A stable portfolio allocates at least 15% to commodities
Is a recession coming now or not? And what does that mean for my investments? The constant ups and downs on the stock market, inflation, and rising energy prices are prompting many investors to seek a crisis-resilient portfolio.
In 1996, world-renowned hedge fund manager Ray Dalio developed the perfect investment strategy for any economic “weather condition.” His so-called “Risk Parity” portfolio is low-risk and demonstrates strong return performance. As the name suggests, this investment strategy focuses on minimizing the overall volatility of a portfolio by risk-weighting its individual assets equally. In his book “Money: Master the Game,” speaker and life coach Tony Robbins took up this idea and summarized it in an “All-Weather Portfolio.” This consists of:
- 30% stocks
- 40% long-term government bonds
- 15% intermediate-term government bonds
- 7.5% gold
- 7.5% other commodities
Every asset has its “season” in which it performs particularly well. Inflation, deflation, positive economic growth, and negative economic growth each have their top performers, which balance out the volatility of the other components during “their” market phase. The following diagram shows the winners of the four phases. The further the point is from the center, the better the respective asset performs:
