All-Weather (Dalio) vs 60/40 Classic
The All-Weather portfolio is usually presented as the sophisticated alternative to the 60/40. It spreads risk across more asset classes and takes far less equity exposure, so it looks defensive next to a portfolio that puts sixty percent into shares. The interesting question is whether that extra structure earns anything once you account for how much less risk it takes.
Set both to the same 10.6% volatility and 60/40 Classic comes out ahead, returning 5.95% against All-Weather (Dalio)'s 5.69%, a gap of 0.26 percentage points a year.
These two views disagree: the forward-looking assumptions favour 60/40 Classic, while the record since September 2000 favours All-Weather (Dalio). That is worth more than either number on its own. The historical figure is one path through one set of decades, and this window contains two equity bear markets and a long gold bull run. The forward-looking figure starts from today's valuations and yields, which is the situation you are actually investing from.
Side by side
| At its own risk level | All-Weather (Dalio) | 60/40 Classic |
|---|---|---|
| Expected return | 5.06% | 5.95% |
| Volatility | 7.41% | 10.63% |
| Sharpe ratio | 0.26 | 0.27 |
Forward-looking estimates over a long horizon, not a measurement of any past period. Built from J.P. Morgan’s 2026 Long-Term Capital Market Assumptions, annualised and compounded, with a 3.10% risk-free rate.
The same comparison at matched risk
The table above compares two portfolios that take different amounts of risk, so part of any gap is just that. Below, the quieter portfolio is levered until both sit at 10.63% volatility. Exposure above one hundred percent is financed at cash plus 0.50 percentage points; anything under it earns the cash rate.
| Both at 10.63% volatility | Exposure | Expected return |
|---|---|---|
| All-Weather (Dalio) | 143% | 5.69% |
| 60/40 Classic | 100% | 5.95% |
Leverage is applied to the whole portfolio and assumes it can be financed at the stated rate, which is closer to true for a futures-based implementation than for a margin account. It does not model the path, and a levered portfolio can be forced to sell at exactly the wrong moment.
What actually happened
Everything above is an expectation. This is the record. The window starts in September 2000 because that is the first month in which every asset class in both portfolios has data, and it runs to July 2026, which is 311 months. It is not a chosen period; a pair holding private equity or inflation-linked bonds simply cannot start earlier than those markets can be measured.
| September 2000 to July 2026 | All-Weather (Dalio) | 60/40 Classic |
|---|---|---|
| Annualised return | 5.30% | 5.74% |
| Volatility | 6.69% | 9.56% |
| Sharpe ratio | 0.33 | 0.28 |
| Worst drawdown | -20.31% | -33.54% |
Rebalanced annually, with no fees or trading costs applied, so the figures compare the allocations rather than an implementation of them. Series are index and fund total returns, extended backwards before each ETF existed by the longer-running instrument tracking the same exposure.
The record at matched risk
| Both at 9.56% volatility | Exposure | Annualised return |
|---|---|---|
| All-Weather (Dalio) | 143% | 5.86% |
| 60/40 Classic | 100% | 5.74% |
One window is one path. A record covering 26 years contains a particular sequence of regimes, and a portfolio that happened to hold the right asset through them will look better than it deserves. Read this next to the forward-looking figures rather than instead of them. Borrowing is charged at the cash rate plus 0.50 percentage points, the same terms as the forward-looking table.
What each one holds
| Asset class | All-Weather (Dalio) | 60/40 Classic |
|---|---|---|
| AC World Equity | 30% | 60% |
| US Aggregate Bonds | — | 30% |
| US Intermediate Treasuries | 15% | — |
| World Govt Bonds | 15% | — |
| TIPS | 15% | — |
| Cash / Money Market | 10% | 10% |
| Gold | 7.5% | — |
| Commodities (Broad) | 7.5% | — |
The comparison almost everyone gets wrong
All-Weather is markedly less volatile than a 60/40. Put their raw expected returns side by side and the 60/40 looks better simply because it took more risk, which is not a finding.
The fair test is to lever All-Weather up until its volatility matches, and only then compare. This is the standard way to judge a risk-balanced portfolio, and it is the test Dalio's own framing invites, since the argument for All-Weather has always been that it is more efficient rather than higher returning.
What the result depends on
This comparison is unusually sensitive to bond assumptions. All-Weather carries a large long-duration position, so the expected return on government bonds drives most of the difference. When yields were near zero this comparison looked far worse for All-Weather than it does now.
It is also sensitive to financing. Levering a portfolio is not free, and the cost of borrowing above full exposure is charged here at the cash rate plus a spread. A wider spread narrows the case for the levered portfolio.
None of this makes the 60/40 a better portfolio to hold. It says that on these particular assumptions the extra complexity is not being paid for, which is a claim about the current assumption set rather than about the idea.
Frequently asked questions
Is the All-Weather portfolio better than a 60/40?
Compared at the same level of risk on forward-looking assumptions, the two are much closer than the usual framing suggests, and the plain 60/40 holds up well. All-Weather's advantage is a smoother ride at its natural risk level rather than more return per unit of risk.
Why lever the All-Weather portfolio at all?
Because otherwise you are comparing a low-risk portfolio with a higher-risk one and calling the difference performance. Levering the quieter portfolio to a matching volatility is the only way to see whether it uses risk more efficiently.
Does this account for the cost of leverage?
Yes. Exposure above one hundred percent is financed at the cash rate plus a spread, and any unlevered remainder earns the cash rate. Financing is a real cost and ignoring it would flatter whichever portfolio needed the most leverage.