Ray Dalio’s portfolio fascinates investors worldwide. As founder of Bridgewater Associates, the world’s largest hedge fund, he has accumulated immense personal wealth. Dalio’s unique strategies consistently outperform the market. Examining his portfolio provides a model for others to emulate. The Ray Dalio portfolio contains over 700 holdings, including S&P 500 ETFs, emerging market funds, blue chip stocks, commodities, and substantial gold. But the specific assets aren’t the only insight. His methodology around diversification, risk parity, and economic cycles is also invaluable. Dalio’s principles offer deep wisdom for investors to apply.
Ray Dalio Portfolio Allocation
Dalio’s investment strategy is based on high diversification across several sectors. His focus on long-term growth with low fees is often compared with lazy portfolios. The core of his strategy is simplicity and ease of implementation. Dalio’s portfolio is currently structured of 730 holdings, and we will look at the most influential ones.
BlackRock iShares Core S&P 500 ETF (NYSEARCA:IVV)
One of the most popular exchange-traded funds that tracks the performance of the S&P 500 index. This is the biggest holding in Ray Dalio’s portfolio with a 5.5% share. Through investing in it, Dalio is diversifying his portfolio through all major sectors, since this fund holds stocks in all big international companies, including Apple, Tesla, Microsoft, Amazon, nVidia, and Meta.
Dalio is well aware of all the benefits of investing in this ETF, with the biggest being:
- Extremely low fees. With an expense ratio of only 0.003%, it is one of the lowest in the industry
- High liquidity. This ETF is highly liquid, meaning that is easy to sell and buy stocks at all times
- Exposure to a wide variety of stocks. Through this ETF investors are making sure that their portfolio is diversified thus reducing risk
- It has a good track record. One of the key factors of all ETFs, a track record, is sparkling clean in this case, and it goes back to 1993.
During Q2 and Q3 2023 Dalio piled up even more shares, buying an additional 215k at an average closing price of $421.42 and $447.30 respectively. He started investing in iShares Core back in 2010 and it brought Dalio a cumulative gain of 47% so far. Currently, Dalio owns 2.04 million shares which are valued at $979 million.
BlackRock iShares Core MSCI Emerging Markets ETF (NYSEARCA:IEMG)
This is an example of a crucial ETF if you are looking for diversification and exposure in emerging market countries. It tracks the performance of the MSCI Emerging Market Index which focuses on companies in 24 emerging market countries.
This ETF is a second-size holding in Ray Dalio’s portfolio, with a 5.3% stake. Dalio started investing in 2016 and he currently owns 19.2 million shares that are valued at $943 million.
Investing in this fund brought him further diversification in emerging markets. This resulted in lower dependence on the market of a single country. Its expense ratio of 0.14% is still low when compared to other actively managed emerging market funds.
Procter & Gamble Co (NYSE:PG)
Ray Dalio started buying stocks of this hygiene and personal care manufacturing giant back in 2006. His extraordinary timing of buying and selling stocks brought gains of 5.4%. Dalio currently owns 4.3 million shares of P&G and the total holding value is $717 million. Currently, this holding is in third place in overall Dalio’s portfolio with a share of 4.03%.
Costco Wholesale Corporation (NASDAQ:COST)
This whale in the wholesale sector has been one of Dalio’s crucial picks since Q4 2005. He currently owns 828 thousand stocks at an estimated $557 million. Over two decades his trades with this holding brought a massive gain of 63%. Currently, Costco is Dalio’s 4th holding taking a 3.13% of his portfolio.
Coca-Cola Co (NYSE:KO)
This giant in the manufacturing of soft drinks has been a part of Dalio’s portfolio since 2005. Currently, he owns 9 million Coca-Cola shares, valued at $540 million. This is currently the 5th holding in Dalio’s portfolio with a stake of 3.03%. This investment is highly lucrative, and it has brought a gain of 9.2% so far.
SSgA Active Trust – SPDR S&P 500 ETF Trust (NYSEARCA:SPY)
This ETF trust commonly known as a SPY is one of the largest and most popular ETFs in the world. It offers high diversification since it includes all 500 companies from the S&P 500 list. It has a low expense ratio of just 0.095% and is highly liquid. Another significant feature of this fund is its high level of transparency that allows the investors to constantly track their investments.
Ray Dalio started investing in this fund back in Q2 2009 and he currently owns 996 thousand shares. They are valued at $475 million, and take 2.66% of Dalio’s portfolio, making it the 6th largest holding. This holding has proved to be particularly lucrative, resulting in cumulative gains over the years reaching 252%.
PepsiCo Inc (NASDAQ:PEP)
Another soft drink manufacturer is on Dalio’s favorite investment list. This holding has been a part of Dalio’s portfolio for almost two decades, with the first investment made back in Q4 2005. He currently owns 2.68 million Pepsico shares valued at $447 million. This is the 7th largest holding in Dalio’s portfolio that netted a gain of 9.7% so far.
