What can you do with business profits or salary — introduction to Ray Dalio’s All weather portfolio
If you know me, I always say that money flows where there is intention.
And after all, we cannot bring any money to our death bed. so we are all merely steward of money we have on hands — it is temporary. If we utilise money well, if we are good money managers, more money flows to us. If we utilise money poorly, if we are poor money managers, more money flows away from us.
So how to be good money managers? What can you do with business profits or your income if you are in employment?
Buy channel bags? Put them in the bank? Go on a luxury vacation?
All of those are do-able, here are some framework questions for guide decision making:
1. Is the money getting you more of what you want or what others think you need to have?
2. Is the money contributing to your or your family’s happiness or causing more trouble and arguments?
3. Is the money contributing to humanity advancement or cause harm to society in the longer run?
If the answers are yes to one or more question above, go for it without any guilt or shame or fear!!!
If you still have some money left and not sure what to do with them, I want to introduce you to Ray Dalio’s All weather portfolio.
Ray Dalio is the founder of Bridgewater Associates, the “world’s biggest hedge fund firm” because his fund holds nearly $40 billion. Ray Dalio is a billionaire himself which means he has a way managing money.
Of course this is not investment advice, because we all have different expertise and you could be very good at bit coin and I don’t want you to go into any investment without knowing what it is and whether it is for you.
But for most people, the majority of folks, we want safe investment. We want reasonably good return with as little risk as possible. And we have limited capital to invest so we want to be cautious.
Plus we know that the governments are printing money and the inflation is only going to get worse.
So instead of putting money in the bank and earning peanuts, we naturally want a safe place to put our money with as little risk as practically possible right?
Over my last 10 years in investing, I have tried a bunch of investment strategies — including technical investment, value investment, stocks, bonds, options, etf, etc.
There are so much to learn under the umbrella of investment, so I really want to simply things for you here.
The 1st decision you need to make is:
do you want to invest actively or passively?
If your choice is active, then the all weather portfolio probably isn’t your cup of tea.
If you choose passive investing, do read on, I’ve got something for you.
Ray Dalio’s All weather portfolio
This All weather portfolio, by its name, means that it is applicable in all weathers regardless of economy cycles. It would still be influenced and affected by the economy but you don’t have to change strategy or readjust your portfolio every month or every week.
To put it simply, it is the portfolio for passive (or lazy) investors (just like me).
The asset allocation of Ray Dalio’s All weather portfolio is broken down into (revealed in Tony Robbins’s book — Money Master the Game):
40% long-term bonds
30% stocks
15% intermediate-term bonds
7.5% gold
7.5% commodities
Here is an example of applying the Ray Dalio’s All weather portfolio in our investment:
30% VTI (Vanguard total stock market etf)
40% TLT (iShares 20+ year treasury bond etf)
15% IEI (iShares 3–7 year treasury bond etf)
7.5% GLD (Gold etf)
7.5% GSG (iShares S&P commodity indexed etf)
There are other options of the etf choices so you will need to do some homework here but the principle stays the same.
Results of the all-weather portfolio:
1. In the last 10 years, the portfolio obtained a 7.7% COMPOUND annual return.
2. back-tested during the Great Depression, the All Weather Portfolio was shown to have lost just 20.55% while the S&P lost 64.4%.
3. $10,000 invested in Ray Dalio All Weather Portfolio on 5 Jan 2010, it would be worth nearly $25,458 for a total return of roughly 154.58% to date (30 Jan 2021).
Would you be satisfied with the results?
The time involvement:
When you get into this passive investment mode, all you need to do is
1. do the homework of choosing the etc before you buy (takes no more than 1–2 hours)
2. deposit money to buy the 5 selected etf each month or each year (takes no more than 10 mins)
3. rebalence the portfolio each year (takes no more than 10 mins)
So the whole investment maintenance process should not take more than 20 minutes each year!
The best thing? You can automate your investment by setting up auto deposit or pre-set instruction to buy a certain amount each month or each year at a specific time. In this day and age, a lot of things can be automated.
wow how much time you would have saved compared to active investment (active investment has its own merits, and I encourage you to do a comparison of the two investment philosophy if you are unsure which one you prefer).
For me, it’s definitely passive investment — take the excitement away please, I just want a relatively safe way to invest with as little risk as possible. I don’t need the thrill.
Rebalancing means that
say for example your 30% VTI grows in capital and increased by 30% in that year.
So you are out of proportion now from your original allocation (i.e.VTI may now take up 38% in the portfolio)
What you need to do is simply sell the number of units of VTI that will bring it back to the original level of 30% of the portfolio.
You can take the gains out for a trip or a bag if you want, or reinvest according to the the all-weather proportion — your choice.
P.S. I conduct regular live streams on abundance business and life on IG, visit @simplifiedbusinesscoach for more.
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Disclaimer: The information contained herein does not constitute the provision of investment advice.
