The all-weather strategy aims to avoid making a portfolio dependent on a single forecast of growth, inflation, or interest rates. Instead of predicting the next economic environment, it combines different risks and market reactions.

This idea is particularly relevant today. Inflation can fall and then rise again later. Growth prospects can change, interest rates can remain high for longer or fall again, and geopolitical conflicts can affect commodity and financial markets simultaneously. However, such uncertainties do not provide a fixed portfolio formula, and certainly not protection against losses.

Short answer: The All-Weather Strategy was developed at Bridgewater Associates with significant input from Ray Dalio. It doesn’t simply allocate equal amounts of money across four asset classes, but rather attempts to balance risks associated with rising and falling inflation, as well as stronger and weaker growth. Gold and other commodities are intended to offer different characteristics than stocks and nominal bonds, particularly in the event of unexpectedly rising inflation or monetary tensions. There is no officially published, fixed percentage allocation suitable for everyone.

What is the all-weather strategy?

All Weather is an institutional portfolio concept from Bridgewater Associates. The underlying question is: How can a portfolio be constructed so that a single economic surprise does not determine the majority of its risk?

Bridgewater developed the approach over many years. The fully developed strategy was initially created in 1996 for Ray Dalio’s trust. Later, it was used by institutional investors and became an important foundation of the risk parity movement. ^[1]

The goal is not freedom from prediction in the literal sense. All Weather also relies on assumptions about how assets react to economic changes. The crucial difference lies in considering multiple possible developments simultaneously and balancing their risk contributions .

The name is a goal, not a guarantee.

“All Weather” does not mean that the strategy will generate profits every month or in every market environment. Stocks, bonds, gold, commodities, and other components can fall simultaneously. The name describes the underlying concept, not a performance guarantee.

Who developed All Weather?

The strategy is often referred to simply as “Ray Dalio’s All-Weather Portfolio.” Ray Dalio provided important impetus, but Bridgewater also cites Bob Prince, Greg Jensen, Dan Bernstein, and other employees as contributors to its development. ^[1]

A defining experience was the end of the US dollar’s gold convertibility in August 1971. Following US President Richard Nixon’s announcement, Dalio initially expected stock prices to fall. In fact, both stocks and gold rose the following day. For Bridgewater, this led to a fundamental insight: markets don’t react solely to news, but rather to how the new development deviates from already priced-in expectations.

This distinction is central to the entire model. It’s not just about high or low inflation, but above all, whether inflation is higher or lower than the market expects. The same applies to economic growth.

What four economic environments does the model distinguish?

Popular descriptions often speak of growth, recession, inflation, and deflation. This is understandable, but inaccurate. Bridgewater’s original grid combines two economic drivers with their direction relative to market expectations : ^[1]

Growth is increasing more strongly than expected.
Growth is developing more slowly than expected.
Inflation is rising more sharply than expected.
Inflation is falling more sharply than expected.

Several of these developments can occur simultaneously. Strong growth and rising inflation are just as possible as weak growth with high inflation. Therefore, the model does not consist of four clearly separated calendar phases.

Increasing growth

If economic growth exceeds expectations, companies can achieve higher sales and profits. Stocks and corporate bonds can benefit from this. However, the element of surprise remains crucial: even positive growth figures can put downward pressure on share prices if even better figures were previously anticipated.

Declining growth

If growth falls short of expectations, corporate profits and riskier loans often come under pressure. Nominal government bonds can react in the opposite way in certain situations, particularly when market participants anticipate falling interest rates and lower inflation.

Rising inflation

Unexpectedly rising inflation can put pressure on nominal bonds because their fixed payments lose real value, making higher interest rates more likely. Commodities and inflation-indexed bonds are intended to provide a different perspective on this environment, according to the all-weather logic. Gold can additionally react to currency devaluation, geopolitical risks, and declining confidence in government promises to pay.

Falling inflation

If inflation falls more sharply than expected, nominal bonds can become more attractive. If this leads to deflation, the real burden of debt increases, while economic activity and corporate profits can come under pressure. Here, too, the actual market reaction depends on interest rates, initial valuations, and the expectations already priced in.

Which asset classes play a role in the all-weather strategy?

Bridgewater’s 2012 analysis does not assign a single asset class to each of the four environments. Among the assets mentioned are equities, nominal and inflation-linked bonds, corporate and emerging market loans, and commodities. Each area is intended to contain several liquid markets that react to different economic surprises. ^[1]

Stocks and company risks

Stocks primarily represent participation in economic activity and corporate profits. Corporate bonds and certain emerging market investments can also benefit from stronger growth. However, they carry credit, valuation, currency, and liquidity risks.

