Robbins' All-Seasons Portfolio

Strategy Rules

Ray Dalio is the founder of Bridgewater Associates, one of the world's largest hedge funds, and widely recognized for pioneering the concept of a risk parity portfolio optimized for all market conditions. Dalio identifies 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 Dalio tailors 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 this risk parity and the observation that stocks are more volatile than bonds, the portfolio contains a relatively low percentage of stocks.

While Robbins' All-Seasons Portfolio is based on the same ideas as Bridgewater's All-Weather Portfolio, the latter employs leverage and an active management component.

The All-Seasons Portfolio does not aim at greedy investors. Instead, it focuses on reducing risk and providing steady returns. Historically, the portfolio has delivered on this objective.

Diversification

The All-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, the All-Seasons Portfolio has 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, the All-Seasons Portfolio has 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.

While Tony Robbins claims 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 the All-Seasons Portfolio contains 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 the All-Seasons Portfolio not to perform quite as well as we progress into an environment of rising bond rates.

Account & Tax Considerations

Due to its passive nature, the All-Seasons Portfolio is 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 the All-Seasons Portfolio contains 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.