: Master the Game," here is Ray Dalio's "All Seasons" Portfolio:

30% in stocks (for instance, the S&P 500 or other indexes)
15% in intermediate term government bonds (7 to 10 year Treasuries)
40% in long term government bonds (20 to 25 year Treasuries)
7.5% in gold
7.5% in commodities

"Wow! There it was in black and white. Ray had masterfully and graciously provided a game-changing recipe that would impact the lives of millions of Americans." - Tony Robbins

Thoughts?

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Robert T
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Re: Ray Dalio's All-Weather Portfolio

Post by Robert T » Tue Nov 18, 2014 6:46 pm

.
Seems to be in same direction as the permanent portfolio.
.

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Re: Ray Dalio's All-Weather Portfolio

Post by Browser » Tue Nov 18, 2014 6:50 pm

jerseyjammer wrote:Hi,

Thought I’d share this with you guys as I look forward to Tony Robbin’s new financial book and interview with Bogle.

Just read the below article and was surprised to see Dalio recommend 65% Fixed Income allocation in his All Weather Portfolio and the article claims an annual net 10% return over the last 30 years.

http://finance.yahoo.com/news/tony-robb ... 19133.html

30% Stock
15% Intermediate Bond
40% Long Term Bond
7.5% Gold
7.5% Commodities

Do you think Dalio made these picks with actively managed funds in mind? Or indexes such as Vanguard? Not sure what was used in the backtesting data.

Maybe your math is different from mine, but I only see 55% in treasuries in Dalio's allocation.
We don't know where we are, or where we're going -- but we're making good time.

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Re: Ray Dalio's All-Weather Portfolio

Post by Grt2bOutdoors » Tue Nov 18, 2014 8:47 pm

Howard Donnelly wrote:From Tony Robbins' new book, "Money: Master the Game," here is Ray Dalio's "All Seasons" Portfolio:

30% in stocks (for instance, the S&P 500 or other indexes)
15% in intermediate term government bonds (7 to 10 year Treasuries)
40% in long term government bonds (20 to 25 year Treasuries)
7.5% in gold
7.5% in commodities

"Wow! There it was in black and white. Ray had masterfully and graciously provided a game-changing recipe that would impact the lives of millions of Americans." - Tony Robbins

Thoughts?


No need to buy Tony's book then, since Ray has laid it all out in black and white! :D
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Ray Dalio's All-Weather Portfolio

Post by Grt2bOutdoors » Tue Nov 18, 2014 8:47 pm

Fixmen wrote:
His take is just an offshoot of the Larry Portfolio, taking risk on the equities side and holding enough fixed income to tide you over during those rollercoaster rides. I'm not a fan of gold nor international bonds (I might be wrong here, who knows?).


This isn't really a good way of characterizing it. All Weather is just a risk parity portfolio. The theory being that the typical 60/40 portfolio takes on lots of market risk (aka equity risk) and relatively small interest rate and inflation risk since (i.e. a large part of "bonds risk"). This is due to the inherent volatility difference between stocks and bonds. The idea of risk parity is that you shouldn't constrain yourself to these inherent volatilities of the different asset classes. Since most investors are typically comfortable with around a ~10% return, risk parity levers up bonds until they have an approriate volatility profile and use fewer equities. (note: you can construct a risk parity that targets 5% return on 20% return if you wanted to). If implemented correctly, the portfolio should have equal exposure to all different types of risks (e.g. credit, market, inflation, interest rate, commodity, etc) in roughly equal proportions.

This isn't really the same as "taking the risk on the equity side". Also, note that risk parity is pretty difficult to implement as a retail investor since it requires using cheap leverage and a thorough understanding and monitoring of the underlying risk of different asset classes.


Thanks for clarifying that for me.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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Re: Ray Dalio's All-Weather Portfolio

Post by LadyGeek » Tue Nov 18, 2014 8:50 pm

FYI - We have an on-going book thread: New Tony Robbins Book on Financial Freedom
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Re: Ray Dalio's All-Weather Portfolio

Post by Robert T » Thu Nov 20, 2014 6:42 pm

.
Here's a backtest of the Dalio portfolio from Tony Robbins' book in comparison to some others.

1972-2013 - Annualized return/Standard Deviation/Sharpe
9.85%/7.73/0.63 = Dalio All Weather
9.10%/7.83/0.53 = Permanent Portfolio
10.37%/7.59/0.71 = Factor tilted

Dalio All Weather
30% US Stocks (TSM)
15% Intermediate Bonds (5-yr T-Notes)
40% Long-term Bonds
7.5% Gold
7.5% Commodities (GSCI)

Permanent Portfolio
25% US Stocks
25% T-Bills
25% Long-term Bonds
25% Gold

Factor Titled (Value, small cap, momentum, quality, term)
15% FF Large Cap Momentum (similar to MSCI momentum)
15% RAFI Fundamental Pure Small Value
70% Intermediate bonds (5 yr T-notes)

The Dalio portfolio is similar to the permament portfolio (risk parity). Neith had superior return/SD characteristics [simulated over last 40+ years] to a 30:70 factor tilted stock:bond portfolio. There are many ways to construct a portfolio. Choose an approach you can stick with.

Best,

Robert
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Last edited by Robert T on Sun Feb 22, 2015 2:22 am, edited 1 time in total.

