Over the past three years, Indian equity markets have surged, drawing investors to benchmark indices like the Nifty 50 and Sensex. The post-pandemic rally, supported by strong domestic demand and government capital expenditure, saw the Nifty rise over 85% between March 2020 and December 2023. But the tide is turning.

Since September 2024, the Nifty has declined nearly 8%, marking its longest losing streak in over two decades. Rising bond yields, global uncertainties, and valuation concerns are rattling sentiment. Investors are asking a familiar question: Is there a smarter way to invest—one that offers growth, but with less turbulence?

One answer may lie in a time-tested strategy devised by hedge fund legend Ray Dalio—and recently adapted for Indian markets.

Ray Dalio’s Risk-Parity Blueprint

Dalio, founder of Bridgewater Associates, designed the “All-Weather Portfolio” to perform across all economic climates—boom, bust, inflation, or deflation. Rather than maximizing returns through equity-heavy exposure, it spreads risk across asset classes to avoid over-reliance on any single macro environment.

His original U.S.-centric allocation includes 30% equities for growth, 40% long-term bonds for stability, 15% intermediate-term bonds to manage duration, and the remaining 15% split between gold and commodities as inflation hedges.

The brilliance of this approach lies in its balance. Equities thrive in expansion. Bonds shine during slowdowns. Commodities and gold cushion the impact of inflation or currency depreciation. The portfolio doesn’t bet on a specific scenario—it prepares for all.

A version of India’s Realities

But India isn’t the U.S. It's a high-growth, high-volatility emerging market with retail investors less exposed to global bond and commodity instruments. A literal replication of Dalio’s model wouldn’t work here.

To tailor the strategy, I propose a modified Indian version: 45% in the Nifty 50 to reflect the country’s growth potential, 40% in 10-year Indian government bonds for risk-free stability, and the remaining 15% divided equally between gold and a mix of silver and crude oil to provide inflation protection and commodity exposure.

This shift increases equity weight to align with India’s growth narrative but anchors it with fixed income and real assets that reduce volatility—offering both participation and protection.

Performance Through Crises

A portfolio’s true strength is revealed during downturns. Backtesting shows that the Indian All-Weather Portfolio has consistently outperformed a pure equity strategy in crisis periods.

In 2008, during the global financial meltdown, the Nifty crashed 47%. The All-Weather Portfolio fell just 24%. In March 2020, during the COVID shock, the Nifty dropped 23% in a single month, while the diversified portfolio declined a milder 13%.

Even in rebound years like 2009 and 2021, the All-Weather model delivered strong double-digit CAGR returns of 12% vs Nifty that clocked 15%. The trade-off? Smoother compounding and fewer sleepless nights.

From January 2000 to January 2025, the All Weather Portfolio gave better returns for the amount of risk taken compared to the Nifty-only strategy. It managed risk more efficiently and rewarded investors with higher returns for each unit of the risk, showing it was the smarter choice over the long run has delivered more stable returns compared to the Nifty Only Strategy. 

Why It Matters in 2025 and Beyond

As 2025 unfolds, global macro risks remain elevated—geopolitical tensions, supply chain disruptions, and tighter U.S. monetary policy all adds to uncertainty. While India’s domestic growth story remains intact, it’s not immune to global tremors.

A 100% equity strategy may seem tempting in bull markets, but it also exposes investors to deep drawdowns when tides turn. In contrast, the All-Weather Portfolio allows investors to remain invested consistently limiting losses during shocks, while capturing upside in recoveries.

For Indian investors seeking more than just headline returns—for those who value resilience, discipline, and long-term wealth creation—this diversified strategy offers a compelling roadmap.

As Warren Buffett always says, “Never lose money.” A strategy that compounds steadily by avoiding major drawdowns may be the best way to honour that advice.

Views are personal. The author is Professor , Finance & Analytics at Great Lakes Institute of Management, Gurgaon