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Ray Dalio’s All Weather Portfolio 2024 (Singapore Edition)

Have you ever heard of the All Weather Portfolio? It’s a portfolio that is designed to do well in all economic environments. The portfolio is designed to do well, even in a recession and during times of uncertainty! In this article, I will share more about the All Weather portfolio, and dive deep into how Singaporeans can build this portfolio in a localized context.

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Understanding the All Weather Portfolio

The “All Weather” Portfolio was first conceptualized by the founder of Bridgewater Associates, Ray Dalio. Firstly to understand how this portfolio works, we need to understand Ray Dalio’s investment thesis. According to Dalio, there are only 4 things that can move the price of an asset and they are:

  1. Inflation
  2. Deflation
  3. Rising Economic Growth
  4. Declining Economic Growth also known as a Recession

From this, we can see that there are 4 clear possible environments or economic seasons that might affect asset prices, although they might not come in this specific order. Because there are only 4 possible economic environments or seasons, Dalio’s investment thesis revolves around having 25% of your risk in each of these 4 categories. This is why the portfolio is termed the “All Weather Portfolio”, because the portfolio is well diversified across each possible economic environment, allowing the portfolio to do well regardless of which season you are in. 

So what asset classes thrive in each season? The image above breaks down which type of investment will perform well in each of these environments. Investors usually struggle with investment theories and principles as they are easy to digest but hard to execute. Thankfully, Ray Dalio has actually shared a sample portfolio that investors could reference.

Ray Dalio’s All Weather Portfolio 2023 (Singapore Edition) | Understanding the All Weather Portfolio

Let’s dive deeper into each component of the portfolio and understand why they are sized as such. Firstly, a 30% exposure to stocks, specifically ETFs of indexes such as the S&P500 to help further diversify the portfolio. Next, adding some stability into the portfolio with bonds, specifically government bonds with a mixture of 15% in shorter-term bonds (7- to 10-year treasuries) and 40% in longer-term bonds (20- to 25-year treasuries). Last but not least, some exposure to commodities, with 7.5% in gold specifically and 7.5% in other commodities. The reason why there is a 15% allocation to commodities is that you need an asset class that will do well when inflation is rising rapidly.

Another important point to take note regarding the All Weather portfolio is that you need to remember to occasionally rebalance your portfolio. This will ensure that the allocations are well-balanced, especially when one segment does well.

So you must be wondering how well this portfolio has performed and whether or not it’s worth your time and effort to follow it. Over a 30-year period from 1993 – 2023, this portfolio has returned a remarkable CAGR of 7.17% as compared to the STI’s 2.46% and the S&P500’s 7.93%. Although it did underperform the S&P500 slightly, it is important to note that the S&P500 is a lot more volatile than the All Weather Portfolio which might not suit some investors.

All Weather Portfolio (Singapore Edition)

As a local investor in Singapore, you might be wondering how to craft such a portfolio in our local context. Well, fret not as I’ve structured a sample portfolio based on the same allocation as the original All Weather Portfolio but with a Singaporean twist.

Intermediate Government Bonds15%Singapore Savings Bonds
Long Term Government Bonds40%Bond ETFs (TLT/VGLT)
Gold7.5%Physical Gold or Gold ETF (GLD)
Commodities7.5%Commodities (PDBC)

Stocks – 30% Allocation

The stock allocation has been further diversified into the following segments:

  1. 10% in US ETFs
  2. 10% in Singapore Stocks
  3. 10% in Singapore REITs

Starting off with the 10% allocation in US ETFs, to help improve the portfolio’s geographical diversification. In addition to that, the US indexes, specifically QQQ and SPY, have been performing very well over the past 10 years. In this segment, we will be allocating 5% into QQQ and VOO each, for a total of 10%. These 2 funds provide exposure to QQQ and SPY and have relatively low expense ratios.

Next would be a 10% allocation in Singapore stocks, which provides some exposure to the local market. Here, we will allocate 5% to Sheng Siong which is a very defensive company by nature as well as 5% to DBS which is Singapore’s largest bank.