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Re: Ray Dalio's All-Weather Portfolio

Post by Call_Me_Op » Fri Nov 21, 2014 8:41 am

The problem with all of these portfolios is they have a lot of government bonds - which experienced a huge run-up over the past 35 years.
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Re: Ray Dalio's All-Weather Portfolio

Post by eolsencreative » Wed Dec 10, 2014 8:18 am

Found Bogleheads after reading Tony Robbins’ book and trying to figure out how to implement the "all-seasons"/"risk parity" portfolio described. (First investment book out of the dozens I've read that's actually made me want to take action.) This community has been extremely helpful in helping me learn more. Would love to live in the Vanguard world exclusively (for ease of management and the low fees). So, I tried to put together a sample “risk-parity”, “all-seasons” portfolio ala Ray Dalio and David Swenson that I could manage exclusively within my Vanguard Roth IRA.

Wanted the Boglehead community’s help in seeing if I’m missing something. Not so much in terms of asset allocation (it seems most of you don’t buy into the gold/commodity allocation for inflation protection). But more specifically, whether or not these vehicles (ETF vs. fund) make the most sense (cost/fee-wise) for the allocation described here?

Stocks – 30%
U.S. Stocks (Vanguard VTI) – 20%
Foreign Stocks (Vanguard VEA) – 5%
Emerging Markets (Vanguard VWO) – 5%
Government bonds – 55%
Total Bond Market (BND) – 40%
TIPS (VTIP) – 15%
Gold
GLD – 7.5%
Commodities
iPath DJP – 7.5%

Thanks so much!

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Re: Ray Dalio's All-Weather Portfolio

Post by General » Wed Dec 10, 2014 9:33 pm

I’m almost done with the book and have found Dalio’s portfolio portion of the book to be some of the most interesting information I have ever read. Some facts from the book:

From 1984 through 2013 the portfolio returned 9.72% net of fees
Made money over 86% of the time(only four down years out of 30 with average loss of 1.9%)
Since 1928 the portfolio only lost money 14 times(which means 73 years of positive returns)
Largest single loss was just -3.93% in 2008(S&P was down 37%)

I would love to hear some more comments from the die hards about the portfolio. How would this stand up to The Three Fund Portfolio…Taylor?

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Re: Ray Dalio's All-Weather Portfolio

Post by Robert T » Sun Feb 22, 2015 6:24 am

.
Here are some additional portfolio comparisons. Few observations:

- Dalio's 'all weather' portfolio has better simulated returns than the Permanent Portfolio
- If you use small value for the stock allocation in Dalio's portfolio it produces fairly impressive 'simulated' returns (P3 in table below).
- If you use gold for the full commodities allocation (following earlier concerns about GSCI simulated returns related to investor impacts on contango/backwardation), results are still good
- Returns seem fairly consistent for some of the sub-periods (periods of high inflation when long-term bonds did badly, and an extended period where gold tanked). Just to note the 12.0% returns for the each of the sub-periods for P3 is not a typo (they were 12.05%, 11.99%, and 12.03% respectively).
- Extending bond duration with a higher commodity allocation (P4 vs. P5), improved mean-variance efficiency over this time period (a similar duration-commodities point made by Larry in one of his books as I recall).
- I tried adding gold stocks instead on gold bullion, but did not find any allocation when it was more efficient.

I know any inclusion/discussion of gold/commodities often becomes emotional. Just presenting, what I found to be interesting results.

P1 = Permanent Portfolio
P2 = Dalio (as per Tony Robins book)
P3 = Dalio with small value for equity allocation
P4 = Dalio with small value for equities, and gold replacing GSCI allocation
P5 = Larry style portfolio
P6 = US Total Stock Market (CRSP1-10)

"High inflation" = 9.2% annualized from 1973-1981 (9 years)
"Gold legal" = in the US, investors could not legally own gold bullion before 1975 (as per Bernstein's book)
"Gold decline" = gold had a -3.1% annualized return for 22 years

Image
Small Value = Dimensional US Small Value 1972-1975, RAFI Fundamental Small Value 1976-2013

FWIW - here are some different views on the inclusion of gold.

From First Eagle


From Buffet - who does not like gold. See letter http://www.berkshirehathaway.com/letters/2011ltr.pdf

From the Permanent Portfolio book

    It is important to remember that when people say gold is doing well, what they often mean is that gold is simply maintaining its value while the value of their currency or other assets are falling. … Gold should not necessarily be thought of as a long-term investment, but as a long-term insurance policy protecting against bad economic events.
.
Last edited by Robert T on Sun Feb 22, 2015 4:12 pm, edited 1 time in total.

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Re: Ray Dalio's All-Weather Portfolio

Post by Howard Donnelly » Sun Feb 22, 2015 8:58 am

Robert T wrote:.
Here are some additional portfolio comparisons. Few observations:

- Dalio's 'all weather' portfolio has better simulated returns than the Permanent Portfolio
- If you use small value for the stock allocation in Dalio's portfolio it produces fairly impressive 'simulated' returns (P3 in table below).
- If you use gold for the full commodities allocation (following earlier concerns about GSCI simulated returns related to investor impacts on contango/backwardation), results are still good
- Returns seem fairly consistent for some of the sub-periods (periods of high inflation when long-term bonds did badly, and an extended period where gold tanked). Just to note the 12.0% returns for the each of the sub-periods for P3 is not a typo (they were 12.05%, 11.99%, and 12.03% respectively).
- Extending bond duration with a higher commodity allocation (P4 vs. P5), improved mean-variance efficiency over this time period (a similar duration-commodities point made by Larry in one of his books as I recall).
- I tried adding gold stocks instead on gold bullion, but did not find any allocation when it was more efficient.