Johnson & Johnson (NYSE:JNJ)
Pharmaceutical and medical giant Johnson & Johnson has been a part of Dalio’s portfolio for almost twenty years. It became a regular part of his portfolio at the same time as Pepsico. Dalio currently owns 2.72 million J&J shares that are valued at $441 million. This makes it the 8th largest holding in Dalio’s portfolio. It had its ups and downs, but when the line is drawn it has delivered a marginal return of 0.4%.
McDonald’s Corp (NYSE:MCD)
A long-time part of Dalio’s portfolio is a fast food innovator and giant McDonald’s. He started trading its shares in Q4 2008, and today he owns 1.48 million McDonald’s shares. Their current value is $436 million, and they bring 26% gains so far. This is the 9th largest holding in Dalio’s portfolio with 2.34% stakes.
Walmart Inc (NYSE:WMT)
Walmart, another well-known company, located in the retail sector has also been an important part of Dalio’s portfolio. Another long-time member of the portfolio, started in Q4 2005, that until now netted a gain of 15%. Dalio owns 2.69 million shares that are currently valued at $434 million, and it takes the 10th place in his portfolio.
Ray Dalio’s Investment Principles
Risk Management
Ray Dalio’s clear view and understanding of the market, and its potential shifts, helps him in creating his portfolio and managing risk. He has enough knowledge, experience, and understanding to anticipate and prepare for potential problems that can arise.
We can see his approach to risk when we are reviewing his portfolio. His diversification across uncorrelated assets is a proven approach to combating sudden market twists that can go ballistic on a global scale.
Dalio’s equity part of the portfolio can capitalize during economic upwards, and his fixed-income holdings minimize the negative impact of the market downturns. This way his portfolio is well-balanced and cannot take a hit from a single holding loss.
Dalio often criticizes himself, and by doing so, he is accepting mistakes, and learning from them. The main cause that pushed him into an extensive diversification approach was the Mexico debt crisis. In that time contrarian predictions resulted in major losses that triggered massive layoffs in Bridgewater Associates.
From that mistake, Dalio learned how important portfolio diversification is, and how much it increases his resilience. From that low point in his career, he developed a characteristic risk parity approach that he still favors.
The core of this approach is to strive for equalizing the risk contribution of each asset class in the portfolio. This is a shift from the approach where maximizing the returns of a specific asset class is viewed as a priority.
By equalizing the risk the portfolio becomes less prone to volatility. It can deliver consistent returns in the long term, while potentially sacrificing higher short-term gains.
Dalio also often relies on stop-loss orders to limit potential losses, while giving up on potential high returns. He advocates that he found it more satisfying to miss out on a potential gain than to suffer catastrophic losses.
Another equally important part of Dalio’s risk management strategy is stress testing. He is frequently testing his portfolio against several potential scenarios. Based on the test results he develops several strategies that he can employ at the right moment, to minimize the losses.
Economic Cycles
By Dalio’s theory, the big cycle is made of a series of recurring patterns in the economy. They have a major impact on all crucial factors including economic activity, wages, and prices. The cycle is made from three phases – a phase of growth, followed by a phase of recession, ending with a phase of deleveraging.
In the growth phase credit and debt levels increase since a growing economy needs it to create further growth. With the input of credits and debts, economic levels rise, resulting in increased economic activities. This further leads to an increase in both prices and salaries. This phase often ends with inflation which is a starting point for the second phase.
In the recession phase due to inflation and lowered economic activity, debt and loan levels contract. These factors lead to a drop in prices and wages.
In the final phase of deleveraging the economic activity slows down even further. Credit and loan levels are minimized while companies and individuals pay them off. This period is often characterized by very low economic activity that often leads to deflation.
Dalio doesn’t want to discuss a chance to avoid this scenario. His point is that it is inevitable, and the only thing is when will it happen. One of his pieces of advice to companies and individuals is to be careful both with borrowing and spending during the growth phase. By doing so they are already preparing for the periods of recession and deflation.
He advocates for the importance of central banks during periods of recession. They should aim to decrease inflation by lowering interest rates. They should focus on encouraging spending and borrowing so the cycle would end as fast as possible with minimal consequences.
Asset Classes
Ray Dalio and his All Weather portfolio is a great example of a portfolio that can perform well in different economic conditions. It is crafted in a manner that always brings constant returns with a minimal level of risk.
His asset allocation is usually divided into three groups:
- Fixed income – 55%
It is further divided into U.S. long-term bonds with a maturity of 20 years which takes 40%, and 15% intermediate-term bonds with a maturity of 7 to 10 years.
- Stocks – 30%
Dalio is focused on ETFs that follow the S&P 500.
