How To Invest Like Ray Dalio
Everyone in the financial industry knows his name and wants his brain more than most, but let's try a different approach by learning instead the best methods to invest like Ray Dalio.
They've been discussing this for so long there's a Yahoo Finance article on How To Invest Like Ray Dalio from 2013. There's no kidding when we say everyone and their mother wants to learn his secrets and his motivations, but truth be told there's a fine line between knowing how to invest like Ray Dalio and knowing how not to, since you have to know the guy if you expect to invest like him (ie read up on Principles by Ray Dalio).
Before you even begin to touch financial channels, banking possibilities, and system operations, first know who Ray Dalio is and, generally, how he operates. Otherwise, like all other average investors, you won't make much beyond a few good hits. If you don't already, I'd also look into things to know before investing in the stock market, for much like knowing who Ray Dalio is, how do you expect to even preform well in mimicking one of the greats if you don't already know the basics? That means also brushing up on some of the top personal finance podcasts, since Dalio does, or at least definitely has before.
In addition to Ray Dalio, who's financial mindset and Wall Street existentialism is enough to warrant him vast popularity, there's also another man you should get to know named Tony Robbins. Him and Dalio have worked together on various shorts and other productions, for instance "The End of the Bull Market," and many more interviews. He's also somewhat of an influencer himself on such topics like money management, financial strategies, and the nature of Wall Street. Beyond that, I present to you a variety of methods in order to invest like Ray Dalio.
An Endurance Game
In an article with Business Insider, Dalio tells of a great many different methods to consistently utilize when first learning how to invest. His pointers are mostly based on statistics and personal findings, but one of the most important takeaways was his subtle saying:
"Average investors need to see investing as a long game to endure, not one where they can make quick wins from time to time."
That's some powerful advice, and I give it straight off the bat, because investing is no child's play, nor is it realistically a game at all. It's a form of strategy one must learn ideally at their own pace, achieving such satisfactions as is necessary, for as long as it takes to reach that point when you actually do invest like Ray Dalio.
Obviously key among any and all investment strategies is the limitation of (or at least as little limitations as possible of) risks. These suckers are the real pinpricks and stubbed toes of the investment world, but often one will find that risks can be somewhat of a benefiting market (ie hedge funds, and the like).
But if you hope to invest like Ray Dalio, I suggest you leave risks at the foot of your 21 year old self. Risks can be or lead to high returns, but more often that not they can be cause for serious concern. They may even leave you penniless if you don't invest correctly, or at least track your own personal finance and investment strategy.
Okay, so I added a bit of my own lingo to this one, but to invest like Ray Dalio you should note that creativity is key. Also of import is the act of rebalancing, so he says, in Robbins' second personal finance book (among the best books on investing ever written), titled Unshakeable:
"Imagine you start with 60% in stocks and 40% in bonds. Then the stock market plunges, so you find yourself with 45% in stocks and 55% in bonds. You'd rebalance by selling bonds and buying stocks."
That's ingenious, to say the least, but Dalio is an Einstein of the financial world. In this, he expresses the power of asset class in line with simple awareness of the field. Know the battleground (market), know the weapons (investments), choose and use them wisely.
Keen Portfolio Awareness
Overpaying is the death touch of all investment woes, and is also among the most overlooked of investment strategy considerations, due to the fact that paying high fees and costs when making transactions isn't usually what's on the minds of most average investors.
To invest like Ray Dalio, as per his interview with Blodget's "The Bottom Line," Dalio himself expresses how keeping an eye on your portfolio isn't just an important tip, it is crucial for your survival in the stock market (and beyond). When and as you are building your portfolio, don't overpay for any transaction costs and fees, as they will eventually kill your entire investment strategy.
The Alpha/Beta Structure
While most average investors sit in front of the mirror asking themselves "What do I want," instead invest like Ray Dalio (or, at least, structure your stratagem for all of your investments as such). He would explain to relatively smart beginner investors that the first step is to understand, to a T, what exactly you want out of investing to begin with.
