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I am in a difficult situation right now where I need some expert advice. I recently finished reading Tony Robbin's Money Master the Game book and he talks about Ray Dalio All Weather Portfolio approach that he recommends to everyone for an easy way to always make money no matter what the market looks like.

The All weather approach consist of: 40% Long Term Bonds; 30% Stocks; 15% Intermediate Bonds; 7.5% Gold; 7.5% Commodities;

I have consulted a couple of local financial advisors and they all have advised against this method. However I am in a position that I recently got a new job and have an old 401k that I need to roll over to an IRA. I am 25 years old and they all tell me I have time to recover against any big downturns in our economy and that I should invest aggressively, however I don't want to HAVE TO recover if you know what I mean, if possible. My goal is to set it up and not worry about it, set it and forget it. Has anyone had any experience with this type of portfolio or something close to it? I also want to have a separate investment account for more aggressive strategy. However I am just at a crossroad since everyone I talk to about it tells me to go aggressive with it, since I'm young and that I am capable of recovering from bad hits. Any recommendations and suggestions would be appreciated. Thanks ahead of time for looking into this.

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    That's a horribly conservative strategy for a 25 year old's IRA. 100% stocks, or 90% stocks 10% bonds, preferably in ultra-low-cost stock index funds, is far superior. – Joe Apr 20 '15 at 22:39
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    It seems a bit conservative approach for a 25 year old, pretty bond-heavy with no foreign allocation. If you are risk adverse, this might be appropriate for you. But, at 25, you have plenty of time to recover, so I'd say look for something more aggressive. – zanussi Apr 20 '15 at 22:39
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    That first paragraph scares me. "Make money no matter what the market does" is an unrealistic expectation. But more important, why don't you believe the pros you met with? Or rather, why would you believe us over the pros? – JoeTaxpayer Apr 20 '15 at 22:54
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    @JoeTaxpayer I agree about that first paragraph, "Make money no matter what the market does," considering that in 2013 the All Weather fund lost 3.9%, versus a 30% gain for the market. Ray Dalio's 'All-Weather' fund goes cold – zanussi Apr 21 '15 at 4:25
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    Tony Robbins is a motivational speaker and author of self help books first and foremost. His job is to market himself, sell himself and sell his books. Certainly it not bad to read his book to gain some financial literacy and to point out some general strategies for investing that you can then research further on your own. I would caution however, using his book as direct how-to bible on your building financial future. Look for literature from professional financial advisers and investors for that. – EkoostikMartin Apr 21 '15 at 17:59
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Making these difficult portfolio decisions for you is the point of Target-Date Retirement Funds. You pick a date at which you're going to start needing to withdraw the money, and the company managing the fund slowly turns down the aggressiveness of the fund as the target date approaches. Typically you would pick the target date to be around, say, your 65th birthday. Many mutual fund companies offer a variety of funds to suit your needs.

Your desire to never "have to recover" indicates that you have not yet done quite enough reading on the subject of investing. (Or possibly that your sources have been misleading you.) A basic understanding of investing includes the knowledge that markets go up and down, and that no portfolio will always go up. Some "recovery" will always be necessary; having a less aggressive portfolio will never shield you completely from losing money, it just makes loss less likely.

The important thing is to only invest money that you can afford to lose in the short-term (with the understanding that you'll make it back in the long term). Money that you'll need in the short-term should be kept in the absolute safest investment vehicles, such as a savings account, a money market account, short-term certificates of deposit, or short-term US government bonds.

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    Note that target date retirement funds typically have a bit higher cost than choosing index funds yourself, though that higher cost might be worth it from the point of view of set it and forget it. – Joe Apr 20 '15 at 22:41
  • The only advantage of Target Date funds is they are hands off. If you are reasonably intelligent, willing to do about 20-40 hours of initial research and 5 hours a month on going, you can pick your own funds and be better off. – EkoostikMartin Apr 21 '15 at 17:52
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    Indeed. I don't use them myself. However, learning about what they do and why they do it might help the OP find the answers to his questions. – dg99 Apr 21 '15 at 20:16
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Here are the specific Vanguard index funds and ETF's I use to mimic Ray Dalio's all weather portfolio for my taxable investment savings. I invest into this with Vanguard personal investor and brokerage accounts.