Nominal government bonds

Nominal government bonds can have a stabilizing effect during periods of falling inflation and weaker growth, provided that market interest rates also decline. This effect can be reversed if interest rates rise or inflation unexpectedly increases. Long maturities are particularly sensitive to changes in interest rates.

Inflation-indexed bonds

Inflation-indexed bonds link payments to a price index according to predefined rules. Bridgewater considers them an important component in managing inflation risks. However, they remain bonds and carry risks such as price, real interest rate, issuer, and liquidity risks.

Gold and other raw materials

In this model, commodities are primarily associated with rising inflation. These can include energy, industrial metals, and agricultural commodities. Gold occupies a special position because its demand is influenced not only by production and consumption but also by currency, reserve, and confidence issues.

Cash and short-term liquidity

Cash is not an equally weighted component in the All-Weather concept as it is in Harry Browne’s Permanent Portfolio . Instead, Bridgewater treats the interest earned on cash as a starting point, from which market premiums and active investment decisions are separated. In practice, however, liquidity and collateral remain important, especially when derivatives or leverage are used.

What does risk parity mean?

Risk parity, simply put, means that a portfolio is assessed not only by the amount of money invested, but also by its risk contributions . An asset class with high volatility can dominate the overall risk, even if its capital share is not particularly large.

The mechanism was older than the now commonly used umbrella term: Bridgewater introduced All Weather in 1996. Edward Qian of PanAgora Asset Management, by his own account, only coined the term “risk parity” in 2005. All Weather is thus considered a pioneer of the movement later known as such, but it is not identical to every risk parity implementation. ^[1] ^[7]

Equal amounts of money do not equate to equal risks.

A portfolio consisting of equal parts stocks and government bonds is therefore not automatically balanced. Stocks often fluctuate more than high-quality government bonds. In such a mix, a large portion of the overall risk can stem from the stock component.

All Weather attempts to balance the risk contributions of different economic environments. In Bridgewater’s original model, each of the four environments receives a quarter of the risk . This explicitly does not mean that 25 percent of the money is invested in each of stocks, bonds, gold, and commodities. ^[1]

Why do leverage and derivatives play a role?

Less volatile investments, such as high-quality government bonds, require a larger capital allocation if their risk contribution is to be aligned with that of equities. Institutional risk parity strategies can therefore utilize futures, swaps, or other forms of leverage. The leverage is intended to raise the risk of a broadly diversified initial portfolio to a specific level. ^[3]

However, this increases complexity. Financing costs, margin calls, counterparty risks, liquidity constraints, and flawed risk models can amplify losses. Bridgewater itself points out that leverage, futures, options, and other derivatives carry significant risks. ^[2]

Is there an official, fixed all-weather classification?

No, Bridgewater does not publish a generally applicable fixed percentage allocation for private investors. The institutional strategy is based on risk contributions, volatilities, correlations, liquid markets, and ongoing portfolio management. Bridgewater stated in 2025 that the strategy now invests in almost all major liquid markets, and that actual positions can vary due to factors including client restrictions, rebalancing, and transaction costs. ^[2]

Simplified model portfolios with fixed allocations to stocks, long- and medium-term bonds, gold, and commodities circulate on the internet. Such allocations can illustrate the basic idea. However, they are not equivalent to Bridgewater’s institutional all-weather strategy .

Anyone who refers to a fixed internet layout as the “official Ray Dalio formula” is conflating three different levels:

Bridgewater’s institutional all-weather strategy,
the general principle of risk parity,
Simplified model portfolios for private investors.

This distinction is crucial because equal capital ratios have a different effect than equal risk contributions.

Why does gold play a role in the all-weather strategy?

Gold can possess value drivers that differ from corporate profits and fixed bond payments. Bridgewater already categorized commodities in its original model as belonging to areas of rising inflation. In a more recent projection for 2025, the company also includes gold in the context of geopolitical risks and high government debt. ^[2]

Gold in times of unexpected inflation and currency devaluation

If inflation rises unexpectedly, fixed future monetary payments lose purchasing power in real terms. Gold has no fixed nominal payment and is not tied to the creditworthiness of any single company. Therefore, it can react differently than nominal bonds during certain periods of inflation or devaluation.

The word “can” is important. The price of gold also depends on real interest rates , the US dollar , central bank demand , market positioning, jewelry and investment demand, and geopolitical expectations. Therefore, gold neither precisely reflects consumer price inflation nor does it rise with every inflation report. The article ” Gold and Inflation: Does Gold Really Protect Against Loss of Purchasing Power? “ explains why gold doesn’t automatically offset inflation.

