All Weather Portfolio

As the old saying goes "The rich man plans for tomorrow, the poor man for today." The idea behind All Weather portfolio construction is that nobody knows what will happen tomorrow. It might rain or shine, there might be an economic boom or bust, inflation or deflation, war or peace and when we invest and plan for long term eventually all this will happen. So how do you plan for that? The all weather portfolio approach is to divide money in equal portions and invest in everything not just stocks and bonds. There are multiple examples of such portfolios constructed using mutual funds and exchange traded funds (ETFs).

Example from Anthony Robbins' book “Money: Master the Game.”

Allocation Description Symbol Name
30% Stocks VTSAX Vanguard Total Stock Market Index Fund
15% 7- to 10-year Treasuries VFITX Vanguard Intermediate-Term Treasury Fund
40% 20- to 25-year Treasuries VUSTX Vanguard Long-Term Treasury Fund
7.5% Gold GLD Gold Shares ETF
7.5% Commodities DBC PowerShares DB Commodity Tracking ETF

Another example from Barry Ritholtz

Allocation Description Symbol Name
20% Total U.S stock VTI Vanguard Total Stock
5% U.S. REITs VNQ Vanguard REIT ETF
5% U.S. small cap value VBR Vanguard Small-Cap
15% Pacific equities VPACX Vanguard Pacific Stock Index Fund
15% European equities VEURX Vanguard European Stock Index Fund
10% U.S. TIPs TIP iShares TIPS Bond
10% U.S. high yield corp bonds VWEHX Vanguard High-Yield Corporate Fund
20% U.S. total bond AGG iShares Barclays Aggregate Bond Fund
Markets Chart