How would you invest if you have 10 million with an annualized target of 15% -20%? Is there a strategy that can face all economic situations? My suggestion is for ordinary people to directly adopt a 24/7 portfolio investment strategy. This strategy has been validated even in China, with Bridgewater Fund China delivering impressive results of 35% in 2024, far exceeding the 14% of the Shanghai and Shenzhen 300 by relying on this strategy. This concept, proposed by Bridgewater Dalio in 1996, subverted the traditional asset allocation logic - its core emphasizes asset allocation based on risk rather than capital ratio, so as to maintain stable returns in different economic cycles. This is the famous' All Weather Strategy '! 01 Core concept: "Four Seasons" based on economic growth and inflation Dalio believes that the core driving factors for long-term fluctuations in asset prices are two unexpected variables: 1. Economic growth exceeding expectations (actual performance better or worse than market expectations) 2. Inflation exceeding expectations (actual inflation is higher or lower than market expectations) By combining two major variables in pairs, four economic environments are formed, which can be analogized as the "four seasons" of the economy: Economic Environment, Economic Growth, Inflation Corresponding to 'Seasons' The environment is higher than expected and overheated in summer Environment 2 is higher than expected and lower than expected, resulting in a bountiful autumn harvest Environment three is lower than expected, higher than expected, stagflation in the cold winter Environment 4 is lower than expected, deflation and recession are lower than expected The core goal of the all-weather strategy is to ensure that there are always assets that can generate positive returns during these four seasons, hedge against the decline of other assets, and keep the entire portfolio running smoothly. 02 Core soul: Risk parity Risk parity is the core of a 24/7 strategy and the fundamental difference between it and traditional asset allocation. The traditional 60/40 portfolio is allocated based on fund weights (60% stocks, 40% bonds), but the volatility risk of stocks is much greater than that of bonds. In the end, over 90% of the risk in the portfolio comes from stocks, which cannot be considered as true risk diversification. The risk parity of the all-weather strategy is to ensure that each type of asset in the portfolio contributes almost equally to the overall risk. Because the risk of bonds is much lower than that of stocks, in order to achieve risk balance, it is necessary to significantly increase the proportion of bond allocation and decrease the proportion of stock allocation. Bridgewater has finally come up with this counterintuitive allocation plan through risk normalization calculation. 03 Simplified version of 24/7 configuration for individual investors Dalio shared a simplified configuration plan for individual investors in the "Principles" that is easy to implement: -30% US stocks (such as S&P 500 ETF) -40% US long-term treasury bond bonds (20 years+maturity treasury bond bonds ETF) -15% US medium-term treasury bond bonds (7-10 year treasury bond bonds ETF) -7.5% Gold -7.5% bulk commodities The underlying logic of this configuration is to accurately match the four major economic environments: when economic growth exceeds expectations, 30% of stocks will contribute core returns; When the growth is less than expected, 55% of treasury bond will rise due to the demand for risk aversion and the downward trend of interest rates; When inflation exceeds expectations, gold and commodities will serve as a hedge against inflation; When inflation is lower than expected, both stocks and treasury bond will benefit from a loose liquidity environment. Through this configuration, no matter which "season" the economy enters, there will always be assets in the portfolio that can make a difference, truly achieving "all-weather" stable returns. 04 Advantages and disadvantages of strategy advantage 1. Strong robustness: The core goal is not to seek short-term maximum returns, but to cross bull and bear markets, significantly reducing portfolio volatility and maximum drawdown. 2. No need to predict the market: completely abandon the "timing" that most people cannot consistently do right, and do not bet on market fluctuations. 3. Friendly holding experience: The low volatility feature makes it easier for investors to stick to long-term holdings and avoid panic buying at the bottom of the market. disadvantage 1. Long term one-sided bull market with underperforming returns: If the market is in a "golden autumn" environment of high growth and low inflation for a long time (such as the US stock market bull market from 2009 to 2020), strategic returns will be significantly lower than pure stock portfolios. 2. Sensitivity to rising interest rates: The portfolio has allocated a large amount of long-term bonds. If encountering a cycle of rapid and sustained interest rate increases (such as 2022), stocks and bonds may fall synchronously, putting pressure on the short-term performance of the strategy. 3. High bond allocation is counterintuitive: A large proportion of bond allocation is difficult for investors who are accustomed to high volatility thinking in stocks to accept. 4. High requirements for rebalancing discipline: It is necessary to regularly (such as annually) adjust the asset ratio back to the target weight, essentially selling high and buying low, which requires high discipline from investors. 05 Minimalist Case Study Understanding Strategic Value We can compare investment to opening a "omnipotent shop": ice cream (stocks) is easy to sell only when it is hot, umbrellas (long-term treasury bond) are popular only in rainy days, sunscreen (gold) is popular in sunny days, hot coffee (medium-term treasury bond) is stable when it is cool, and dehumidifiers (bulk commodities) are not hard to sell in wet seasons. If you bet on ice cream all over the warehouse, you can make a big profit on hot days, but lose everything on rainy days; According to the logic of 24/7 balanced inventory allocation, no matter what weather, there will always be products that can be shipped steadily, and overall revenue will always be stable. Using a combination of 100000 yuan, we can see two extreme scenarios: after following the simplified strategy configuration, if the stock market rises by 20%, the overall combination can still achieve a positive return of about 3.8% and will not go short of the market; If the stock market crashes by 30%, the overall loss of the portfolio is only about 0.9%, almost perfectly hedging against the extreme downside risk of the stock market. This is the core magic of all-weather strategy. 06 Last Brothers The essence of an all-weather strategy is not to bet on market direction, not to predict whether tomorrow will be sunny or rainy, but to prepare all the necessary equipment in advance; Using the returns of different assets as a hedge to smooth out extreme volatility; Its goal has never been to earn the most in a bull market, but to lose the least in a bear market and achieve asset appreciation through long-term stable compound interest. Ray Dalio's all-weather strategy is an investment philosophy that shifts from "predicting the future" to "dealing with all possibilities". Through risk parity and cross cycle asset hedging, it constructs a highly resilient investment system. For ordinary investors who pursue long-term stable growth and do not want to bear the ups and downs of their portfolios, this is a top-level strategy worth researching and learning from. Keep it up!