Principles: Life and Work

by Ray Dalio

I knew which shifts in the economic environment caused asset classes to move around, and I knew that those relationships had remained essentially the same for hundreds of years. There were only two big forces to worry about: growth and inflation. Each could either be rising or falling, so I saw that by finding four different investment strategies—each one of which would do well in a particular environment (rising growth with rising inflation, rising growth with falling inflation, and so on)—I could construct an asset-allocation mix that was balanced to do well over time while being protected against unacceptable losses. Since that strategy would never change, practically anyone could implement it. And so, with help from Bob and Dan, I created a portfolio mix that I could comfortably put my trust money in for the next hundred or more years. I called it the “All Weather Portfolio” because it could perform well in all environments.