All Weather Overview
| CAGR | 8.4% |
|---|---|
| Maximum drawdown | -21.1% |
| Ulcer Index | 4.20 |
| UPI | 1.01 |
| History | 46 years (561 months) |
All Weather is the public formulation of Ray Dalio's answer to a question most portfolios never ask: what do you hold when you have no idea what the economy will do next? It holds 30% U.S. stocks, 40% long-term Treasuries, 15% intermediate Treasuries, 7.5% gold and 7.5% commodities, rebalanced once a year and otherwise left alone. No signals, no forecasts, nothing to monitor.
Dual Momentum Systems tracks it as a benchmark and as one of the three classic all-weather allocations, alongside Harry Browne's Permanent Portfolio and Tyler's Golden Butterfly.
The Backstory
Ray Dalio and the four boxes
Dalio founded Bridgewater Associates in 1975 out of his apartment and built it into one of the largest hedge funds in the world, on a foundation of macro research rather than stock picking.
By the early 1990s he was working on a different problem from the one his flagship fund solved. Bridgewater's main strategy depended on being right about markets. Dalio wanted a portfolio for money that had to survive without him, specifically his own family's, that did not depend on anyone calling the next recession or bull market correctly.
The framework his team arrived at reduces the economy to two variables, each of which can surprise in either direction: growth coming in above or below expectations, and inflation coming in above or below expectations. That gives four boxes, and every asset class has a box it thrives in.
- Growth surprising upward: stocks, corporate credit, commodities.
- Growth surprising downward: long-term Treasuries.
- Inflation surprising upward: commodities, gold, inflation-linked bonds.
- Inflation surprising downward: stocks and long-term Treasuries.
The insight is in the word "surprise". What matters is not whether growth is strong but whether it is stronger than the market already expected, because expectations are already in the price.
Risk parity
The second idea is what separates All Weather from the older all-weather portfolios, owning something for each box is not enough if one box's asset dominates the portfolio's risk. Stocks are several times more volatile than intermediate Treasuries, so a portfolio split evenly by dollars is not split evenly by risk. A conventional 60/40 portfolio puts 60% of its money in equities and close to 90% of its risk there. It is an equity portfolio with a bond garnish.
Risk parity balances the risk contributions instead of the dollars. That is why the published weights look so strange next to a conventional portfolio: 55% in Treasuries and only 30% in stocks is not a bearish view on equities, it is what equalizing risk looks like when one asset is far more volatile than another.
Bridgewater launched All Weather as a fund in 1996, initially for a family office client, and it grew into one of the largest systematic strategies in institutional investing.
How the retail version came about
The weights above are not Bridgewater's. They came from an interview Dalio gave Tony Robbins for his 2014 book on personal finance, in which Dalio described a simplified, unleveraged version an ordinary investor could run. He said at the time that the weights would not be exact or perfect.
That is the version tracked here, and it is worth knowing where it came from. It is a public sketch of an institutional strategy, offered in good faith and never presented as a replica.
What This Is Not
Bridgewater's own All Weather fund differs from the portfolio on this page in two fundamental ways.
It is actively risk-balanced. Positions are sized by how much risk each contributes and resized as volatility and correlations change. The version here holds fixed weights and resets them once a year. The gap shows up most in a volatility spike, where the real fund cuts exposure and this one does not.
It runs levered. Risk parity portfolios are low-volatility by construction, so institutional implementations borrow to bring expected return up to something worth the effort, generally somewhere between 140% and 200% notional. This version uses no leverage at all.
Same underlying idea, far simpler machinery, and no claim to be a replica. Any comparison between the numbers below and Bridgewater's reported fund results is comparing two different things.
How It Works
| Sleeve | Fund | Weight | Environment it serves |
|---|---|---|---|
| U.S. stocks | VOO | 30% | Growth surprising upward |
| Long-term Treasuries | TLT | 40% | Growth surprising downward, falling inflation |
| Intermediate Treasuries | IEF | 15% | The same, with less rate sensitivity |
| Gold | SGOL | 7.5% | Monetary crisis, currency debasement |
| Commodities | PDBC | 7.5% | Demand-driven inflation |
Stocks carry the growth exposure. The two Treasury sleeves carry deflation and falling growth, split across durations so the whole bond position is not at the long end. Gold and commodities carry inflation.
The two inflation hedges are not redundant. Gold responds to monetary crises, currency debasement and fear. Broad commodities respond to demand-driven inflation, when the real economy is running hot. Those arrive at different times and for different reasons, and splitting the 15% between them is doing real work rather than duplicating a bet.
Rebalancing
Once a year, in January. Between resets the weights drift with each sleeve's returns.
Annual rebalancing mechanically trims whatever has run up and adds to whatever has lagged, which is where a meaningful part of any fixed-allocation portfolio's long-run return comes from. See rebalancing and drift bands for the general mechanism.
No signals
Nothing here is timed, ranked or forecast. The holdings are identical in every environment, which is what makes the portfolio holdable for decades and also what makes it unable to react when one of its sleeves stops working.
The Bond Concentration
The thing to understand before holding this portfolio is the bond position: 55% in Treasuries, 40 points of that in long duration.
For four decades that was close to the best trade available in any market. Interest rates fell almost continuously from 1981, long Treasuries rallied for a generation, and the long-run record of this portfolio substantially reflects that tailwind.
