Performance & Risk Metrics (2016-2026)
| Metric | Dual Momentum | All Weather Portfolio |
|---|---|---|
| CAGR (10-Year Annualized Return) | 10.9% | 7.2% |
| Max Drawdown | -18.2% | -11.9% |
| Sharpe Ratio (Risk-Adjusted Return) | 0.62 | 0.60 |
| Strategy Type | Tactical Asset Allocation (Trend following) | Passive Portfolio (Risk Parity) |
| Rebalancing Frequency | Monthly (on momentum signals) | Annually (fixed target weights) |
DM Philosophy
Dual Momentum simplifies trend following to a single binary signal: is the S&P 500's trailing 12-month return greater than T-Bills? If yes, invest 100% in US stocks. If no, rotate entirely to bonds. This removes the international equity component, sacrificing diversification for maximum execution simplicity.
All Weather Philosophy
Ray Dalio's All Weather portfolio uses risk parity to balance four economic environments: rising/falling growth and rising/falling inflation. By heavily weighting long-term bonds alongside stocks, commodities, and gold, it aims to perform reasonably across all market regimes without requiring any market timing or active decisions.
Key Differences Explained
This comparison pits active trend-following against passive risk parity. DM's tactical rotations deliver substantially higher returns (10.9% vs 7.2%) but with deeper drawdowns. The All Weather portfolio's structural bond-heavy allocation provides a smoother ride but sacrifices significant upside, especially during strong equity rallies.
- Strategy Type: DM is a tactical, actively-managed approach. All Weather is a passive, buy-and-hold approach.
- Return vs Risk: DM delivered 10.9% CAGR with -18.2% max drawdown (Sharpe: 0.62). All Weather delivered 7.2% CAGR with -11.9% max drawdown (Sharpe: 0.60).
- Maintenance: DM requires monthly signal monitoring. All Weather needs only annual rebalancing.
Side-by-Side Pros and Cons
DM Strengths & Limits
- Simplest possible momentum system — single binary signal
- Only requires two ETFs to implement
- Easiest to automate and follow consistently
- Misses international equity rallies entirely
- No global diversification
- Same whipsaw vulnerability as GEM
All Weather Strengths & Limits
- Lowest volatility and smoothest equity curve
- Performs well during deflationary crises
- Zero market timing — truly passive
- Heavy bond allocation drags returns in rising rate environments
- Underperforms in strong equity bull markets
- Negative real returns possible when bonds and stocks fall together (2022)
Which Strategy is Right For You?
Choose DM if: You believe in momentum and want higher returns with manageable monthly effort. DM's crash protection means you're not fully exposed during bear markets.
Choose All Weather if: You want a truly passive, all-weather approach. If you can accept lower returns for much smoother portfolio behavior, All Weather eliminates the need for any market timing.
Deep Dive
Want to master this strategy? Read our definitive Guide to Momentum Investing to understand the core rules, historical performance, and exact ETF implementations.