Why All Weather?

We live in a time of great unknown. After decades of declining interest rates, we’ve seen interest rates hiking faster than ever before bringing chaos to the markets. This has brought huge levels of unknown into the market, bringing into doubt whether stocks and bonds will bring the same kinds of historical returns. To help offset this unknown, all-weather type funds bring in other types of assets to reduce dependence on stocks/bonds returns, without sacrificing too much in returns.

All-weather funds aim to provide consistent returns regardless of market conditions by investing in a diversified portfolio of assets. The benefits of investing in all-weather funds include:

  1. Reducing risk – By investing in a diversified portfolio, all-weather funds aim to reduce the risk of losing money in a single market or asset class.
  2. Consistent returns – All-weather funds aim to provide consistent returns over the long-term, regardless of market conditions.
  3. Simplicity – All-weather funds offer a simple and convenient way for investors to achieve diversification in their portfolio.
  4. Access to a wide range of assets – All-weather funds invest in a wide range of assets, including stocks, bonds, and alternative investments, providing investors with access to a diverse range of investment opportunities.

Humans suffer from loss aversion, where losses hurt more than gains. For these reasons, it often makes sense for investors to trade a small amount of returns for reduced risk and consistent returns. All-weather makes this easy with a little planning ahead.

All weathers by Dall-E

To check out more information on all-weather funds, check out this blog on the Dragon Portfolio or check out my Follow portfolio for more all-weather information (full disclosure – Follow is paying me).

Author: fatbabyfunds