In 2022 the pattern reversed. Rates rose sharply, stocks and long Treasuries fell together, and the sleeve meant to protect the portfolio during trouble was the largest single source of the damage. Commodities helped and gold did not fully offset.
That year deserves examination on its own before the forty-year number means much, because it is the environment the published weights handle worst: inflation surprising upward while a bond-heavy portfolio has nowhere to hide. Dalio's framework anticipates that box. The fixed unleveraged weights do not defend it well.
Performance Highlights
Over the full published history, alongside the two other classic all-weather allocations:
January 1980 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| All Weather | +8.4% | -21.1% | 4.20 | 1.01 |
| Golden Butterfly | +8.5% | -17.3% | 3.57 | 1.19 |
| Permanent Portfolio | +7.4% | -15.7% | 3.17 | 0.99 |
| 60/40 | +9.8% | -32.3% | 6.22 | 0.90 |
| S&P 500 | +12.0% | -51.0% | 12.72 | 0.61 |
The third column is the Ulcer Performance Index: return above cash divided by how deep the portfolio went and how long it stayed there. Max Drawdown reports the worst single moment; UPI reports the experience of holding it. Higher is better.
Against 60/40 and the index, All Weather does what it promises: less return, and a much smaller worst decline than either. Against its two peers it is the weakest of the three on risk-adjusted terms, taking the deepest decline of the group while earning about what Golden Butterfly earns and more than the Permanent Portfolio.
The reason is the bond concentration. All three of these portfolios hold long Treasuries, but All Weather holds the most by a wide margin, and the assets that were supposed to offset that position are only 15% of the portfolio between them.
The same five, measured from January 2000:
January 2000 through September 2026, net of trading friction:
| CAGR | Max Drawdown | Ulcer Index | UPI | |
|---|---|---|---|---|
| All Weather | +6.6% | -21.1% | 4.86 | 0.97 |
| Golden Butterfly | +7.8% | -17.3% | 3.63 | 1.63 |
| Permanent Portfolio | +6.7% | -15.7% | 3.34 | 1.45 |
| 60/40 | +6.6% | -32.3% | 7.62 | 0.62 |
| S&P 500 | +8.1% | -51.0% | 15.89 | 0.39 |
The recent window flatters most defensive portfolios, since it contains two equity declines of roughly half. All Weather still beats 60/40 on every measure and still cuts the index's worst decline by well over half.
It also stays behind both of its peers, and its worst decline is identical in both tables, which means its deepest drawdown of the past four decades happened in this window rather than in the 1980s. Given what the portfolio holds, 2022 is the obvious candidate.
Two cautions apply as always. Portions of this history rely on reconstructed data for funds that did not exist for the full period, particularly the commodity sleeve. And a single figure covering four decades says nothing about the order the returns arrived in, which for a portfolio this bond-heavy matters a great deal, since the entire record was earned in a falling-rate era that has ended.
Portfolio Characteristics
- Fixed and passive. The same five sleeves at the same weights forever. No signals, no regime detection.
- Risk-balanced rather than dollar-balanced. The unusual weights come from equalizing risk contributions, not from a bearish view on stocks.
- Bond-heavy. 55% Treasuries, 40 points of it long duration, which is the portfolio's defining exposure and its defining vulnerability.
- Two distinct inflation hedges. Gold for monetary crises, commodities for demand-driven inflation.
- Unlevered. Bridgewater's own fund is not, which is a large part of why its reported results differ.
- Annual rebalancing. Once a year, with drift in between.
- Modest returns by design. Less than an equity portfolio over almost any long stretch, in exchange for a far smaller worst decline.
- Tax-friendly. One rebalance a year and no turnover otherwise make it reasonable in a taxable account.
- Five holdings. Simple enough to run manually and to keep running for decades.
Who It's For
All Weather is designed for investors who want:
- A fixed allocation built around economic environments rather than around asset classes.
- Risk spread by contribution rather than by dollars.
- A ride mild enough to stay on, which matters more than backtests suggest, because a portfolio abandoned at the bottom returns nothing at all.
- Low turnover and reasonable tax treatment.
- Nothing to monitor between Januaries.
It is a poor fit for investors seeking maximum growth, who would be uneasy holding more than half the portfolio in Treasuries, or who expect rising rates over their holding period. Those drawn to the all-weather idea with less duration risk should compare Golden Butterfly and Permanent Portfolio DMS, which pursues the same goal with instruments that do not depend on the rate environment. Investors who want an all-weather profile from an active design should look at Quiet Compounding.
The All Weather framework was developed by Ray Dalio and Bridgewater Associates. The allocation presented here is the simplified public formulation, implemented independently. It is unleveraged and not risk-balanced dynamically, and it is neither Bridgewater's fund nor a replica of it. Dual Momentum Systems is not affiliated with or endorsed by Ray Dalio or Bridgewater Associates.
Past performance, including backtested results, is not indicative of future results. Backtested performance is hypothetical and does not reflect actual trading. Portions of the long-term history rely on reconstructed proxy data for funds that did not exist for the full period. Investors should carefully consider their risk tolerance and consult with a financial advisor.
For the latest details, visit www.DualMomentumSystems.com