How to recreate Ray Dalio’s All-Weather portfolio only using ETFs

The All-weather portfolio from Bridgwater/ Ray Dalio is well known in investing circles. It looks to mimic (aka keep up) with the returns from an all-stock portfolio (aka the S&P 500) while limiting drawdowns to a fraction of that level.

The theory is that by doing this an investor could sleep better at night, do better in recessions and inflation, and in the end come out better, or at least even, to what a much more volatile all-stock portfolio could offer.

The problem with the portfolio comes from it being difficult to replicate. With investors needing access to gold, bonds, commodities, etc, it can be a full time job to just manage it all.

By using low-cost ETFs investors can try to mimic the more complicated asset strategy using a much more simple “buy and hold” strategy, and one that only uses tax-efficient ETF’s to accomplish.

This is a truly PASSIVE portfolio, other than maybe the occasional tax-loss harvesting. There is nothing active like using trend-following methods, angel investing, or anything more complicated than that.

So… how does one build this portfolio using ETFs?

Directions to make the All-weather portfolio using ETFs

To recreate the all-weather portfolio using ETFs, you will need to invest in a mix of different assets that have low correlations with each other. This will allow you to create a diversified portfolio that can perform well in different market conditions.

One way to do this is to invest in the following ETFs:

1. VTI (Vanguard Total Stock Market ETF): This ETF tracks the performance of the entire U.S. stock market and offers exposure to a wide variety of companies.
2. BND (Vanguard Total Bond Market ETF): This ETF tracks the performance of the U.S. bond market and offers exposure to a broad range of bonds.
3. VEA (Vanguard FTSE Developed Markets ETF): This ETF tracks the performance of developed market stocks outside of the U.S. and Canada.
4. VWO (Vanguard FTSE Emerging Markets ETF): This ETF tracks the performance of emerging market stocks.
5. GSG (iShares S&P GSCI Commodity-Indexed Trust): This ETF offers exposure to a basket of commodities, including energy, metals, and agriculture.

By investing in a mix of these ETFs, you can create a diversified portfolio that can perform well in different market conditions. It’s important to note that this is just one possible approach to creating an all-weather portfolio using ETFs. The specific mix of ETFs that is right for you will depend on your investment goals, risk tolerance, and other factors. It’s always a good idea to consult with a financial advisor before making any investment decisions.