What is the All Weather Portfolio? (Complete Guide)
Contents
Core principles
The All Weather idea is to stay resilient through different macro regimes (rising/falling growth and inflation) by balancing risk across assets with low or negative correlation.
Macro quadrants and assets that tend to benefit in each.
Typical allocations
An educational example (not advice): 30% equities, 40% long-term government bonds, 15% short/intermediate bonds, 7.5% gold, 7.5% commodities — to balance risk, not just capital.
Illustrative allocation only — not a recommendation.
Why it works across cycles
- True diversification across low/negative correlations.
- Risk balancing so the most volatile sleeve doesn’t dominate.
- Inflation hedge via gold and commodities.
- Recession buffer via high-quality government bonds.
No portfolio is invincible. The goal is to reduce the odds of extreme outcomes, not eliminate risk.
Step-by-step setup
- Define your risk profile and time horizon.
- Select low-cost ETFs for each sleeve (equities, LT bonds, ST/IT bonds, gold, commodities).
- Set a rebalancing policy (e.g., annual or threshold-based).
- Monitor costs (TER), tracking, liquidity, and slippage.
- Handle taxes according to your jurisdiction.
Risks & caveats
- Rate risk for long-duration bonds.
- Prolonged drawdowns in extreme inflationary regimes.
- Tracking differences across ETFs.
- Currency risk for unhedged exposures.
FAQ
How many ETFs do I need?
A small, robust set typically covers the sleeves: global equities, long-duration gov bonds, short/intermediate bonds, gold, commodities.
How often should I rebalance?
Many investors use annual intervals or ±5% drift bands. Costs, taxes, and preferences matter.