You now hold 10 million, aiming for an annualized return of 15%-20%. How would you invest?

Is there a strategy that can face all economic conditions?
My suggestion is, for ordinary people, go straight to—an all-weather investment strategy.
This strategy, even in China, has been proven in live trading. Bridgewater Fund China relied on this approach in 2024 to deliver an impressive 35% return, far surpassing the 14% of the CSI 300.
This concept, proposed by Ray Dalio in 1996, revolutionized traditional asset allocation—it emphasizes risk-based allocation rather than capital proportions, allowing for steady performance across different economic cycles.
This is the famous “All-Weather Strategy”(All-Weather Strategy)!
01, Core Concept: The “Four Seasons” Based on Economic Growth and Inflation
Dalio believes that the key drivers of long-term asset price fluctuations are two major surprises:
1. Unexpected economic growth (better or worse than market expectations)
2. Unexpected inflation (higher or lower than market expectations)
Combining these two factors results in four possible economic environments, analogous to “seasons”:
Economic Environment Economic Growth Inflation “Season”
Environment One Above expectations Above expectations Hot Summer
Environment Two Above expectations Below expectations Bountiful Autumn
Environment Three Below expectations Above expectations Stag Winter
Environment Four Below expectations Below expectations Deflation Recession
The goal of the all-weather strategy is to ensure that in these four “seasons,” some assets perform well enough to hedge against others’ declines, keeping the entire portfolio stable.
02, Key: Risk Parity
Risk parity is the soul of the all-weather strategy.
Traditional allocation is based on capital weights (e.g., invest 600,000 in stocks, 400,000 in bonds), but risk parity allocates based on risk contribution.
The problem: in a 60/40 portfolio, stock volatility risk far exceeds that of bonds. In fact, over 90% of the risk comes from stocks.
This isn’t true diversification.
Solution: the all-weather approach seeks to make each asset class contribute equally to the overall risk of the portfolio. Since bonds have much lower risk than stocks, to achieve risk balance, the allocation to bonds must be significantly increased, while stocks are reduced.
Dalio’s Bridgewater uses complex calculations to normalize the risk of various assets, ultimately deriving a seemingly counterintuitive allocation ratio.
03, Classic “Simplified” All-Weather Allocation
Dalio shares a simplified version for individual investors in his book *Principles*, which is easy to understand and implement:
30% US stocks (e.g., S&P 500 ETF)
40% US long-term bonds (e.g., 20+ year Treasury ETF)
15% Mid-term bonds (e.g., 7-10 year Treasury ETF)
7.5% Gold
7.5% Commodities
Why this allocation?
When economic growth exceeds expectations (environments one and two): 30% stocks perform well, generating gains.
When growth is below expectations (environments three and four): 55% bonds (40% long-term + 15% mid-term) perform well, as investors seek safety, and interest rates may fall, boosting bond prices.
When inflation exceeds expectations (environments one and three): 7.5% gold and 7.5% commodities perform well, as they are traditional inflation hedges. Meanwhile, inflation erodes the value of fixed-income bonds, which is why bonds shouldn’t be 100%.
When inflation is below expectations (environments two and four): 55% bonds and 30% stocks benefit, as low inflation environments favor financial assets.
With this allocation, regardless of which “season” the economy enters, the portfolio always has assets that can “bloom,” achieving “all-weather” stability.
04, Strengths and Weaknesses
Advantages:
1. Very robust: the core goal isn’t to chase the highest returns but to navigate bull and bear markets, reducing volatility and maximum drawdown.
2. No market prediction needed: abandons “timing,” which most people cannot do consistently.
3. Good investment experience: low volatility makes it easier for investors to hold long-term, avoiding panic selling at market bottoms.
Disadvantages:
1. Underperformance in long bull markets: if the market stays in “environment two” (good growth, low inflation), like 2009-2020, the all-weather strategy’s returns will be much lower than a pure stock portfolio.
2. Sensitive to interest rates: the strategy includes a large allocation to long-term bonds. If interest rates rise rapidly and persistently (like in 2022), both stocks and bonds decline simultaneously, leading to poor short-term performance.
3. The seemingly “counterintuitive” high bond allocation can be hard for stock-oriented investors to accept.
4. High discipline required for rebalancing: regularly (e.g., annually) adjusting assets back to target proportions involves “buying low and selling high,” which can be psychologically challenging.
05, A Simple Example
Start a “Versatile Small Shop”
Sell ice cream (representing stocks): performs well only on hot days (overheating economy).
Sell umbrellas (representing long-term bonds): performs well only on rainy days (recession).
Sell sunscreen (inflation hedge assets like gold): sells well in hot and sunny weather (high inflation).
Sell hot coffee (stable assets like mid-term bonds): sells steadily even in somewhat cool weather (moderate growth).
If you put all your money into ice cream (full stock position), you’ll make a killing on hot days but lose badly on rainy days.
If you balance your inventory based on “weather” probabilities:
30% of funds into ice cream (bet on hot weather)
40% into umbrellas (bet on rain)
15% into hot coffee (daily baseline)
7.5% into sunscreen (bet on intense sun)
7.5% into dehumidifiers (representing commodities)
This way, no matter the weather, you always have something to sell, and your daily income remains relatively stable.
Suppose you have a 100,000 yuan portfolio, allocated according to the simplified all-weather strategy:
30,000 yuan in stock index funds (expect growth)
40,000 yuan in long-term bonds (prepare for recession)
15,000 yuan in mid-term bonds (steady income)
7,500 yuan in gold
7,500 yuan in commodities
Let’s look at two extreme economic scenarios:
Scenario 1: Prosperous economy, stock market surges (+20%)
Stocks: 30,000 * 20% = earning 6,000 yuan
Long-term bonds: good economy, no one buys bonds, prices may fall 5%. 40,000 * -5% = losing 2,000 yuan
Mid-term bonds: slight decline of 1.5%. 15,000 * -1.5% ≈ losing 225 yuan
Gold and commodities: may stay flat.
Total profit: 6,000 - 2,000 - 225 = +3,775 yuan (about 3.8% total return)
Result: Although missing out on the full stock market rally, you still make money without losing.
Scenario 2: Economic crisis, stock market crashes (-30%)
Stocks: 30,000 * -30% = losing 9,000 yuan
Long-term bonds: safe haven, prices jump 15%. 40,000 * 15% = earning 6,000 yuan
Mid-term bonds: up 5%. 15,000 * 5% = earning 750 yuan
Gold: safe haven, up 10%. 7,500 * 10% = earning 750 yuan
Commodities: may fall 5%. 7,500 * -5% = losing 375 yuan
Total profit: -9,000 + 6,000 + 750 + 750 - 375 = -875 yuan (about -0.9% total return)
Result: Even with a 30% stock drop, your overall portfolio almost breaks even! That’s the power of the all-weather strategy.
06, Final words, brothers:
Don’t bet on the direction: it doesn’t bet on whether tomorrow will be sunny or rainy, but prepares all gear.
Hedge risks: losses in stocks are offset by gains in bonds and gold.
Pursue stability: its goal isn’t to earn the most in good times but to lose the least in bad times, achieving long-term steady compound growth.
Ray Dalio’s all-weather strategy is a profound investment philosophy. It shifts from “predict the future” to “prepare for all possibilities,” using risk parity principles and economic environment-based hedging to build an extremely resilient investment system.
For investors seeking long-term steady growth without big portfolio swings, it’s a top-tier strategy worth studying and emulating.
Let’s work together!