Ray Dalio All Weather Portfolio Withstands the Test

This article is an excerpt from the Shortform summary of "Principles: Life and Work" by Ray Dalio. Shortform has the world's best summaries of books you should be reading.

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What is the Ray Dalio All Weather Portfolio? Why did Dalio set up this portfolio, and did it perform well?

The Ray Dalio All Weather Portfolio is a trust that Dalio set up as a risk parity fund. The All Weather Portfolio was meant to withstand all market conditions.

Keep reading to find out more about the Ray Dalio All Weather Portfolio and its impact.

The Ray Dalio All Weather Portfolio

Previously, Bridgewater introduced the Pure Alpha fund, which is the greatest-returning fund in history. 

Dalio mentions three more funds that Bridgewater introduced, each in response to a specific investment need. One of these is the All Weather Fund or the All Weather Portfolio.

Risk Parity Fund

Dalio set up a trust for his family, and he wanted the wealth to last over as many generations as possible. He had seen firsthand how different market environments could destroy wealth, and how difficult it was to predict such situations. Even the best investors fail to do well in all economic environments, when inflation rises and falls, and when the economy grows and shrinks.

Dalio’s solution was thus to create four investment strategies, each succeeding in a particular environment—rising inflation with rising growth, rising inflation with falling growth, and so forth. By combining these strategies together, this could do well over time, no matter the economic environment. He called this the “All Weather Portfolio.” This All Weather fund is also known as “risk parity.”

In 1996, he created this fund for himself, and he remained the only investor until 2003, when Verizon’s pension fund called asking for something that would do well in all environments. Bridgewater opened the All Weather Portfolio to its outside clients, and by 2015 it had $80 billion under management. The Ray Dalio All Weather Portfolio was a success.

Ray Dalio All Weather Portfolio Withstands the Test

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  • How Ray Dalio lost it all on bad bets, then rebounded to build the world's largest hedge fund
  • The 5-step process to getting anything you want out of life
  • Why getting the best results means being relentlessly honest with everyone you work with

Carrie Cabral

Carrie has been reading and writing for as long as she can remember, and has always been open to reading anything put in front of her. She wrote her first short story at the age of six, about a lost dog who meets animal friends on his journey home. Surprisingly, it was never picked up by any major publishers, but did spark her passion for books. Carrie worked in book publishing for several years before getting an MFA in Creative Writing. She especially loves literary fiction, historical fiction, and social, cultural, and historical nonfiction that gets into the weeds of daily life.

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