Investors looking for a diversified portfolio that performs well in all market conditions have long been drawn to the All Weather Portfolio, a strategy pioneered by Ray Dalio of Bridgewater Associates. Designed to withstand both inflationary and deflationary environments, the All Weather approach seeks to minimize volatility while aiming for consistent long-term returns.
At Validea, we’ve built our version of the All Weather Portfolio based on the core principles of asset class diversification that underpin Dalio’s original concept. The portfolio allocates across U.S. equities, gold, commodities, and long-duration and intermediate-term Treasury bonds. Each of these asset classes tends to perform well in different economic regimes, making the All Weather strategy a compelling option for long-term investors who prioritize consistency and downside protection.
All Weather Portfolio: Asset Class Behavior Across Economic Regimes
| Asset Class | Performs Well In | Why It’s Included |
|---|---|---|
| U.S. Equities | Growth / Disinflation | Capture economic expansion and corporate earnings growth |
| Gold | Inflation / Crisis | Hedge against inflation and currency debasement; safe haven during geopolitical risk |
| Commodities | Rising Inflation / Early Growth | Benefit from rising prices in raw materials and demand during early expansion |
| Intermediate Bonds | Disinflation / Mild Recession | Provide income and tend to perform well when interest rates fall modestly |
| Long-Term Bonds | Deflation / Severe Recession | Strong price gains during sharp interest rate declines and deflationary shocks |
👉 Watch the explainer video here:
Validea’s All Weather Portfolio on YouTube
Current Portfolio Allocation
Here is a breakdown of the current holdings and target weights in Validea’s All Weather Portfolio:
| Ticker | ETF Name | Target Weight | Return Since Inception |
|---|---|---|---|
| SPY | SPDR S&P 500 ETF | 15.0% | +486.8% |
| GLD | SPDR Gold Shares | 7.5% | +380.3% |
| IWM | iShares Russell 2000 ETF | 15.0% | +226.8% |
| IEF | iShares 7–10 Year Treasury Bond ETF | 15.0% | +72.7% |
| TLT | iShares 20+ Year Treasury Bond ETF | 40.0% | +70.7% |
| GSG | iShares S&P GSCI Commodity-Indexed Trust | 7.5% | -47.2% |
This mix balances growth (via large- and small-cap equities), inflation hedges (via gold and commodities), and deflation protection (via Treasury bonds).
Performance: A Smoother Ride Through Market Cycles
While the All Weather Portfolio may lag during strong bull markets, its true strength lies in its resilience during downturns. The chart below compares the All Weather Portfolio to a traditional 60/40 stock-bond portfolio from 2007 through 2025 YTD:
| Year | All Weather | 60/40 Portfolio |
|---|---|---|
| 2007 | 11.1% | 6.0% |
| 2008 | -0.4% | -21.0% |
| 2009 | 1.1% | 17.3% |
| 2010 | 14.5% | 11.7% |
| 2011 | 17.6% | 5.0% |
| 2012 | 7.1% | 11.0% |
| 2013 | 0.3% | 17.5% |
| 2014 | 11.5% | 10.5% |
| 2015 | -4.2% | 1.1% |
| 2016 | 7.8% | 8.3% |
| 2017 | 10.9% | 14.2% |
| 2018 | -3.6% | -2.3% |
| 2019 | 18.2% | 22.0% |
| 2020 | 16.6% | 14.3% |
| 2021 | 6.9% | 16.3% |
| 2022 | -19.5% | -16.2% |
| 2023 | 8.9% | 17.8% |
| 2024 | 3.9% | 15.3% |
| 2025 YTD | 1.2% | 1.7% |
Key highlights:
- In 2008, during the global financial crisis, the All Weather Portfolio lost only -0.4%, compared to -21.0% for the 60/40.
- In 2011, a year marked by volatility and global uncertainty, the All Weather Portfolio returned 17.6% versus 5.0% for the 60/40.
- While it lagged in the recent growth-led bull markets like 2021, its long-term defensive characteristics remain a valuable feature for risk-conscious investors.
Conclusion: Building Resilience Into Your Portfolio
The All Weather Portfolio isn’t designed to outperform every year. Instead, it’s built to perform reasonably well across a wide range of market conditions—and more importantly, to help investors stay invested during turbulent times.
For those seeking a diversified, rules-based approach that doesn’t rely on predicting economic outcomes, the All Weather Portfolio offers an evidence-backed framework worth considering.