Obviously, practically everyone wants to make billions in assets (or, at least, $150 billion), but there's more to the game of investment than simply money making and asset allocation. As he puts it, there's actually an Alpha and a Beta to these premises, for which he discusses in his 2011 interview with Erik Schatzker for Bloomberg Markets 50 Summit.
Uncorrelated Return Streams
Dalio has posited before how the acquisition of uncorrelated return streams is of the utmost importance, but they have to be over 10 truly worthwhile investments, or else you're not really trying to invest like Ray Dalio. You see, how he puts it:
"So in that first principle, what I'm saying is that if you follow that first principle and you get fifteen good, don't have to be great, uncorrelated return streams, you'll improve your return to your risk by a factor of five. That means five times the return for the same amount of risk."
While the average person may read this as if it were Chinese to them, investing is a lot like learning a new language. If you follow Dalio's principle, in that acquiring a good amount of somewhat well-received and uncorrelated return streams, you'll find a much larger amount despite the overall risk.
Much the same as a young child may act out unpredictably, similarly stocks are highly wavering and change pretty much at a drastically swift schedule (so fast that it even created issues in the early 2000s of investing, which you can read about in Flash Boys by Michael Lewis).
Aside from that, to invest like Ray Dalio, you have to unlock deeper potentials of the investments you already have, or want to have. His ideology stems from an extreme examination into the specifics of certain investment types, for instance both bonds and stocks, in addition to how these two correlate. It's a lot like raising a child, your portfolio must have an ever-learning, ever-growing structure that depends more on an uncorrelated, yet positively advancing return strategy.
Functions & Transactions
Like most investors who are truly well-resourced and know the layout of the land like the back of their hand, Ray Dalio speaks up on one of the ways he himself sees transactions and exchanges. Instead of viewing them all as assets, or prices, or even identities, Dalio instead believes transactions are "a function of a transaction."
This may sound a little abstract, or even highly outlandish, but it's rooted in some exceptional understanding. In order to invest like Ray Dalio, one must view the act of exchange, or buying, as a subset of another subset. There's an action of an action of another action, or more accurately put within his words:
"There's a transaction that takes place. And that transaction is an exchange between buyers and sellers. And what happens is that a buyer gives money and a seller gives the thing. The thing being a stock or a widget."
You can't go anywhere in the industry of personal finance management without at least hearing this three or four times, because even beyond those who want to invest like Ray Dalio, the diversified portfolio is one with little risk and high return. Period.
More to the point, if you can diversify your portfolio the right way, hopefully much the same as Dalio, than you'll find a greater return than expected. He expresses the necessity of a balanced asset allocation, one of as mentioned before uncorrelated means, thereby structured by risk and not their dollar amounts.
Growth & Inflation
In one of their more infamous works together, Dalio and Tony Robbins discuss the ladder's own recommended portfolio, created by the former. If you want to invest like Ray Dalio, I suggest looking up Money: Master the Game, Tony Robbins' 2014 book on personal finance.
Essentially, while the recommendations made by Dalio are highly subjective to Robbins alone, the investment guru broke down the two "powers that be" among influencers of high returns: growth and inflation. The key to engineering the best investment possible is thereby rooted in a strong (hopefully diversified) portfolio. This calls for substantiating risk as somewhat of a reward, not to allot risky returns but to ensure a great deal of varied commodities that outweigh the general risks at hand.
Yes, you may want to invest like Ray Dalio (I mean, who doesn't?), but realistically the only person you can truly invest like is yourself. While this may be unfortunate news, there's no reason to be alarmed. Dalio's principles are profound and insightful in conjunction with learning the fundamentals of a good investing strategy, but let's face it: they don't alway work.
Nothing's perfect, and that goes the same for Dalio, who's even the founder and co-CIO of Bridgewater Associates. You'd think he'd be wrong just about never, but we have to be realistic (especially when you're investing like Ray Dalio, let me tell you). Aside from this, get creative when following the aforementioned principles, or else you may find the stock market a terrible beast highly reminiscent of the decision you have made in diving into this world. Lesson of utmost importance: it's not a game, it's a lifestyle. Live it (but, preferably, like Ray Dalio).