All-Weather Portfolio: Complete Guide for European Investors 2026

1. What is the All-Weather Portfolio?

The All-Weather portfolio is an asset allocation strategy built on the principle that there are four possible economic environments, and each favors different asset classes. Ray Dalio's original allocation is: 30% stocks, 40% long-term bonds, 15% intermediate bonds, 7.5% gold, 7.5% commodities. The heavy bond weighting — 55% total — surprises most equity-focused investors. It's deliberate and based on risk parity logic: stocks are roughly 3 times more volatile than bonds, so to achieve true risk balance you need significantly more bond exposure by weight. In practice this means the All-Weather targets equal risk contribution from each economic regime, not equal dollar contribution. The result is a portfolio that has historically delivered roughly 60-70% of equity returns with less than half the maximum drawdown. For investors who prioritize capital preservation and smooth, predictable returns over maximum growth, this trade-off is the central appeal of the strategy.

2. The 4 Economic Seasons Framework

Dalio's framework divides the economic cycle into four 'seasons' based on the direction of growth and inflation. Rising growth is good for stocks and commodities — corporate earnings expand and commodity demand increases. Falling growth is good for bonds and gold — central banks cut rates (boosting bond prices) and safe havens attract capital. Rising inflation is good for gold, commodities, and inflation-linked bonds — these assets hold their real value as purchasing power erodes. Falling inflation (or deflation) is good for stocks and nominal bonds — lower rates boost valuations and fixed coupon payments become more valuable in real terms. The All-Weather strategy holds assets from all four seasons simultaneously. When one season underperforms — say, falling growth hurts stocks — the gold and bond positions compensate. This is the core insight: diversification across economic regimes, not just across asset classes. A traditional 60/40 portfolio is still dominated by equity risk; the All-Weather attempts to genuinely balance risk across all four economic environments.

3. All-Weather ETF List for European Investors 2026

You can implement the All-Weather portfolio entirely with low-cost index ETFs available on European broker platforms. For stocks (30%): iShares Core MSCI World UCITS ETF (IWDA) or Vanguard FTSE All-World UCITS ETF (VWCE) for global equity exposure. For long-term bonds (40%): iShares € Govt Bond 20yr Target Duration UCITS ETF or a global long-duration government bond ETF hedged to EUR. For intermediate bonds (15%): iShares Core Euro Government Bond UCITS ETF (IEGA) or a 7-10 year EUR government bond ETF. For gold (7.5%): iShares Physical Gold ETC (IGLN) or Xetra-Gold — both provide physical gold exposure via ETCs traded on European exchanges. For commodities (7.5%): iShares Diversified Commodity Swap UCITS ETF or Invesco Bloomberg Commodity UCITS ETF. The bond component is particularly important for European investors: using EUR-denominated or EUR-hedged bond ETFs avoids currency risk on the largest portion of the portfolio. Currency risk on the equity portion can be either accepted (historically has been manageable over long horizons) or hedged using currency-hedged ETF variants.

4. Tracking and Rebalancing the All-Weather Portfolio

The All-Weather portfolio requires periodic rebalancing because asset prices diverge over time. When stocks rally strongly, your equity weight grows from 30% toward 35-40%, reducing your risk-balancing properties. When gold surges, it overshoots its 7.5% target. Restoring balance means selling the over-weighted assets and buying the under-weighted ones. Most practitioners rebalance annually or when any asset class drifts more than 5 percentage points from its target weight — whichever comes first. A practical middle ground for tax efficiency is to rebalance using new capital contributions: direct monthly investments toward the most under-weighted assets rather than selling existing positions. This minimizes taxable events while keeping the portfolio close to target. In DonkyCapital, you set your target All-Weather allocation once and the dashboard continuously tracks your actual vs target weights for each position. The Capital Management tool calculates exactly which trades to make to rebalance — whether through new capital deployment or direct rebalancing — and shows you the precise amounts in your currency.

5. All-Weather Performance in 2022, 2023, and 2024

The All-Weather portfolio's performance during 2022 surprised many of its adherents and is worth understanding in full context. 2022 was an exceptional year: both stocks and long-duration bonds fell sharply simultaneously — a combination that had not occurred at this scale in decades. The S&P 500 fell approximately -18%; 20+ year US Treasury bonds fell approximately -29%; gold was roughly flat; commodities surged +25%. The net result for the All-Weather was a loss of approximately -11% to -16% depending on the exact implementation and currency. This was painful but far less severe than a pure equity portfolio's -18% to -25% decline in the same year. The lesson: the All-Weather provides genuine downside protection, but is not immune to simultaneous rising-rate and falling-growth environments. In 2023, the All-Weather recovered modestly — equities rebounded strongly, but bonds remained under pressure. In 2024, falling inflation expectations began to restore the strategy's balance. Over a full cycle, the All-Weather has historically delivered its intended purpose: smoother returns with materially smaller drawdowns, at the cost of lower long-term growth versus pure equity portfolios. Backtesting from 1970 to 2023 shows annualized returns of approximately 7-8% with maximum drawdowns rarely exceeding 15-20%.

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