Billionaire investor Ray Dalio says he's owning gold to hedge the risk of debt and inflation crises (2024)

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Billionaire investor Ray Dalio says he's owning gold to hedge the risk of debt and inflation crises? ›

Ray Dalio says he owns gold partly to hedge against debt and inflation risks. The legendary hedge fund founder cast another warning on rising debt balances around the world. He's warned investors of a US debt crisis, which could push the economy into a balance sheet recession.

Gold is widely considered an inflationary hedge because its price in U.S. dollars is variable. For example, if the dollar loses value from the effects of inflation, gold tends to become more expensive.

Raymond Thomas Dalio (born August 8, 1949) is an American investor and hedge fund manager, who has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985. He founded Bridgewater in 1975 in New York. New York City, U.S.

Another key principle is diversification, which Dalio views as the holy grail of investing. This is especially true when it comes to different asset classes – groups of similar assets such as stocks, bonds, real estate, and so on – that don't move in the same way in a given economic environment.

Gold is consistently in demand around the world, so a recession in any one region is unlikely to skew its international value. In the case of a global recession, gold is still seen as a valuable commodity because of its liquidity, and it is an easy asset to cash in on when the markets are down.

rising across the longer-term to offset the grinding long-term losses in the stock market. Day-to-day, the price of gold shows pretty much no correlation with or against the stock market. Half the time that stocks go up or down, gold goes in the same direction. Week-to-week, the same picture.

Commodities like gold are speculative, so you should only invest what you can afford to lose. Orman recommends putting no more than 5% of your investments into commodities.

It's very seldom you ever see gold come to the rescue. I don't believe in investing in gold for that reason. Plus, the track record on gold, as far as a rate of return, is horrible over the long haul. There was a time a few years ago when everyone went crazy on it, but other than that?

However, gold is typically a poor investment option when the economy is strong. It will often lose money during these periods as investors sell gold to put their money in the stock market and other growth assets. In the long run, gold has a significantly lower average annual return than stocks.

“He who lives by the crystal ball will eat shattered glass”

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The March shakeup marked the biggest change since Dalio relinquished control of Bridgewater in September 2022, transferring his voting rights to the board and stepping down as one of three co-CIOs.

Ray Dalio says he owns gold partly to hedge against debt and inflation risks. The legendary hedge fund founder cast another warning on rising debt balances around the world.

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Dalio is a big proponent of diversification. He recommends diversifying across 15 or more uncorrelated assets to reduce the risk-to-return ratio. Uncorrelated assets do not move together, either directly or inversely.

The bottom line

While gold can be a smart hedge against inflation, experts advise against investing too much in the precious metal. By most accounts, you'll want no more than 5 to 10% of your total portfolio invested in gold, though the exact amount depends on your goals, appetite for risk, and other factors.

While the purchasing power of the US dollar has declined over time, the purchasing power of gold generally remains steady or increases. Gold therefore provides a way to protect against the rapid erosion or purchasing power/wealth during periods of inflation, which are often associated with recessions.

Sometimes those advocating for gold as an investment claim it is a good hedge against economic downturns, inflation, or both. However, historical data does not support this idea.