Key insights

• ⚔️ Bridgewater's 'Holy Grail' method aims to shield investors during market collapses
• 🌦️ Creating an all-weather portfolio with multiple assets like stocks, bonds, commodities, and crypto
• 💹 Inflationary crashes occur when the Fed raises interest rates, causing bonds and gold to crash while Commodities go up
• 📉 A multi-asset all weather portfolio reduces volatility and declines, but may lead to lower returns in the long run
• ⚖️ Trade-off between high returns and low volatility in investing
• 📉 Drawdowns are normal in investing and are unavoidable
• 📈 The market is designed to go up, so being bearish may lead to losses
• 💼 Picking high quality companies and buying them when undervalued can outperform the market

Q&A

• Are drawdowns normal in investing?

  Yes, drawdowns are normal in investing and are unavoidable. Trying to avoid drawdowns by hedging and buying put options may lower long-term returns. The market is designed to go up, so being bearish may lead to losses. Accepting volatility and investing in high quality companies or index funds leads to long-term portfolio growth.

• What is the trade-off between high returns and low volatility in investing?

  The trade-off between high returns and low volatility in investing is that hedging can reduce volatility but also lowers returns. High return comes with high volatility, and hedging through options incurs cost and may not always be effective. Legendary investors like Peter Lynch achieved high returns at the cost of high volatility.

• How does the multi-asset all weather portfolio compare to a 100% US Stocks portfolio?

  The multi-asset all weather portfolio includes allocation to US Stocks, long-term treasury bonds, medium-term treasury bonds, gold, and commodities. It reduces volatility and declines during market crashes but may lead to lower long-term annual growth rates compared to a 100% US Stocks portfolio. Comparison of portfolio performance using Portfolio Visualizer shows higher annual growth for the 100% US Stocks portfolio, but with higher volatility and larger declines during market crashes.

• What types of market crashes are there, and how does the 'All Weather Portfolio' allocate assets?

  There are two types of market crashes: recessionary and inflationary. During recessionary crashes, the Fed cuts interest rates, causing bonds and gold to go up while commodities go down. Inflationary crashes happen when the Fed raises interest rates, causing bonds and gold to crash while commodities go up. The 'All Weather Portfolio' allocates 30% to US stocks, 40% to long-term treasury bonds, 15% to intermediate treasury bonds, and 7.5% to Commodities.

• How did the all-weather multi-asset portfolio perform during previous crashes and bear markets?

  The all-weather multi-asset portfolio performed well during previous crashes and bear markets, cushioning the blow of stock market declines through a mix of bonds, gold, and commodities. During recessionary bear markets, the Federal Reserve's actions affect the performance of bonds and gold.

• How does the 'Holy Grail' method aim to shield investors during market collapses?

  Bridgewater's 'Holy Grail' method aims to shield investors during market collapses by creating an all-weather portfolio that includes a mix of assets like stocks, bonds, commodities, and crypto. This diversification helps cushion stock market declines by allowing other assets to perform well during downturns.

• What is Bridgewater's 'Holy Grail' investing method?

  Bridgewater introduced the 'Holy Grail' investing method to create an all-weather portfolio that can protect against market collapses. By diversifying into multiple assets like stocks, bonds, commodities, and crypto, the portfolio aims to reduce volatility and cushion stock market declines.

• 00:01 Bridgewater introduced the 'Holy Grail' investing method to create an all-weather portfolio that can protect against market collapses. By diversifying into multiple assets like stocks, bonds, commodities, and crypto, the portfolio aims to reduce volatility and cushion stock market declines.
• 03:30 The all weather multi-asset portfolio performed well during previous crashes and bear markets, cushioning the blow of stock market declines through a mix of bonds, gold, and commodities. During recessionary bear markets, the Federal Reserve's actions affect the performance of bonds and gold.
• 06:59 In 2022, the stock market, bonds, gold, and Bitcoin crashed, while Commodities (such as oil and gas) went up. There are two types of market crashes: recessionary and inflationary. During recessionary crashes, the Fed cuts interest rates, causing bonds and gold to go up while Commodities go down. Inflationary crashes happen when the Fed raises interest rates, causing bonds and gold to crash while Commodities go up. The 'All Weather Portfolio' allocates 30% to US stocks, 40% to long-term treasury bonds, 15% to intermediate treasury bonds, and 7.5% to Commodities.
• 10:37 A multi-asset all weather portfolio reduces volatility and declines, but may lead to lower returns in the long run. Comparison of portfolio performance shows that a 100% US Stocks portfolio had higher annual growth rates than the multi-asset portfolio, but with higher volatility and larger declines during market crashes.
• 14:33 The trade-off between high returns and low volatility in investing. Hitting your portfolio can reduce volatility but also lowers returns. There's no perfect solution – high return comes with high volatility. Hitting through options incurs cost and may not always be effective. Legendary investors like Peter Lynch achieved high returns at the cost of high volatility.
• 17:50 Drawdowns are normal in investing, trying to avoid them may lower returns. Market is designed to go up, so being bearish may lead to losses. Accepting volatility and investing in high quality companies leads to long-term growth.