What's Inside Ray Dalio's Investment Portfolio?

Ray Dalio is a famous founder of Bridgewater Associates – hedge fund with more than $140 billion under management. The man whose ‘Principles’ are at the backbone of many investors strategies on the market now. His all-weather portfolio obtained a 7.29% compound annual return In the last 30 Years. No wonder the whole world is watching him. 

Although this portfolio has been in the largest drawdown since the inception of the fund in 1992, I’m confident that such mega-mind will figure it out - how to gain back.

Let’s look at the recent actions and figure out what’s his strategy.

Recent changes in Ray Dalio's All-Weather portfolio

The largest buys are Visa, Mondelez, Johnson&Johnson, Alphabet and Microsoft. 

So he’s increasing an already big share of healthcare by buying J&J. And not so big consumer staples sector by buying Mondelez.   

These facts don’t say much, therefore let’s look at portfolio changes over the last 4 years to see the bigger picture.

• Since 2018 the % of financial stocks(in blue) in the portfolio dropped from 30 to 8 and the share of ‘Other’(orange) category which consists of S&P500 ETFs and Gold has also declined 4 times from 49% to 11%. So Dalio might realize that there’s no point in holding the whole market when you can bet on sectors that feel stronger during certain periods of time (we suspect recession). So since the second quarter of 2020, we see complete rebalancing.
• To replace finance and S&P500, Bridgewater started buying Consumer Staples such as Pepsi, Coca-cola (almost equal shares, however, Pepsi’s is 0.07% bigger) and General mills. Which now comprises 12.7% of the total portfolio (light green). 
• As well as he substantially increased the Healthcare share. It used to be 1,83% in 2018, while now it’s 20.5% (dark green). 
• However, the largest share of 30% in the portfolio belongs to Consumer Discretionary (yellow). Companies like Procter&gamble(btw the largest share in portfolio), Macdonalds, Costco, Walmart, etc. 

This does look like preparation to the high-inflation environment, as in such case the companies mentioned above are the ones who can transfer increased prices to consumers easier.

• The biggest mistake I see in Dalio’s portfolio is selling energy stocks too early (in purple and circled). Because since Q2 2020 they grew 72%. 

• Still, knowing that energy prices also have a correlation with high inflation, Dalio started buying energy stocks back at the beginning of this year. Whereas Buffet has been buying Occidental petroleum since 2019 and already profited $4 billion from them. 

• At the same time, Dalio started increasing exposure to the Technology sector (red), while they are so much discounted. It’s classic of the American market that "Smart money" often comes into play when most market participants are in a hurry to close their positions and are in fear. 

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Ray Dalio's investing strategy for 2023

1. He’s buying more inflation-proof sectors probably because prepares for a protracted economic recovery.
2. He’s slowly buying the dip of the strongest tech companies such as Google and Microsoft. 
3. One more thing I haven’t mentioned is his large exposure to emerging markets. 3.24% is in IEMG (iShares Core MSCI Emerging Markets ETF). Emerging markets account for 80% of global growth and have consistently demonstrated higher gross domestic product (GDP) growth than developed countries through past market cycles. Most of the emerging markets such as China, India, Brazil, and others encourage industrialization to move away from being commodity-based exporters and thus fuel growth.

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Interestingly enough, although the fund is not the best performing among classic medium-risk portfolios, it has the lowest drawdown of 20%. 

The most performing in this bunch is the Couch potato portfolio by Scott Burns. As simple as its name, this fund has only 2 assets: all stocks and government bonds. Vanguard’s Total US Stock Market ETF (VTI) and the iShares U.S. Treasury Bond ETF (GOVT).

Should you invest like Ray Dalio?

There is no point in repeating the exact same moves, hedge funds have more active approach than the majority of long-term investors and about 90% of index funds, which track companies of all sizes did better than active funds. 

What we should pay attention to are his strategic changes in sectors and learn lessons from them. Unfortunately, since we get information about their changes with 45 days delay, buying the same stocks is late, but buying industries is not. You can find great thematic portfolios in Gainy with selected exposure to Healthcare, Consumer Staples and Tech sectors.