Ray Dalio is one of the most successful investors in history, unmatched by few others. Ray Dalio, who has, after twelve years in the making, transitioned control of Bridgewater Associates to the next generation of leaders.
Dalio started Bridgewater Associates from his New York apartment in 1975 and has turned it into the largest hedge fund in the world, with over $150 billion in assets under management as of today.Dalio adopts a top-down, macro investing approach, whereby the initial steps are to understand the current state of the overall economy, derive what the risks involved are, and how to best position the portfolio accordingly. One notable instance of this happened in 2008 when Dalio was able to predict a crisis, reallocating his portfolio to benefit from that. He oversaw positive growth in a period where the average hedge fund lost around 20%.
Given the role that Ray Dalio has played in financial markets, both as a seasoned investor and educator as well, we’d like to highlight some Ray Dalio quotes, and the lessons we’ve learned from them.
1. “He who lives by the crystal ball will eat shattered glass”
Dalio mentioned this in 2012 as a response to speculating about interest rate movements. This would also be applicable to any type of prediction in financial markets, which has proven to be all but consistent.
Following an investment style which is based on directional bets, might work a few times, but would not be sustainable for the average investor over a stretch of time.
2. “I don’t get caught up in the moment”
We couldn’t agree more, Mr Dalio. Making decisions in the moment, especially during extreme conditions (think of a market spike or sell-off), is bound to be driven by your emotions. History has shown us that decisions made under duress are typically linked with negative impacts on performance.
So, yeah, we know we sound like a broken record at this point, but try to disassociate your long-term goals from short-term market conditions, and maintain discipline and structure throughout your horizon.
3. “The average man tends to buy high and sell low.”
Well, that is kind of true. The average investor (man or woman) will have the tendency to follow the crowd, also known as “herd mentality.” So, they’ll be buying at higher prices, and selling after general sentiment would have affected prices. This is where we’d like to differentiate investing based on “information” and “sound.” The average Joe/Jane will most likely not have access to better information than large financial institutions participating in markets. Their decisions will be based on information readily available online, and accessible to millions of participants.
Given that active trading is time-sensitive, one can imagine the effects of “always being late to the party” (talk about being unfashionably late).
4. “Diversifying well is the most important thing you need to do in order to invest well.”
Goosebumps. This Ray Dalio quote highlights the fact that his approach to diversification is very methodic. Based on his research and analysis, he believes that adding non-correlated components in a portfolio does reduce overall risk, and makes the risk-to-return ratio more attractive. In other words, proper diversification allows for reducing risk by more than expected return, maintaining a potential attractive upside, while avoiding catastrophic downsides.
[To learn more about how you can get rich slow, read, “How to Become Rich, Slowly: 5 Ways to Save and Build Wealth.”]
5. “Radical open-mindedness and radical transparency are invaluable for rapid learning and effective change.”
In his book Principles, this one of many Ray Dalio quotes highlights valuable life and work ethics that he learnt and developed throughout his life. While this principle is not directly related to investing, we think it’s such an important one.
Being radically open-minded refers to the ability to accept being wrong, incorporate differences in opinions or points of view, and have the ability to be malleable when making decisions, without being limited or impacted by ego.
We subconsciously rely on sources of information that support our thought processes and beliefs, strengthening our ego in the process, and narrowing our scope of thinking.
Being open to opposing views and including them in our decision-making, would not only result in better outcomes but in more “meaningful relationships” as Dalio highlights. We’d highly recommend going through Dalio’s Principles, whether you’re an investor, business owner, or student.
If we listen and learn from Ray Dalio quotes, we can find ourselves looking for ways to begin or even enhance our own investment journeys.
It’s worth mentioning that Sarwa has a wealth advisory teamwith experience and expertise in finance, trading, consulting, business development, investor relations, and investing technologies, including former employees of Accenture, McKinsey and Co, PwC, and Vigilant Global.
We also haveinvestment advisors and expertsthat include Dr. Jiro Kondo, an Assistant Professor of Finance at McGill University, and Dr. Zeina Zeidan, the chair of the Board Royal Financials. And there are many public figures who serve as Sarwa’s ambassadors, as well.
If we listen to Buffett, the smartest way to invest is to take action today and enjoy its benefits over time.
Schedule a free callwith one of our wealth advisors to learn how Sarwa can help you begin your investment journey. Our wealth advisors are specialized in helping new investors create portfolios to match your unique financial goals, risk tolerance and time horizon.
Important Disclosure:
The information provided in this blog is for general informational purposes only. It should not be considered as personalised investment advice. Each investor should do their due diligence before making any decision that may impact their financial situation and should have an investment strategy that reflects their risk profile and goals. The examples provided are for illustrative purposes. Past performance does not guarantee future results. Data shared from third parties is obtained from what are considered reliable sources; however, it cannot be guaranteed. Any articles, daily news, analysis, and/or other information contained in the blog should not be relied upon for investment purposes. The content provided is neither an offer to sell nor purchase any security. Opinions, news, research, analysis, prices, or other information contained on our Blog Services, or emailed to you, are provided as general market commentary. Sarwa does not warrant that the information is accurate, reliable or complete. Any third-party information provided does not reflect the views of Sarwa. Sarwa shall not be liable for any losses arising directly or indirectly from misuse of information. Each decision as to whether a self-directed investment is appropriate or proper is an independent decision by the reader. All investing is subject to risk, including the possible loss of the money invested.