Gold and other raw materials are not the same.

Energy and industrial metals are constantly consumed and react strongly to economic conditions, production capacities, and supply chains. Gold is largely held, resold, and used as a reserve. Therefore, the prices of gold, oil, copper, and agricultural commodities can vary significantly over time.

A concrete example is provided by the Bank for International Settlements for the period from November 29, 2021, to February 21, 2022: Although global inflationary pressures intensified and energy prices rose significantly, gold remained largely unchanged during this clearly defined three-month period. The observation period ended three days before the Russian invasion of Ukraine and therefore explicitly does not reflect the subsequent gold price reaction. ^[6] A single commodity thus does not replace a broad-based inflationary component.

Gold does not pay ongoing income.

Physical gold generates neither interest nor corporate profits. The return depends on the eventual selling price. Depending on the form, additional costs include premiums, trade margins, storage, and insurance. For context regarding the metal’s price, see the article on the current gold price .

Which type of gold is meant in this model?

The institutional all-weather strategy aims for liquid market positions and risk characteristics. This does not automatically prescribe a specific form of gold ownership. Depending on the implementation, options include gold derivatives, exchange-traded instruments, or physical investment gold. These options differ in ownership structure, costs, liquidity, and counterparty risk.

The following distinction applies to physical gold:

form	Key value drivers	Proximity to the all-weather gold function
Gold bars	Gold content, gold price and profit margin	High when the price predominantly follows the metal value
Bullion coins	Gold content, gold price and standard market premium	High to medium, depending on premium and tradability
Certified collector coins	Gold content, rarity, condition, certification and collector demand	Lower, because additional numismatic value drivers exist.

The differences between collector coins and investment coins are significant here. A Krugerrand, as a common bullion coin, follows a different pricing logic than a rare proof issue with a low mintage and exceptional condition.

Do certified collector coins belong in an all-weather portfolio?

Not as an automatic replacement for the gold or raw material building block. For modern certified gold rarities, the pure metal value can only explain part of the market price. Other factors include:

Print run and actual number of copies available,
NGC or PCGS rating,
Proof or reverse proof quality,
Population and top pop status,
Origin, documentation and accessories,
Demand in the specialized collectors’ market.

These characteristics can decouple a coin’s price from the gold price. At the same time, the pool of potential buyers may be smaller than for standardized bullion. The creation of collector value thus follows an additional market logic.

An NGC or PCGS certification improves the documentation of authenticity and condition. It does not guarantee a specific selling price or future value. The basic information on certified collector coins explains this separate category in more detail.

Wasserthal RareCoin.Store’s expertise therefore does not lie in replicating an all-weather portfolio. It lies in the professional differentiation between standardized investment gold and modern, certified gold rarities with documented rarity and quality.

What role do other raw materials play?

A broad range of raw materials can include energy, industrial metals, precious metals, and agricultural commodities. The individual markets react to different factors:

Energy: Production volumes, stock levels, transport routes, weather and geopolitical conflicts
Industrial metals: global economy, construction industry, infrastructure and production capacities
Agricultural commodities: harvests, weather, arable land, stockpiles and trade policy
Precious metals: industrial demand, investment demand, currencies and real interest rates

Institutional commodity positions are often traded via futures. The performance of an investment product can deviate from the visible spot price, for example, due to the regular replacement of expiring futures contracts. Costs and rollover mechanisms must therefore be considered when assessing actual returns and risks.

Gold coins are therefore no substitute for a broadly diversified basket of commodities. Conversely, a commodity index reflects neither numismatic rarity nor collector value.

Why is the all-weather idea relevant today?

Today’s relevance lies less in a supposedly timeless pattern division than in the question of which economic surprises actually determine a portfolio .

Many asset allocations appear broadly diversified at first glance, but depend primarily on stock prices, economic growth, or falling interest rates. All Weather therefore draws attention to hidden concentrations:

How much does total wealth depend on corporate profits?
How sensitive are bond positions to changes in interest rates?
Which building blocks react to unexpected inflation?
What currency risks exist?
Are multiple positions dependent on the same liquidity during periods of stress?

These questions relate to the core idea of the three-spoke rule , although the two models should not be equated. The three-spoke rule is a historical diversification concept. All Weather, on the other hand, is a modern institutional risk model.

The magic triangle of investing also poses a different question. It describes the conflicting goals of security, return, and liquidity, but does not prescribe a portfolio composition.

What are the strengths of the all-weather strategy as a conceptual model?

She takes forecasting errors seriously.