I know any inclusion/discussion of gold/commodities often becomes emotional. Just presenting, what I found to be interesting results.

P1 = Permanent Portfolio
P2 = Dalio (as per Tony Robins book)
P3 = Dalio with small value for equity allocation
P4 = Dalio with small value for equities, and gold replacing GSCI allocation
P5 = Larry style portfolio
P6 = US Total Stock Market (CRSP1-10)

"High inflation" = 9.2% annualized from 1973-1981 (9 years)
"Gold legal" = in the US, investors could not legally own gold bullion before 1975 (as per Bernstein's book)
"Gold decline" = gold had a -3.1% annualized return for 22 years

Image

FWIW - here are some different views on the inclusion of gold.

From First Eagle


From Buffet - who does not like gold. See letter http://www.berkshirehathaway.com/letters/2011ltr.pdf

From the Permanent Portfolio book

    It is important to remember that when people say gold is doing well, what they often mean is that gold is simply maintaining its value while the value of their currency or other assets are falling. … Gold should not necessarily be thought of as a long-term investment, but as a long-term insurance policy protecting against bad economic events.
.

This is very enlightening and helpful. Thank you for putting it all together.

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Re: Ray Dalio's All-Weather Portfolio

Post by nedsaid » Sun Feb 22, 2015 11:58 am

209south wrote:As someone who is at the 'approaching retirement / protecting what I've earned' phase of my investing life, Ray Dalio's comments have been among the more influential. At the end of last year I shifted from `60/40 equities to my current allocation of '25% equities + 10% REITs + 7.5% gold + 2.5% high yield + 50% investment grade bonds (1/2 total bond and munis/ the other half TIPs and international) - while I am presumably sacrificing upside, I sleep better at night and am happy with my version of the 'all-weather' approach.


The idea of portfolio insurance has more appeal to me as I get older. The idea of adding gold and commodities to guard against unexpected events and to perhaps reduce volatility in a portfolio is worth consideration. Larry Swedroe has said that adding commodities allows an investor to extend the maturities of bonds in a portfolio. A way perhaps of reaching a bit for yield.
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Re: Ray Dalio's All-Weather Portfolio

Post by Robert T » Sun Feb 22, 2015 4:07 pm

.
The portfolios posted earlier perform relatively well because of the relatively low correlation of assets in the portfolio over 1972-2013 time period. Here are some observations form the correlation matrix below:

- Bonds of any duration were negatively correlated with SV, more so than with TSM
- Goldman Sachs Commodity Index (GSCI) was more negatively correlated with SV than TSM, although gold had a similar negative correlation with SV and TSM
- T-bills had highest annual correlation with inflation, then gold, then GSCI, although the latter two are not effective inflation hedges IMO (re: the earlier point when the gold price declined at an annualized rate of -3.1% for 22 years, while inflation increased at an annualized rate of +3.8% over this period. Including gold in a portfolio, justified as an expected inflation hedge, is not a good enough reason to include it in a portfolio. The other attributes – a currency that retains value relative to ‘paper money’, and provides some protection during currency crises (macroeconomic instability), is a more justifiable reason for inclusion - IMO.

Image

Historically, combining these assets in a portfolio (particularly gold) provided good results in simulated back-tests. The challenge is looking forward. Gold prices are currently about $1,200/t.oz, close to an historic high. There’s no knowing whether prices will continue to go up, or decline now for 22 years as they did from 1980 to 2001. If they do decline, we are in a very different situation than 1980 for the other assets in the portfolio. For example, US Small Value is more than twice as expensive (on a book-to-market basis), and bond yields are 1/5 or less what they were in 1980. So if gold tanks, together with the low expected returns of stocks and bonds, then the performance of the overall portfolio will be very different from the 1980-2001 period. Obvious, it gold does very well, it may offset some of the lower returns from the other assets. Obviously no guarantees.

Approximate.
Image
Source: Ken French website, Ibbostson Yearbook, iShares website.
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Re: Ray Dalio's All-Weather Portfolio

Post by Bogle_Feet » Sun Feb 22, 2015 6:08 pm

This is a problem.
40% Long Term Bond - way, way, way too much. I'd take 39% and put that in AGG (the total bond market)
7.5% Gold - I'd bring this down to about 2 1/2%
7.5% Commodities - I'd bring this down to about 2 1/2%

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Re: Ray Dalio's All-Weather Portfolio

Post by countmein » Sun Feb 22, 2015 6:34 pm

Robert T wrote:.

Image



This is totally depressing. I think it's time to learn about real estate.

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Re: Ray Dalio's All-Weather Portfolio

Post by Robert T » Mon Feb 23, 2015 6:40 am

countmein wrote:This is totally depressing. I think it's time to learn about real estate.

The message to me is - need to rely more on savings than investment return, pay close attention to expenses (to prevent complete erosion of lower returns), and diversify - globally and across multiple factors.

Interestingly, that according to the linked graph, the real return (price change) of houses in the US (Case-Shiller House price index) between 1980 and 2014 has been close to zero (slightly negative). Thats about what I'm expecting from house purchase - over the long-term, no appreciation in value above rate of inflation. This has been about its has worked out so far. There have been significant increases in real prices of houses in other countries.
http://www.economist.com/blogs/dailycha ... ea65f756e0
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Re: Ray Dalio's All-Weather Portfolio

Post by countmein » Mon Feb 23, 2015 1:47 pm

Robert T wrote:
countmein wrote:This is totally depressing. I think it's time to learn about real estate.

