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How to Build an All Weather Portfolio

Updated on: Jan 11th, 2022


4 min read

An all-weather portfolio is the one that provides you with good returns irrespective of the market developments. Such a portfolio would benefit from all market conditions. Here, the diversification of your portfolio plays a major role. We have covered the following in this article:

Be clear with your risk and diversification

The most important aspect that must be considered while building a portfolio is understanding your risk tolerance. An all-weather portfolio should be able to withstand any development in the market and provide stable returns. This calls for the diversification of your portfolio. When you diversify your portfolio, the overall risk associated with your portfolio depends on the underlying assets. You have to say away from assets whose risk levels are not in sync with your risk tolerance. 

Correlate your assets

Correlating two assets means that when one asset performs well, the other’s subdued. For instance, thriving equity markets would mean that debt markets fall. Likewise, with equities, high beta stocks do not move in line with defensive stocks. You have to identify and invest in the correlative asset class of every asset in your portfolio. Investing in correlative securities help you ride the wave of volatility. 

Consider investing in hybrid funds

Hybrid funds are a class of mutual funds that invest across securities in both equity and debt markets. They help you strike the right balance between risk and rewards. The fund managers of hybrid funds dynamically modify the portfolio’s asset allocation depending on the market trend. Therefore, investing in hybrid funds keeps you prepared to face all market conditions. 

Invest in a phased manner

Investing in phases helps you mitigate market volatility as you will purchase securities at different market trends. The best way to do this is by initiating a systematic investment plan or SIP. When you are buying securities at different prices, the cost of purchase gets averaged out over time. This is referred to as rupee cost averaging. You get the benefit of this when the markets rise, and you opt to cash out. 

Never ignore gold

Investing in gold is considered a traditional investment. Yet, it is viewed as a hedge against inflation and stock market fall. It is advisable to invest about 10% to 15% of your portfolio in gold. You may consider gold funds and gold ETFs for this purpose. 


It is essential to build an all-weather portfolio. It helps you stay ahead of inflation and be ready to face any market development. Investing in a good hybrid fund helps you strike the right balance between risk and rewards and enables you to ride the wave of market volatility at ease as it invests across both equity and fixed-income markets. Gold, over the years, has proved its importance by acting as a hedge against inflation, and you have to include gold in your portfolio. 

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Quick Summary

An all-weather portfolio is crucial for stable returns, achieved through diversification, risk understanding, correlation of assets, hybrid funds, phased investment, and gold inclusion. It helps manage market volatility and inflation.

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