The model assumes that even experienced market participants cannot reliably predict economic turning points. Therefore, not all components should depend on the same expectation.

It distinguishes between capital and risk

A large capital allocation does not necessarily represent the greatest risk contribution. Conversely, a smaller, highly volatile position can shape the overall portfolio. This perspective makes apparent diversification more transparent.

It considers inflation and growth separately.

Weak growth does not necessarily go hand in hand with low inflation. Stagflation demonstrates that these two factors can move in opposite directions. The four-field grid is better able to capture such combinations than a simple classification into boom and recession.

It gives gold and raw materials a clearly defined function.

Gold and commodities are not generally considered “safe”. Their role arises from the fact that they can react differently to certain inflation, currency and supply developments than stocks and nominal bonds.

What are the limitations and risks of this strategy?

Risk parity is complex.

Risk contributions cannot be observed directly. They are calculated from volatilities, correlations, and other assumptions. If these relationships change, a previously balanced portfolio can suddenly react differently. Therefore, institutional risk parity portfolios require ongoing risk management and adjustment. ^[4]

The first half of 2022 demonstrated this limitation particularly clearly: On a total return basis in US dollars, the S&P 500 lost around 20 percent. At the same time, the S&P US Treasury Bond 7-10 Year Index fell by 10.6 percent. ^[8] Thus, during this period, equities and nominal government bonds did not move in opposite directions, but were under pressure together. Diversification temporarily loses its effectiveness when the prices of key components move more in the same direction than assumed in the model.

Leverage can amplify losses

The use of debt financing or derivatives may be necessary to amplify the impact of lower-risk components. At the same time, this creates additional financing, liquidity, and counterparty risks. A simplified private implementation without leverage is therefore not the same strategy.

Bonds are not automatically stable.

If inflation and interest rates rise rapidly, long-term nominal bonds can fall significantly in price. If, at the same time, stocks suffer from higher financing costs, the expected rebound may temporarily fail to materialize.

Gold and commodities can remain weak for a long time.

Gold does not pay ongoing income. Commodity markets can fluctuate significantly and be affected by political intervention, futures market structures, or drops in demand. A function within the model is not a guarantee of positive performance.

Rebalancing causes effort and costs

When volatilities and market values change, positions need to be adjusted. This can result in transaction costs, taxes, trading spreads, and unfavorable selling times.

“All Weather” does not eliminate the risk of loss.

Diversification can reduce dependencies. It cannot prevent several asset classes from falling simultaneously or an entire portfolio from temporarily losing significant value.

Can this strategy be applied to Germany?

Not unchanged. The institutional all-weather strategy was developed from a US and global market perspective. A German reader typically plans in euros and is subject to different tax, regulatory, and product-related conditions.

A transfer raises, among other things, the following questions:

Which government bonds and issuers should form the bond component?
Should foreign exchange risks be hedged?
Which inflation-indexed bonds are actually available and liquid?
How are raw materials technically represented?
What costs are incurred through funds, derivatives, custody and rebalancing?
How do taxes change the individual building blocks?

A recent example illustrates the difference to the US perspective: Germany has not issued any new inflation-indexed federal bonds since 2024. Bonds already in circulation can still be traded, but the available supply is developing differently than the US market for TIPS. ^[5]

As soon as asset classes, currencies, risk targets, or instruments are changed, a separate implementation emerges. This can be objectively sensible, but it is no longer identical to Bridgewater’s institutional strategy.

How does All Weather differ from the Permanent Portfolio?

Both models aim to avoid relying on a single economic forecast. However, their construction is fundamentally different.

feature	All-weather strategy	Permanent Portfolio
origin	Bridgewater Associates, institutional risk model	Harry Browne, simplified model for private investors
Basic principle	Compensation for risk contributions	Four equal capital shares
Economic classification	Rising or falling growth and inflation expectations	Prosperity, deflation, recession and inflation
Asset classes	Wide range of liquid markets	Stocks, long-term government bonds, cash and gold
Weighting	No generally published fixed capital ratio	Classic four times 25 percent
Implementation	Risk models, rebalancing and often derivatives	Relatively simple fixed division

The Permanent Portfolio is easier to understand, but more rigid. The All Weather Portfolio is more flexible and risk-oriented, but considerably more complex. Despite their similar basic idea, the two models should not be treated as variants of the same percentage rule.

Frequently asked questions about the all-weather strategy

What is the all-weather strategy explained simply?

She tries to spread a portfolio across different growth and inflation trends in such a way that no single economic surprise dominates the overall risk.

Did Ray Dalio develop the all-weather strategy on his own?