Last but not least, we will also allocate 10% towards Singapore REITs as it helps provide the investor with a steady flow of income. Here, we will allocate 5% to Parkway Life REIT and 5% to Keppel DC REIT as they are the 2 most defensive REITs in the Singapore market, in my opinion.

Intermediate Government Bonds – 15% Allocation

Moving onto the intermediate government bonds, in our localized context, we have the Singapore Savings Bond (SSB) which has a maturity of 10 years. An investor can easily buy these SSBs as they are issued on a monthly basis with a new yield, which could be higher or lower than the previous issuance.

Due to the flexible nature of SSBs, if an investor wants to take advantage of the highest yield possible, they can easily redeem their current SSBs and buy the new ones that are being issued for a small fee of $2. Do keep in mind that the redemption period opens on the 1st business day of each month and closes on the 4th last business day of the month. You will receive your redemption proceeds along with any accrued interest by the 2nd business day of the following month. As such, you might need to use some of your liquid cash to buy the new SSB first while waiting for the redemption to process.

For this month’s edition of SSB, read more here.

Long Term Government Bonds – 40% Allocation

As Singapore doesn’t issue any government bonds that have maturity periods of 20-25 years, the only alternative for an investor is to buy a Bond ETF to have the same exposure. Given that there are plenty of Bond ETFs to choose from in the market, it might be hard to find the right one. 

Among the wide plethora of Long Term Government Bond ETFs, we have narrowed it down to 2, namely iShares 20+ Year Treasury Bond ETF (TLT) and Vanguard Long-Term Treasury ETF (VGLT). 

Here is a table of comparison between the 2 ETFs:

Ray Dalio’s All Weather Portfolio 2023 (Singapore Edition) | All Weather Portfolio (Singapore Edition) | Long Term Government Bonds - 40% Allocation

Looking at the table, both are great ETFs but I’d give the slight edge to VGLT for its very low expense ratio which could really eat into an investor’s returns, especially if they are investing for the long term.

Gold – 7.5% Allocation

To gain exposure to gold, there are a few ways you can do so. You could buy physical gold through banks or jewelry shops, gold ETFs such as SPDR Gold Shares (GLD), or gold spot contracts which are essentially contracts that give you exposure to gold but you do not hold any physical gold. As we are building an all-weather portfolio, it would be best to hold gold ETFs instead of physical gold or gold spot contracts. This is because gold ETFs are highly liquid and might have lower costs in comparison. Additionally, some gold ETFs actually offer a dividend whereas the other 2 do not generate any form of income for the investor.

Regarding which ETF to hold, SPDR Gold Shares (GLD) would be the best option as it’s the largest gold ETF in the market with an AUM of ~$55B and it has a relatively low expense ratio of 0.40%.

Read Also: Inflation-Proof Your Investments with Gold: A Comprehensive Guide 2024

Commodities – 7.5% Allocation

Similarly to gold, you can gain exposure to commodities through a variety of ways but we will opt for ETFs as well since it has the most flexibility and liquidity. Given the wide array of ETFs to choose from, Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC) seems to be the most appealing for investors.

Ray Dalio’s All Weather Portfolio 2023 (Singapore Edition) | All Weather Portfolio (Singapore Edition) | Commodities - 7.5% Allocation

Being the largest commodities ETF available with an AUM of ~$6B, coupled with a relatively low expense ratio of 0.59%, it is the best pick for investors. On top of this, it has performed relatively well over the past 5 years, outperforming other commodity ETFs as well as its factset segment average.

Final Thoughts

So there you have it, Ray Dalio’s All Weather Portfolio 2024 (Singapore Edition). It is important to understand that this portfolio is not built to outperform the market but rather, to provide decent returns with minimal volatility, allowing you to profit regardless of economic conditions. It is also important to maintain a long-term investing mindset so you can avoid panic selling during economic recessions or market crashes.

As always, you can take a look at my portfolio updates to see my current positions! P.S. I’m running a telegram chat group for you guys to share and discuss investment-related topics so come on in! I’ll be there too! You can join the chat here:

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