- Gold and Commodities – 15%
Dalio’s portfolio aims for 7.5% gold and 7.5% commodity stakes.
Take A Look At Ray Dalio: There’s One Thing Every Portfolio Should Have:
Comparison with Lazy Portfolios
When we think about lazy portfolios we know that they aim to result in long-term gain with minimum effort. They are often the best approach for beginner investors, and for those who don’t want to lose too much time about their investing strategies.
These portfolios are composed of several low-cost index ETFs that track broad market indexes. By investing in them the investor is aiming for a safe and diversified investment into a broad array of strong companies that usually bring constant returns. Investors cannot expect large returns, since this type of investment has a philosophy of playing it safe.
Other key aspects of why they are popular are their low fees and maintenance. Since their management fee is often very low, it doesn’t have a visible impact on the fund’s returns. Investors who want to avoid the hustle and high-risk investing prefer it.
Ray Dalio’ All Weather portfolio (AWP) has several key differences. The first is in asset allocation. While lazy portfolios are focused on stocks and bonds, Ray Dalio has a more diverse approach to allocating assets. He often invests in gold, commodities, and short-term cash.
AWP when compared with lazy portfolios aims for lower levels of volatility and drawdowns. This can sometimes result in lower returns in bull markets.
Another significant difference is in the complexity of setting up, and rebalancing of portfolios. AWP demands an understanding of this specific asset allocation strategy, which can come with periodic needs for rebalancing.
Lazy portfolios are not made for risk-takers, and AWP is certainly not a risky investment approach. But, depending on the setup of the portfolio, it can come with different risk tolerance levels. Its wider array of assets can focus on those that can bring higher returns at a higher risk when compared to lazy portfolios.
Performance Analysis
To analyze AWP’s historical performance we must compare it with relevant investment strategies. Comparing it with the traditional 60/40 Stock-Bond portfolios, with a S&P 500 index, and Lazy portfolios can give us a more detailed picture of AWP portfolio performance.
When talking about traditional 60/40 Stock-Bond portfolios, their balance offers a balance that can result in both growth and stability if handled properly. When we analyze AWP and its risk management focus it doesn’t come as a surprise that the AWP has historically resulted in lower volatility and drawdowns. This is even more visible during major market drawturns.
The S&P 500 index is focused on representing the performance of the 500 largest publicly traded companies in the United States. This parameter is often used as a benchmark for stock market performance. Due to the high diversification of the AWP portfolio, the potential for high gains is sacrificed, especially during bull markets. That is the factor that is causing the AWP portfolio to bring lower returns when compared to the S&P 500.
Lazy portfolios, as we mentioned, are low-risk, low-maintenance, and simple investment approaches. They are highly diversified due to their focus on broad-market ETFs. These portfolios can offer similar or even greater returns during bull markets but with a risk of higher volatility.
It is also worth noting that Ray Dalio’s signature risk parity approach has been losing its edge in recent years. This comes as a result of frequent central bank interventions, combined with a low-interest rate economic landscape. These factors limit the chance of a risk parity approach to capitalize and bring significant returns.
Also, the constant unpredictability of the market is making it difficult to successfully implement Dalio’s approach. The market is often volatile, and that doesn’t bode well with his investment preferability. Finally, the use of technology and the development of new strategies are frequently outpacing Dalio’s more traditional approach to investing.
FAQs
What Commodities Does Ray Dalio Invest In?
A significant part of AWP’s portfolio is reserved for investing in commodities that combined with gold make about 15%. Dalio prefers investing in gold which usually takes around 7.5% of his portfolio. His investment in commodities is based on investing in ETFs that focus on commodities investing. Those can be oil, gas, or land, depending on his current preference.
How Much of Bridgewater Does Ray Dalio Own?
What is the size of the exact ownership share of Dalio is not known. Since Bridgewater is a private company, they do not need to publicly reveal the exact ownership share. From interviews and news snippets, we can take a guess.
In the past, he held a major stake in the company, but with time passing he transferred voting rights to the board. He transitioned his position to the co-CEO and founder role. In one interview in 2018, he hinted that he owns less than half a share of Bridgewater.
In a second, more recent interview in 2022, Dalio mentioned that he has transferred all voting rights to the board, from which we can deduce that he doesn’t hold the controlling stake.
Final Thoughts
Dalio’s trademark risk parity approach with its focus on consistent performance across different market cycles has constantly delivered. It helped in making him one of the most successful hedge fund managers.
Current issues that come with employing this approach are that it can underperform the S&P 500, especially in the bullish markets. When utilizing this approach you are willingly giving up the potential for maximized returns and choosing stability.
But, another issue that can be now identified, is the current economic climate which often causes market volatility. To be successful with Dalio’s approach you should focus on active fund management, which results in higher fees. But, regarding Dalio, he is still managing due to his experience in rebalancing his strategy and finding a way to bring constant and stable returns.