No. Ray Dalio provided significant impetus. Bridgewater also mentions Bob Prince, Greg Jensen, Dan Bernstein, and other employees who were involved in the development.

Which four market phases does the model use?

More precisely, it’s about growth that is stronger or weaker than expected, as well as inflation that is higher or lower than expected. Growth, recession, inflation, and deflation are simply simplified terms.

What is the official gold content?

Bridgewater does not publish a generally applicable fixed gold allocation for private investors. Its institutional strategy diversifies risk rather than simply allocating fixed sums of money to individual asset classes.

Why are gold and raw materials part of the model?

They may react differently than stocks and nominal bonds to unexpectedly rising inflation, supply shortages, currency devaluation, or geopolitical tensions. Therefore, no guaranteed or consistently positive performance can be expected.

Are gold and raw materials the same thing?

No. Gold, besides its commodity properties, also has a monetary and reserve-related role. Energy, industrial metals, and agricultural commodities are more strongly influenced by production, consumption, weather, and economic conditions.

Are certified gold coins an all-weather asset?

Not automatically. For certified collector coins, rarity, condition, population, and collector demand influence the price in addition to the gold value. Therefore, they are not equivalent to a liquid position in the gold market.

Is the all-weather strategy safe?

No. Even a broadly diversified portfolio can suffer losses. Leverage, derivatives, interest rate changes, currencies, inflation, and altered correlations create additional risks.

Is this strategy suitable for German investors?

This cannot be answered in general terms. The institutional US strategy cannot be transferred to Germany unchanged due to different markets, currencies, products, taxes, and costs.

Conclusion: Diversification of risk instead of weather guarantees

The all-weather strategy is not a fixed recipe of stocks, bonds, gold, and commodities. Its core lies in a different perspective: The focus is not on equal amounts of money, but rather on balancing risks against growth and inflation surprises as much as possible.

Gold and other commodities thus play a comprehensible role. They can react differently than stocks and nominal government bonds to unexpected inflation, currency devaluation, supply bottlenecks, or geopolitical tensions. However, this does not automatically make them safe, nor does it guarantee success in every market phase.

For Wasserthal RareCoin.Store, another distinction is crucial: A standardized gold market item, a bullion coin, and a modern certified gold rarity do not follow the same pricing logic. Rarity, condition, certification, and collector demand make numismatic coins a distinct category.

The lasting benefit of All Weather therefore lies less in a replicated internet quota than in a question: What economic assumption and what concrete risk lie behind each building block?

About the author

Dirk Wasserthal is the managing director of Wasserthal RareCoin.Store and focuses on rare modern gold coins as well as the economic framework of the international gold market. In his articles, he combines numismatic market experience with an objective assessment of gold, risk diversification, portfolio models, and market mechanisms.

Transparency note

This article is for general information and historical financial context only. It does not constitute investment, legal, or tax advice. The described asset classes and risk functions explain the all-weather strategy and are not a recommendation for personal asset allocation. Prices, interest rates, exchange rates, correlations, taxes, and legal frameworks are subject to change. All investments can result in losses.

Sources

Bridgewater Associates: The All Weather Story , January 2012, in particular on the origin of the strategy, the four-field model and the distribution of risk contributions.
Bridgewater Associates: Investing in a New World – Capturing Opportunity and Weathering Uncertainty , March 6, 2025, in particular regarding today’s all-weather concept and the role of bonds, inflation-indexed bonds, commodities and gold.
Clifford S. Asness, Andrea Frazzini and Lasse H. Pedersen: Leverage Aversion and Risk Parity , Financial Analysts Journal , Volume 68, Issue 1, 2012.
Michael A. Mendelson, Adam Berger and Daniel Villalon: Risk Parity, Risk Management and the Real World , AQR Capital Management, April 2011, on risk management, rebalancing and stress phases.
German Finance Agency: Inflation-indexed federal securities , in particular regarding indexation, tradability and the suspension of new issuance since 2024.
Bank for International Settlements: Markets jolted , BIS Quarterly Review, March 2022, in particular regarding the observation period from 29 November 2021 to 21 February 2022 and the differing development of gold and energy prices.
Edward Qian: Are Risk Parity Managers Risk Parity?, PanAgora Asset Management, November 2012, in particular regarding the coining of the term “Risk Parity” in 2005.
S&P Dow Jones Indices: Defense Beyond Bonds – Defensive Strategy Indices , August 2022, in particular regarding the total return performance of the S&P 500 and the S&P US Treasury Bond 7-10 Year Index in US dollars in the first half of 2022.

Sources last checked in July 2026.