The message to me is - need to rely more on savings than investment return, pay close attention to expenses (to prevent complete erosion of lower returns), and diversify - globally and across multiple factors.

Interestingly, that according to the linked graph, the real return (price change) of houses in the US (Case-Shiller House price index) between 1980 and 2014 has been close to zero (slightly negative). Thats about what I'm expecting from house purchase - over the long-term, no appreciation in value above rate of inflation. This has been about its has worked out so far. There have been significant increases in real prices of houses in other countries.
http://www.economist.com/blogs/dailycha ... ea65f756e0
.


Yes 0% expected cap appreciation. But don't forget the rental yield-- that is the bulk of the return, whether it's imputed or collected rent. I'm not meaning to hijack the thread with a real estate discussion, just pointing out that in an extremely low-return stock/bond environment, it's hard not to look at other things, e.g. real estate (not REITS), especially if you can find something with say 7% or higher yield after expenses. Personally, time permitting, I have decided to take the plunge, look for a property that can usurp a large chunk of my equity allocation (with no mortgage).

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Re: Ray Dalio's All-Weather Portfolio

Post by kenguo » Thu Jun 18, 2015 7:03 am

Thank you so much for this, it's very enlightening

In the light of much debate over the inclusion or not of gold in a portfolio, would anyone happen to have any back test done on these portfolios without gold?

i'm wondering how these portfolio would have performed...

Robert T wrote:.
Here are some additional portfolio comparisons. Few observations:

- Dalio's 'all weather' portfolio has better simulated returns than the Permanent Portfolio
- If you use small value for the stock allocation in Dalio's portfolio it produces fairly impressive 'simulated' returns (P3 in table below).
- If you use gold for the full commodities allocation (following earlier concerns about GSCI simulated returns related to investor impacts on contango/backwardation), results are still good
- Returns seem fairly consistent for some of the sub-periods (periods of high inflation when long-term bonds did badly, and an extended period where gold tanked). Just to note the 12.0% returns for the each of the sub-periods for P3 is not a typo (they were 12.05%, 11.99%, and 12.03% respectively).
- Extending bond duration with a higher commodity allocation (P4 vs. P5), improved mean-variance efficiency over this time period (a similar duration-commodities point made by Larry in one of his books as I recall).
- I tried adding gold stocks instead on gold bullion, but did not find any allocation when it was more efficient.

I know any inclusion/discussion of gold/commodities often becomes emotional. Just presenting, what I found to be interesting results.

P1 = Permanent Portfolio
P2 = Dalio (as per Tony Robins book)
P3 = Dalio with small value for equity allocation
P4 = Dalio with small value for equities, and gold replacing GSCI allocation
P5 = Larry style portfolio
P6 = US Total Stock Market (CRSP1-10)

"High inflation" = 9.2% annualized from 1973-1981 (9 years)
"Gold legal" = in the US, investors could not legally own gold bullion before 1975 (as per Bernstein's book)
"Gold decline" = gold had a -3.1% annualized return for 22 years

Image
Small Value = Dimensional US Small Value 1972-1975, RAFI Fundamental Small Value 1976-2013

FWIW - here are some different views on the inclusion of gold.

From First Eagle


From Buffet - who does not like gold. See letter http://www.berkshirehathaway.com/letters/2011ltr.pdf

From the Permanent Portfolio book

    It is important to remember that when people say gold is doing well, what they often mean is that gold is simply maintaining its value while the value of their currency or other assets are falling. … Gold should not necessarily be thought of as a long-term investment, but as a long-term insurance policy protecting against bad economic events.
.

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Re: Ray Dalio's All-Weather Portfolio

Post by Fat-Tailed Contagion » Tue Sep 29, 2015 11:00 am

Robert T wrote:
countmein wrote:This is totally depressing. I think it's time to learn about real estate.

The message to me is - need to rely more on savings than investment return, pay close attention to expenses (to prevent complete erosion of lower returns), and diversify - globally and across multiple factors.

Interestingly, that according to the linked graph, the real return (price change) of houses in the US (Case-Shiller House price index) between 1980 and 2014 has been close to zero (slightly negative). Thats about what I'm expecting from house purchase - over the long-term, no appreciation in value above rate of inflation. This has been about its has worked out so far. There have been significant increases in real prices of houses in other countries.
http://www.economist.com/blogs/dailycha ... ea65f756e0
.


Thanks for the analysis, Robert.

I have come to a similar conclusion:

1. Asset values are high and expected returns are lower.

2. Lower (expected) yielding negative correlation assets should be viewed more as insurance against negative outcomes than as growth assets.
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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Re: Ray Dalio's All-Weather Portfolio

Post by Bustoff » Sun Oct 11, 2015 8:13 am

Ray Dalio featured on Bloomberg Surveillance today at 1pm (ET).

*original air date Sept.16, 2015

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Re: Ray Dalio's All-Weather Portfolio

Post by small_index » Sun Oct 11, 2015 12:11 pm

Grt2bOutdoors wrote:
209south wrote:... 50% investment grade bonds (1/2 total bond and munis/ the other half TIPs and international) ...

You do realize that Ray Dalio advocates holding long duration zero coupon nominal bonds to maturity - there is no principal risk if held to maturity.

