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Getting started with the All Seasons Portfolio

Getting started with the All Seasons Portfolio

(This post was updated 12 December 2019 and 30 March 2020)

Learn more about:

  • How I fell in love with the All Seasons Portfolio Strategy
  • What is the All Seasons Portfolio
  • What will I do next? How will I get started?

Alright then. The first blog post of many to come on this blog I am so excited to get this project started.To be honest, I have very much been looking forward for a while to write this first blog post.

It is going to be a great journey to tell you about how I am starting to invest with the All Seasons Portfolio Strategy and building it from scratch with widely available ETFs.

As I want to help as many as possible to begin investing responsibly and with a sensible risk exposure, I will share my journey to try to inspire, educate, and hopefully, get you started as well on switching your spending habits or non-interest bearing bank accounts to accumulating enough wealth to feel secure.

During the Covid-19 coronavirus outbreak, a huge number of investors have realized that they have actually taken way more risk in their portfolios than they were prepared for. For many, it came as a surprise how psychologically difficult it would be to see the portfolio lose so much in value. Until then, it had been easy to be a stock investor during the longest bull market in history, but it did not feelnot so great when the bear market and recession arrived.

Many savers need to learn from the coronavirus crisis and adjust the risk of their portfolios

Therefore, many savers need to learn from the coronavirus crisis and see their investments from a new light and adjust the risk of their portfolios. For most, it will mean to decrease the stocks part in the portfolio, and to hedge the risk of economic downturn using other assets such as gold or government bonds.

With this idea in mind, I started to figure out how I should reshape my portfolio to decrease the amount of risk I was exposed to, while still getting good long-term yield. Risk parity investing fits into this mindset perfectly.

Finding the All Seasons Portfolio

I first came across the All Seasons Portfolio from Tony Robbins’ book Money Master the Game (the book where most savers first encounter this investment strategy, but if you haven’t – read it), where Ray Dalio elaborates how his incredibly successful asset management firm, Bridgewater Associates, manages its clients’ funds.

The Weather Portfolio is one of the company’s most famous products and is a leveraged (loan-induced) portfolio with a mix of assets types that counters market risks in all market environments – be it bull market or bear market – and with limited drawdowns (how much value is lost from the previous top). The strategy is based on macro focused investing and algoritms to achieve extremely good results.

Ray Dalio also developed a simplified portfolio, which requires less maintenance and that gives a hedged value growth by risk parity. This is the portfolio that Dalio presents in Money Master the Game. According to Tony Robbin’s team’s back-testing, the portfolio has made money 86% of each year since 1984 to 2013, and the average annual loss was only just under 2%. That is a phenomenal achievement. This portfolio Ray calls the “All Seasons Portfolio”.

This is the portfolio and strategy that I fell in love with because it works great for regular people and is easy to replicate. There is a lot of uncertainty on the stock market and the financial system, so you better be prepared for whatever event or crisis is thrown at you.

In the book, Ray Dalio shares how even small individuals can achieve a similar portfolio, with the caveat that Ray has many analysts at his hands and they constantly monitor and adjust according to market trends to maximize profits.

But the core portfolio split between assets can easily be replicated by you and I, which means non-professional investors and just any person you could meet on the street. This retail investor portfolio, Ray Dalio calls the “All Season Portfolio”, as it is not as exact as the All Weather Portfolio. The idea of the All Seasons Portfolio is also that it is easy to maintain and only requires minimal efforts by the investor. Rebalancing can be done only once per year, meaning that only annually, you would be selling what you have too much of and buying what you have too little of.

So what I am going to do? Well, I will take the asset split from Ray Dalio’s magic formula, and translate that into low-cost ETFs (Exchange Traded Funds) available to everyone, but not only that – I will do so in the European environment. Most blogs on investing and tips concerning ETFs are unfortunately based in America, so a European perspective is needed. If you are American however,, you can easily follow the same ideas and concepts, but using ETFs available in the United States.

In addition to describing the strategy, I will be blogging about my experiences and how the All Seasons Portfolio Strategy works in practice. I will write monthly portfolio updates and mix it up with some other relevant content about investing as well, so make sure to subscribe to the newsletter in the page footer or on the right hand side of this post.

What is the All Seasons Portfolio?

