While the search for the Holy Grail is the most famous search of all time, the author of this article has been on his own quest for the last 20 years. This odyssey has required the reading of countless pages over time and seemingly to no avail. The bear market from 2007-2009 was the low point of the quest, as the S&P 500 dropped 56.4% in 18 months. The most inspiring part of the quest for the ultimate investment strategy, however, is that the author never gave up trying to find the bullet-proof portfolio that would not only protect his clients hard earned money in a down market but perform well in all kinds of market scenarios. The answer came in what initially seemed like one of the most unlikely forms of information. Tony Robbins, the motivational speaker who has inspired so many people including Oprah, wrote a book called Money: Master the Game—7 Simple Steps to Financial Freedom. In this book, Robbins unveils the answer to your author’s quest in an easy to understand and succinct fashion. And for the loyal readers of this series of monthly email essays, the author will in short order describe this pearl of investment wisdom and save readers trudging through the 624-page book.
Robbins refers to the most important chapter of the book as the one in which he writes about Ray Dalio, who is the largest hedge fund manager in the world. Dalio runs Bridgewater Associates, which manages 160 billion dollars. Dalio breaks down his asset allocation in the following way:
|Long-Term U.S. Bonds||40%|
|Intermediate U.S. Bonds||15%|
(This information is found on page 391 of Money: Master the Game)
Dalio claims “by having a fifty-fifty portfolio, (an even split between stocks and bonds), you really have more like ninety-five percent of your risk in stocks” (382)! Dalio argues since stocks carry three times more risk than bonds that a balanced portfolio must acknowledge this fact.
What really got my attention, however, is that Tony Robbins had Dalio’s All Seasons portfolio back tested to 1925. Since 1925 the S&P has lost money 24 times while the All Seasons Portfolio lost money 14 times. The average loss for the S&P was -13.66% while Dalio’s average loss was just -3.65%. Being down only -3.93% during 2008 especially caught my eye because I was advising people during that crash. Although Dalio’s All Season Portfolio was not created to beat the S&P 500, “in the 30 years from 1984 to 2013. The portfolio was rock solid: Just under 10% (precisely 9.72%, net of fees) average annualized return” (393). Such a portfolio is the envy of every investor, and readers now have access to it for just devoting five minutes of their time to reading this essay.
If you would be pleased with a portfolio that’s worst year in 30 was -3.93% and averaged almost 10% over 30 years, then your quest has been fulfilled too. For more information on the All Seasons portfolio and what investments to devote to each allocation area contact Innovative Investment Solutions, Inc.
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The information presented and made available in this article is intended for educational purposes only. The information is not and should not be confused with investment advice and does not attempt or claim to be a complete description of any specific securities or markets. This information is of a general nature and has not been prepared with regard to any particular person’s investment objectives, financial situation and/or particular needs.
The opinions and analyses included herein are based on sources and data believed to be reliable and are presented in good faith; however, no representation or warranty, expressed or implied is made as to their completeness or accuracy. It is imperative to understand your investment risks since all stock and option investments involve significant risk. The risk of loss in trading securities and options can be substantial.