To intrude on you and 209south, I'm curious how Ray Dalio handles rebalancing with zero coupon bonds held to maturity. Zero coupon means no interest for rebalancing, and holding to maturity means no selling to rebalance. Quoting from the article:
Lastly, the portfolio must be regularly rebalanced. Meaning, when one segment does well, you must sell a portion and reallocate back to the original allocation. This should be done at least annually and ...

I'd speculate that maybe he uses a small allocation to a bond fund to allow stock/bond rebalancing, but that's speculation.

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Re: Ray Dalio's All-Weather Portfolio vs. The Three Fund Portfolio?

Post by Taylor Larimore » Sun Oct 11, 2015 1:02 pm

General wrote:I’m almost done with the book and have found Dalio’s portfolio portion of the book to be some of the most interesting information I have ever read. Some facts from the book:

From 1984 through 2013 the portfolio returned 9.72% net of fees
Made money over 86% of the time(only four down years out of 30 with average loss of 1.9%)
Since 1928 the portfolio only lost money 14 times(which means 73 years of positive returns)
Largest single loss was just -3.93% in 2008(S&P was down 37%)

I would love to hear some more comments from the die hards about the portfolio. How would this stand up to The Three Fund Portfolio…Taylor?

General:

The oldest trick in the book is to select a past-period, determine which asset classes outperformed, then recommend that portfolio. Unfortunately, past performance does not forecast future performance--it often forecasts inferior performance when funds return to the median.

There is no single Three Fund Portfolio because its fund allocations are tailored to each individual investor based on their time-frame, risk-tolerance and personal financial situation.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Ray Dalio's All-Weather Portfolio

Post by Dandy » Mon Oct 12, 2015 8:56 am

I don't trust historical rates of returns, especially for portfolios that are fixed income heavy, since the decades long bond bull market is unlikely to provide anything like those returns going forward. It seems to me that it overstates the comfort level of a large fixed income allocation.

I have a large allocation to fixed income but am under no idea that it will provide much help on the return side. It does provide modest income and ballast against the riskier equity allocation. That is one reason I don't put all my fixed income in an intermediate bond fund. Some TIPS, some CDs and some short term bond funds.

And it speaks to getting to your number by saving more and that at least in early retirement still living somewhat below your means. It also might mean having an equity allocation a few points higher than planned.

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Re: Ray Dalio's All-Weather Portfolio

Post by wxyz » Mon Oct 12, 2015 10:44 am

My SIMPLE opinion....INSANITY. Only thing I would want to know is the record of this portfolio over the past 5 years. I dont care how it does going back to 1972 when in theory 40% of the portfolio is locked in to 30 year treasuries that are returning anywhere from 8% to a high of 15+% from 1971 to 1991. Ancient history and NOT relevant to today. I suspect that the majority of the so called historical return of this portfolio is due to the massive interest rates of the 1970's and 1980's. Not likely today. As to commodities and gold...forget it, more insanity.

No way I am going to lock in 30 year treasuries to maturity at the rates of today for 40% of my portfolio. I have seen hundreds of similar examples over the years that look so good on paper and might even work for the one person that is touting them. But will it work for anyone else over the long term....very unlikely.

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Re: Ray Dalio's All-Weather Portfolio

Post by Fat-Tailed Contagion » Sun Oct 18, 2015 12:46 pm

http://www.bloomberg.com/news/videos/20 ... how-09-16-

Recent interview with Dalio I found informative.
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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Re: Ray Dalio's All-Weather Portfolio

Post by stemikger » Sun Oct 18, 2015 12:53 pm

Fat-Tailed Contagion wrote:http://www.bloomberg.com/news/videos/2015-09-17/dalio-on-fed-policy-hedge-funds-china-full-show-09-16-

Recent interview with Dalio I found informative.


Thanks for posting this. I just started to watch it, but I can't get to it now. On a side note, I hope I can overlook Tom Kean (don't know who he is) one of the hosts very bad choice of suits. He looks like a big man dressed like Pee Wee Herman. It literally looks like he is dressed for Halloween. :oops:
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!

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Re: Ray Dalio's All-Weather Portfolio

Post by Fat-Tailed Contagion » Sun Oct 18, 2015 5:50 pm

stemikger wrote:
Fat-Tailed Contagion wrote:http://www.bloomberg.com/news/videos/2015-09-17/dalio-on-fed-policy-hedge-funds-china-full-show-09-16-

Recent interview with Dalio I found informative.


Thanks for posting this. I just started to watch it, but I can't get to it now. On a side note, I hope I can overlook Tom Kean (don't know who he is) one of the hosts very bad choice of suits. He looks like a big man dressed like Pee Wee Herman. It literally looks like he is dressed for Halloween. :oops:


You're welcome. And I agree, it's hard not to feel like strangling some of these guys when they interrupt with stupid sarcastic jibs.

It appears to me that Dalio has truly mastered the financial realm ("the game").
“The intelligent investor is a realist who sells to optimists and buys from pessimists.” | ― Benjamin Graham, The Intelligent Investor

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Re: Ray Dalio's All-Weather Portfolio

Post by eddiepmartin » Fri Jan 22, 2016 1:49 am

209south wrote:As someone who is at the 'approaching retirement / protecting what I've earned' phase of my investing life, Ray Dalio's comments have been among the more influential. At the end of last year I shifted from `60/40 equities to my current allocation of '25% equities + 10% REITs + 7.5% gold + 2.5% high yield + 50% investment grade bonds (1/2 total bond and munis/ the other half TIPs and international) - while I am presumably sacrificing upside, I sleep better at night and am happy with my version of the 'all-weather' approach.



