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Summary
- Objective: balanced growth
- Type: strategic portfolio
- Invests in: ETFs tracking stocks, bonds, commodities, gold
- Rebalancing schedule: buy & hold
- Taxation: 60% short-term capital gains
- Minimum account size: $5,000
Tony Robbinsis a board member and Chief of Investor Psychology at Creative Planning, Inc., a Registered Investment Advisor with over $18 billion in assets under management. He published theAll-Seasons Portfolioin his 2014 bookMoney – Master the Game.
Robbin’sAll-Seasons Portfoliois a simplified version ofRay Dalio‘sAll-Weather Portfolio, aiming to provide smooth returns across all economic environments.
TheAll-Seasons Portfoliois passive and, therefore, has only minimal maintenance requirements.
Performance
This table shows the portfolio’s key performance metrics over the course of the simulation:
The following chart shows the portfolio’s historical performance and drawdowns, compared to their benchmark, throughout the simulation:
This chart shows the portfolio’s annual returns:
The following charts show the Monte-Carlo simulation of returns and drawdowns, the portfolios 12-months rolling returns, and how the portfolio is tracking to its benchmark:
Asset Allocation
The portfolio last required rebalancing after the exchanges closed on@last-rebal@. Due to fluctuations in asset prices, the exact allocations vary daily, even when no rebalancing occurred. The current asset allocation is as follows:
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>> Historical Asset Allocations
Strategy Rules
Ray Daliois the founder ofBridgewater Associates, one of the world’s largest hedge funds, and widely recognized for pioneering the concept of arisk parityportfolio optimized for all market conditions.Dalioidentifies four major economic environments or ‘seasons’:
- higher than expected inflation
- lower than expected inflation (deflation)
- higher than expected economic growth
- lower than expected economic growth
For each of these seasons,Ray Daliotailors a portfolio addressing the season’s challenges. These portfolios are then weighted such that they represent equal amounts of risk resulting in the portfolio’s overall asset allocation. Because of thisrisk parityand the observation that stocks are more volatile than bonds, the portfolio contains a relatively low percentage of stocks.
WhileRobbins‘All-Seasons Portfoliois based on the same ideas asBridgewater‘sAll-Weather Portfolio, the latter employs leverage and an active management component.
TheAll-Seasons Portfoliodoes not aim at greedy investors. Instead, it focuses on reducing risk and providing steady returns. Historically, the portfolio has delivered on this objective.
Diversification
TheAll-Seasons Portfolio‘s construction is all about improving diversification through the risk-parity approach. And indeed,Robbins‘ portfolio is well diversified across multiple asset classes and manages to do well in many different economic environments.
The Monte-Carlo simulation illustrates the effectiveness of the portfolio’s diversification. The curves for returns and drawdowns are only slightly sloped, indicating only little variation. Moreover, the portfolio’s risk profile is much smaller than that of a passive 60/40, suggesting roughly half the risk of its benchmark.
Returns & Volatility
Since the end of the last economic cycle in early 2008, theAll-Seasons Portfoliohas delivered remarkably smooth returns, roughly on par with a passive 60/40. The rolling returns show that the portfolio achieved this result primarily through losing less during the 2008 recession. Since 2013, theAll-Seasons Portfoliohas been trailing its benchmark, the expected outcome for a bond-heavy portfolio during the longest bull market in history. However,Robbins‘s portfolio has proven its stability again during the 2020’s COVID-19 crisis.
WhileTony Robbinsclaims the portfolio’s annualized performance is just shy of 10%, more recent returns are unfortunately lower. This shortfall originates in the investment thesis, which does not consider rising bond yields outside of inflationary pressure. Because theAll-Seasons Portfoliocontains a considerable percentage of bonds, it bears a substantial interest-rate risk. While over the past 40 years, declining interest rates have bolstered bond returns, this trend has now come to an end. As a result, investors should expect theAll-Seasons Portfolionot to perform quite as well as we progress into an environment of rising bond rates.
Account & Tax Considerations
Due to its passive nature, theAll-Seasons Portfoliois very tax-efficient. Except for a small percentage of assets affected by rebalancing, the portfolio holds the same ETFs throughout. Therefore,Robbins‘ portfolio triggers only a few taxable events for its capital gains.
However, investors need to tax the dividends and bond interest received in the years they occurred. As theAll-Seasons Portfoliocontains a higher percentage of bonds than most passive stock/ bond portfolios, a higher percentage of the portfolio’s returns are taxable at the income tax rate.
Robbins‘ portfolio can be replicated by holding only five ETFs. Therefore, an account size of $5,000 should be sufficient to get started.
