![]() The major revision involves applying leverage and dynamically adjust it based on volatility. For the commodity issue, I will just not use it (a really simple solution). I have been implementing it for about 2 years (even, or should I say especially, during the 2020 March turmoil). I will elaborate on my own financial situation and investment goals at the end so you can evaluate whether this approach applies to you. ![]() At this point, I finally figured out a revision that I am comfortable with for the long run. AWP With Dynamic Leveragingīeing a big fan of the AWP idea (I truly believe the underlying idea is sound) and recognizing the above issues, I have been researching ways to overcome the above issues and revise it to a version that is more applicable to me. Yet if you stick to the original AWP, you would still be holding 55% of government bonds in your portfolio. As a recent example, during the 2020 March COVID-19 crash, treasury yields dropped to a level (0.6% for 10 year maturity) that Dalio himself considered silly to own government bonds. Third, the fixed allocation does not make intuitive sense. I may consider it when I get really close to my retirement age. Second, it might be too conservative for many investors (with only 30% stocks). First, it is difficult, at least for individual investors, to invest in commodities with reasonable cost/fees. ![]() In practice, there are however several issues in the implementation of the idea. More specifically, the original AWP consists of: The name itself suggests the essence (or the goal) - it is a portfolio built to weather any storm. The idea is based on risk parity, and it has been shown to be very effective in limiting volatility and drawdowns. Ray Dalio's All Weather Portfolio (AWP) is a diversified portfolio consisting of four asset classes (stocks, bonds, commodities, and gold). ![]() Photo by Thos Robinson/Getty Images Entertainment via Getty Images Dalio's All Weather Portfolio #RAY DARIO INVESTMENT ALL WEATHER UP IN 2008 FREE#Active contributors also get free access to SA Premium. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Editor's note: Seeking Alpha is proud to welcome Envision Research as a new contributor. ![]()
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