Hello 209south: curious; how is your "all-weather " portfolio doing now? was 2015 performance better that the 60/40?
Wi$hing you the be$t of good buy$

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Re: Ray Dalio's All-Weather Portfolio

Post by Dulocracy » Fri Jan 22, 2016 10:55 am

So, 30% stocks, 55% bonds, and 15% alternative investments....

30% stock is just too low for most people in an accumulation phase, and likely for some in the decumulation phase.

Bonds did perform well over the past 30 years in a falling interest rate environment. What will they do in a rising interest rate environment or stagnant interest rate environment? Mitigate risk, but certainly not perform as well as they did over the last 30 years in real return.

Commodities may do well in the near future, but I would not have them in my long term portfolio. Sure, they are poised to do well now, but historically, they are volatile and not as productive as stocks.

Gold. Gold is volatile as can be, and buying gold is more like gambling than any other aspect of investing.

Personally, I would recommend against this portfolio.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Ray Dalio's All-Weather Portfolio

Post by 209south » Thu Jan 28, 2016 10:20 pm

eddiepmartin, great question! I haven't compared my 2015 results to a 60/40 portfolio, but I do know the year was mediocre for me. C'est la vie, I'm comfortable with my allocations and haven't shifted anything - I continue to like the 'all weather' hypothesis, but we'll see where I am in ten years!

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Re: Ray Dalio's All-Weather Portfolio

Post by azanon » Mon Mar 14, 2016 8:54 pm

Dulocracy wrote:Bonds did perform well over the past 30 years in a falling interest rate environment. What will they do in a rising interest rate environment or stagnant interest rate environment? Mitigate risk, but certainly not perform as well as they did over the last 30 years in real return.

Commodities may do well in the near future, but I would not have them in my long term portfolio. Sure, they are poised to do well now, but historically, they are volatile and not as productive as stocks.

Gold. Gold is volatile as can be, and buying gold is more like gambling than any other aspect of investing.

Personally, I would recommend against this portfolio.


Don't forget about stocks. S&P 500 P/E 10 is 25.5, which is nosebleed high, and predicts very low long term returns relative to historical performance. (source: latest entry shiller data http://www.econ.yale.edu/~shiller/data.htm )

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Re: Ray Dalio's All-Weather Portfolio

Post by Dulocracy » Tue Mar 22, 2016 9:50 am

azanon wrote:
Dulocracy wrote:Bonds did perform well over the past 30 years in a falling interest rate environment. What will they do in a rising interest rate environment or stagnant interest rate environment? Mitigate risk, but certainly not perform as well as they did over the last 30 years in real return.

Commodities may do well in the near future, but I would not have them in my long term portfolio. Sure, they are poised to do well now, but historically, they are volatile and not as productive as stocks.

Gold. Gold is volatile as can be, and buying gold is more like gambling than any other aspect of investing.

Personally, I would recommend against this portfolio.


Don't forget about stocks. S&P 500 P/E 10 is 25.5, which is nosebleed high, and predicts very low long term returns relative to historical performance. (source: latest entry shiller data http://www.econ.yale.edu/~shiller/data.htm )


I guess I think of it like hiring employees. Right now, stocks are the steady and slow employee. The work will get done, just not as quickly as you want. Commodities are the employee that may or may not show up for work at all. Gold is the employee that is on speed: He may be really productive, or he may shank you in the back with a screwdriver... you don't know.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Ray Dalio's All-Weather Portfolio

Post by afan » Tue Mar 22, 2016 6:44 pm

I suppose one could have comparable return from long bonds if we move to a decades long period of continuously declining negative interest rates. Seems like a stretch. Absent that it is hard to see how bonds could reproduce their performance of the last 30 years.

But if we are choosing which asset mix would have been optimal over the last 30 years, why pick "stocks"? Why not pick the single best performing stock over that period and recommend it going forward? Or a portfolio that chooses the single best stock each year, in hindsight? Same for bonds. As long as we are looking backwards, let's really look back for optimal allocations.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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Re: Ray Dalio's All-Weather Portfolio

Post by Dulocracy » Wed Mar 23, 2016 2:02 pm

afan wrote:I suppose one could have comparable return from long bonds if we move to a decades long period of continuously declining negative interest rates. Seems like a stretch. Absent that it is hard to see how bonds could reproduce their performance of the last 30 years.

But if we are choosing which asset mix would have been optimal over the last 30 years, why pick "stocks"? Why not pick the single best performing stock over that period and recommend it going forward? Or a portfolio that chooses the single best stock each year, in hindsight? Same for bonds. As long as we are looking backwards, let's really look back for optimal allocations.


I do not look back for optimal results. I look back to see behavior patterns. I do not like the behavior pattern of any alternative investment except REITs. I am not opposed to commodities or gold. I am opposed to asset classes that tend to behave in wild and unpredictable manners in such a way that you cannot say something like "X tends to..." You can say bonds tend to... REITs tend to.... and Stocks tend to...., but I do not feel that I can say the same thing about gold. (Except that it tends to be erratic.)
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Ray Dalio's All-Weather Portfolio

Post by azanon » Wed Mar 23, 2016 7:03 pm

Dulocracy wrote:I guess I think of it like hiring employees. Right now, stocks are the steady and slow employee. The work will get done, just not as quickly as you want. Commodities are the employee that may or may not show up for work at all. Gold is the employee that is on speed: He may be really productive, or he may shank you in the back with a screwdriver... you don't know.