40%     VUSTX       Vanguard Long-Term Treasury Fund 
7.5%    GLD         SPDR Gold Shares ETF
15%     VFITX       Vanguard Intermediate-Term Treasury Fund
7.50%   DBC         PowerShares DB Commodity Index Trac ETF 
30%     VTSAX       Vanguard Total Stock Market Index Fund

Here's a summary of the performance results from 2007 to today:

  • Max drawdown: -13.37% (S&P was -50.95%)
  • Worst year: -2.11% (S&P was -37.00%)
  • Best year: 13.99% (S&P was 32.39%)
  • CAGR: 13.16% (S&P was 14.27%)
  • IRR: 6.63% (S&P was 7.81%)
  • Portfolio Expense Ratio: 0.21%

2007 is when the DBC commodity fund was created, so that's why my results are only tested back that far. I've tested the broader asset class as well and the results are similar, but I suggest doing that as well for yourself. I use portfoliovisualizer.com to backtest the results of my portfolio along with various asset classes, that's been tremendously useful. My opinionated advice would be to ignore the local investment advisor recommendations. Nobody will ever care more about your money than you, and their incentives are misaligned as Tony mentions in his book.

Mutual funds were chosen over ETF's for the simplicity of auto-investment. Unfortunately I have to manually buy the ETF shares each month (DBC and GLD).

I'm 29 and don't use this for retirement savings. My retirement is 100% VSMAX. I'll adjust this in 20 years or so to be more conservative. However, when I get close to age 45-50 I'm planning to shift into this allocation at a market high point.

When I approach retirement, this is EXACTLY where I want to be. Let's say you had $2.7M in your retirement account on Oct 31, 2007 that was invested in 100% US Stocks. In Feb of 2009 your balance would be roughly $1.35M. If you wanted to retire in 2009 you most likely couldn't. If you had invested with this approach you're account would have dropped to $2.4M in Feb of 2009.

Disclaimer: I'm not a financial planner or advisor, nor do I claim to be. I'm a software engineer and I've heavily researched this approach solely for my own benefit. I have absolutely no affiliation with any of the tools, organizations, or funds mentioned here and there's no possible way for me to profit or gain from this. I'm not recommending anyone use this, I'm merely providing an overview of how I choose to invest my own money. Take or leave it, that's up to you. The loss/gain incured from this is your responsibility, and I can't be held accountable.

  • What does the max drawdown number mean? The 2008 -37% had positive years before and after. I suppose if you determined the volatility of the portfolio, the 6.63% comes with far less risk than the S&P 7.81%. Still, to lag the market 1.2%/yr will add up over time. And I'd be having a tough time with a 14% return in a year the S&P gained 32%. – JoeTaxpayer Jul 21 '15 at 13:02
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    Max drawdown is an indicator of the risk of a portfolio chosen based on a certain strategy. It measures the largest single drop from peak to bottom in the value of a portfolio (before a new peak is achieved). For the S&P this occured Nov 2007 to Feb 2009, according to the backtest tool I use. – Kevin Leary Jul 21 '15 at 13:16
  • I appreciate the quick explanation. For the period you show, you have a great risk adjusted return. – JoeTaxpayer Jul 21 '15 at 13:22
  • I have long been looking for something like portfoliovisualizer.com to compare various portfolios! – Markus Schanta Jun 3 '16 at 8:22
  • Some of these fund fees are exorbitant? I just finished the Robbins book and am looking at different options for the commodities & gold...whew, nothing seems worth it. – Rocco The Taco Nov 21 '16 at 11:05

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