But how is the All Seasons Portfolio fundamentally built? It is a split between the asset types bonds, stocks, gold and commodities. But they are not split equally within portfolio, but rather according to their relative volatility (risk) when compared to each other. Instead you will get the following split:

Bonds – 55%
Stocks – 30%
Gold – 7.5%
Commodities – 7.5%
Total – 100%

The basis behind this allocation and risk parity investing could be explained extensively, and I will do so piece by piece in my monthly updates.But to simplify it, stocks carry more risk than bonds and should therefore have a smaller proportion in the portfolio to make the portfolio more stable. That is also the basis for why gold and commodities have such a small share in the total portfolio – these asset types are even more volatile than both bonds and stocks.

Another beautiful aspect of the All Seasons Portfolio is that the value of each of these asset types move differently in different investment climates. The basis is that there are fundamentally two variables that move prices: inflation and economic growth.

In higher than expected economic growth, stocks, corporate bonds, gold and commodities would flourish, while government bonds and inflation-linked bonds ( or “TIPS” in the U.S. (Treasury Inflation Protected Securities)) would fall in price. The opposite would be true in lower than expected economic growth of the market.

And if inflation would come in higher than expected, commodities, gold and TIPS would increase in value, while stocks and government bonds would decrease in such a climate. The tables would then be turned if the inflation would be lower than expected.

The biases of each asset class thus be divided into the squares in the below simple matrix:

With these biases in mind, you will end up with a portfolio as shown in the pie chart above when weighing each asset class in accordance with their volatility. The key will then be to rebalance the portfolio through the economic cycles to maintain the correct splits when different assets are performing stronger and others weaker. By doing so, you will automatically buy at a low price and sell at a high price – something that could otherwise be a challenge when focusing on only one asset class, for example when investing in individual stocks.

For a comprehensive description of how each asset class is biased to certain economic environments, I highly recommend the book Balanced Asset Allocation by Alex Shahidi. Here, Shahidi explains the reasons for why the matrix here above looks like it does, for example why stocks do well in an environment of higher than expected economic growth and low inflation, and why inflation-linked bonds perform well in the completely opposite environment.

What to do next – how to get started

Thus, I have spent my holiday doing research on Morningstar – the benchmarking institute for mutual funds and ETFs – finding appropriate ETFs available in Europe that at the same time are very cost-effective – low costs, means that there are more left for you – and I have shaped a couple of example portfolios with average annual management fees of low 0.2%. That is a cheap price for diversification.

I acknowledge there will be some challenges to get the full effect from the All Seasons Portfolio when you start with little money. If you will have 5-6 different ETFs in your portfolio, it will be almost impossible to get the asset splits right because of the prices of each ETF unit.

My advice is therefore to save up to about EUR 4,000, because then you will be able to actually get the splits in % that was described earlier. I learned this the wrong way trying buy only one ETF at the time. I learned that it is best to save until you have EUR 4,000 in you investment account and only then shape your All Seasons Portfolio.

When you have got started, and have a smaller amount invested (less than EUR 20,000), you can rebalance your portfolio by buying those ETFs that you have too little of. For example, if your gold portion has dropped from 7.5% to 5%, you buy gold back to its original share when you make your monthly deposit to your account. No need to sell any other ETF in that case.

When you have a more sizeable portfolio, with a value of more than EUR 20,000, you can start rebalancing your portfolio in suitable intervals by Selling what you have too much of and then buying assets that you have too little of. You can do so either once per year or quarterly – completely up to you.

When you have a greater amount invested, it will be quite cost efficient to rebalance the portfolio by selling and buying, rather than just by adding funds. If you start with this kind of rebalancing too soon, the transaction cost may eat up an unreasonably high proportion of the value added from the rebalancing act itself.

This blog is your and mine joint journey, and we will learn by doing together. Therefore, I will be extremely transparent with my mistakes, personal finances and learned lessons here on the blog. You will see all my returns and Performance of my portfolio through good times and hard times, of which the Covid-19 outbreak was an interesting example.

So join me on this ride, and always feel free to leave a comment with any input, question or feedback that you would have. This is a shared experience where we learn and grow our wealth together.

Read more about my approach and Game Plan here.

Remember to sign up to the newsletter (subscription form in the footer) so that you will receive notifications of new blog posts with ideas and market updates.


Want to learn more about the All Seasons Portfolio Strategy before you get started yourself? Check out this great book where Bridgewater Associates shows the data and statistics for the All Weather Portfolio Strategy works, how small the drawdowns are in comparison to stock indexes and the reasoning behind the splits to achieve risk parity.

This book is a showcase of the data behind the strategy, so it is a good read if you are not yet 100% convinced that this is a wise strategy for non-professional investors like you and me.

Also go have a look at my list of the Best Books on the All Seasons Portfolio and Risk Parity Investing for more inspiration.

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