If you view, judge, and make decisions about asset classes in isolation, that's spot on. Gold and commodities suck in isolation. Stocks, even at horrible valuations, will eventually find their way to generous real return, even if you have to wait about 10-15 more years to get there.

What I find attractive about gold and commodities is how they work in a portfolio. There's a beauty in the mathematics of an asset class that might have low returns, but is highly volatile in a relatively uncorrelated way relative to "core" asset classes, namely stocks and bonds. It is mind blowing in a way, that one can significant profit from an asset class that really doesn't make much of anything on its own. And all the while lower portfolio volatility at the same time. How do I like them apples? I'll take it and get over the fact that their isolation return is pretty bad.

I want my portfolio to go as high as possible, in as low of volatile way as possible. I'm willing to pay the price of almost knowing with certainty one or maybe two of my individual asset classes will typically have a bad year.

If you want to see this in action, give the calculators at www.portfoliocharts.com a try. Make sure and try adding a little gold or commodities to your portfolio and let me know if you like the end result.... :mrgreen:

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Re: Ray Dalio's All-Weather Portfolio

Post by David C » Wed Mar 23, 2016 9:02 pm

Does anyone know how the all weather portfolio did in 2015?

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Re: Ray Dalio's All-Weather Portfolio

Post by lack_ey » Wed Mar 23, 2016 9:08 pm

David C wrote:Does anyone know how the all weather portfolio did in 2015?


https://www.portfoliovisualizer.com/bac ... TBills3=25

Click annual returns. The way I've interpreted it and set it up (20% US stock, 10% international stock), it returned -3.5% nominal in 2015.

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Re: Ray Dalio's All-Weather Portfolio

Post by Dulocracy » Tue Apr 05, 2016 8:55 am

azanon wrote:
What I find attractive about gold and commodities is how they work in a portfolio....

If you want to see this in action, give the calculators at http://www.portfoliocharts.com a try. Make sure and try adding a little gold or commodities to your portfolio and let me know if you like the end result.... :mrgreen:


I used portfoliovisualizer, as I am familiar with it. I my portfolio as 100% stock. 90% stock 10% bonds. 80% stock 10% bonds 5% gold 5% commodities. Starting amount 100,000. Adding 15,000 per year. Rebalancing: annual.

100% stock had the best returns.
90% stock, 10% bonds had the second best return
80% stock, 10% bonds, 5% gold, 5% commodities had the worst return of the three

In fairness, my actual stock bond ratio is 87/13, but I was lazy with the math. I used total bond for the bonds, as what I am actually doing is not easy to replicate, but a reasonable person would use total bond. Also, a nice boglehead did the math for me and what I am doing gets me a slightly better return than total bond, which makes it worth the complexity. Getting bogged down in that detail is somewhat irrelevant, however.

As far as how gold and commodities work in an accumulation portfolio, I disagree with what you have stated. I do not think that they work well. Some very smart people basing their findings on really well researched data also think that gold and commodities should not be in a portfolio. Several boglehead books have been written on it. Larry Swedroe and Rick Ferri, both slice and dicers in their books, both recommend against using gold and commodities in their respective books. Larry actually had a book on alternative investments wherein he went into great detail about why these do NOT work in a portfolio.

If someone is bound and determined to have gold and commodities, I would not recommend them as a part of the portfolio, but as "play money" or extra money. That is, meet your 15% or whatever your savings goal is. If you must add these asset classes, use only money that is not a part of your written plan. I have admittedly done this by using my rewards from my Fidelity 2% back card to get shares of FM, a frontier market stock holding lots of stock in Nigerian Beer. If it goes somewhere, that is fun. If it flops, it was only my cash back. I would never use the core portfolio for this (or for gold or commodities).
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Ray Dalio's All-Weather Portfolio

Post by azanon » Tue Apr 05, 2016 1:13 pm

Dulocracy wrote:
azanon wrote:
What I find attractive about gold and commodities is how they work in a portfolio....

If you want to see this in action, give the calculators at http://www.portfoliocharts.com a try. Make sure and try adding a little gold or commodities to your portfolio and let me know if you like the end result.... :mrgreen:


I used portfoliovisualizer, as I am familiar with it. I my portfolio as 100% stock. 90% stock 10% bonds. 80% stock 10% bonds 5% gold 5% commodities. Starting amount 100,000. Adding 15,000 per year. Rebalancing: annual.

100% stock had the best returns.
90% stock, 10% bonds had the second best return
80% stock, 10% bonds, 5% gold, 5% commodities had the worst return of the three

In fairness, my actual stock bond ratio is 87/13, but I was lazy with the math. I used total bond for the bonds, as what I am actually doing is not easy to replicate, but a reasonable person would use total bond. Also, a nice boglehead did the math for me and what I am doing gets me a slightly better return than total bond, which makes it worth the complexity. Getting bogged down in that detail is somewhat irrelevant, however.


I noticed you focused on and compared only returns. If returns are all you care about, gold or commodities wrapper is not for you.

I care about risk adjusted return. I search for a sweet spot of risk-adjusted return. That's where your alternatives come in to help.

As far as how gold and commodities work in an accumulation portfolio, I disagree with what you have stated. I do not think that they work well. Some very smart people basing their findings on really well researched data also think that gold and commodities should not be in a portfolio. Several boglehead books have been written on it. Larry Swedroe and Rick Ferri, both slice and dicers in their books, both recommend against using gold and commodities in their respective books. Larry actually had a book on alternative investments wherein he went into great detail about why these do NOT work in a portfolio.


Larry Swedroe actually not only supports commodities being in a portfolio, but also commodities actually made the top tier ("the good") in the exact book that you referenced. So since you specifically mentioned him as someone who you'd want to support the position, you've got it!

If someone is bound and determined to have gold and commodities, I would not recommend them as a part of the portfolio, but as "play money" or extra money. That is, meet your 15% or whatever your savings goal is. If you must add these asset classes, use only money that is not a part of your written plan. I have admittedly done this by using my rewards from my Fidelity 2% back card to get shares of FM, a frontier market stock holding lots of stock in Nigerian Beer. If it goes somewhere, that is fun. If it flops, it was only my cash back. I would never use the core portfolio for this (or for gold or commodities).


I think considering any portion of your portfolio to be "play money" is irresponsible. I think any money that you invest, should be invested responsibly.

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Re: Ray Dalio's All-Weather Portfolio

Post by Clive » Tue Apr 05, 2016 2:31 pm

azanon wrote:...What I find attractive about gold and commodities is how they work in a portfolio. There's a beauty in the mathematics of an asset class that might have low returns, but is highly volatile in a relatively uncorrelated way relative to "core" asset classes, namely stocks and bonds. It is mind blowing in a way, that one can significant profit from an asset class that really doesn't make much of anything on its own. ...

Best looked at as a barbell IMO. Gold is a form of zero coupon inflation bond, stocks are a form of variable coupon inflation bond. A barbell of the two broadly comparing to a bond bullet. https://www.portfoliovisualizer.com/bac ... entage=0.0

Instead of 50/50 stock/bond, 72/25 stock/gold https://www.portfoliovisualizer.com/bac ... entage=0.0

A primary benefit is that both stocks and gold can be held in low/no dividend/interest form. When inflation is in double digits and taxation as high as 95%, being able to roll up capital gains instead of enduring returns of highly taxed capital/interest will be worth its weight in gold :)

https://en.wikipedia.org/wiki/History_o ... ed_Kingdom The highest rate of income tax peaked in the Second World War at 99.25%. It was then slightly reduced and was around 90% through the 1950s and 60s.

UK 1974/75 when inflation was running at 25% and T-Bills were yielding 12.5%, but some taxpayers were paying 80% base rate and a further 15% unearned income tax (95% total), amounted to in effect a -25% real loss even when holding 'safe' T-Bills ... and then next year inflation slowed to 16%, T-Bills 11% ... but still highly taxed.

For low/no dividend stocks combined with gold (no interest), taxflation risk could be deferred/avoided as capital gains aren't taxed until realised (asset sold).

When you lend (buy treasury bonds) to (from) someone (treasury) - who can tweak interest rates and taxes, don't be surprised if the house (treasury) wins.

If you're lucky those that show historic relative performance might adjust to account for inflation. Much less often do you see historic rewards adjusted for both inflation and taxation (taxflation).

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Re: Ray Dalio's All-Weather Portfolio

Post by Dulocracy » Wed Apr 13, 2016 9:49 am

azanon wrote:Larry Swedroe actually not only supports commodities being in a portfolio, but also commodities actually made the top tier ("the good") in the exact book that you referenced. So since you specifically mentioned him as someone who you'd want to support the position, you've got it!


You are correct. It is gold both recommend against, sorry. Commodities, Rick, Taylor, and a slew of other authors recommend against on this site. Larry is the outsider on the commodity issue, but he recommends this category only as insurance, as he has elaborated on this website.

The point remains, however, that the drag on the portfolio is significant enough during every time period that I have tried, that I do not think commodities or gold's benefit to the portfolio outweighs the drag created. Further, the benefit appears to be more for those who may not buy and hold for longer periods of time.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

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Re: Ray Dalio's All-Weather Portfolio

Post by azanon » Wed Apr 13, 2016 10:02 am

Dulocracy wrote:You are correct. It is gold both recommend against, sorry. Commodities, Rick, Taylor, and a slew of other authors recommend against on this site. Larry is the outsider on the commodity issue, but he recommends this category only as insurance, as he has elaborated on this website.

The point remains, however, that the drag on the portfolio is significant enough during every time period that I have tried, that I do not think commodities or gold's benefit to the portfolio outweighs the drag created. Further, the benefit appears to be more for those who may not buy and hold for longer periods of time.


So for Gold then, the applicable expert (among many others) is in the thread title; Mr. Ray Dalio. #1 Hedge fund manager, 15.6 billion net worth and, in short, an elite investing resume. By all means, just downgrade me to nothing more than a messenger that understands Dalio's reasoning for using gold in a portfolio.

I didn't have the time to go back an re-read what was already said in this thread, but I'm still at a loss for what drag you're talking about. Go to portfoliocharts.com or portfolioanalyzer.com, add a nice chuck of gold, and watch 1. your portfolio return go up 2. your standard deviation go down 3. Sharpe and Sortino ratio go up. Those are all good things. The real bottom line, is you're claiming there's drag, yet every calculator I've used shows the opposite; they boost returns.

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