The investor’s playbook: Key investment lessons from self-made billionaire Ray Dalio

Ray Dalio, the founder of Bridgewater Associates, one of the biggest hedge funds in the world, has been a global macro investor for more than 50 years. He began investing at the age of 12 and by the time he entered high school, had already created an investment portfolio running into several thousand dollars.

Dalio believes that in trading, one has to be defensive and aggressive at the same time. “If you are not aggressive, you are not going to make money, and if you are not defensive, you are not going to keep the money,” he says.

Here we break down his top investment strategies to survive market volatility and stabilise your portfolio in the long run.

Invest in uncorrelated funds

Dalio told Investopedia in an interview that getting into a state of panic during an approaching market crash and going on a stock selling spree is not what he follows as an ace investor. Most investors sell their holdings and move to “safe havens” like gold and bonds.

However, his investment mantra is investing in 15 good uncorrelated return streams which balances the risks well. An uncorrelated asset is an investment that has little to no correlation with the traditional asset classes like stocks and bonds, hence stabilising your portfolio during a market downturn.

Invest beyond market predictions

Dalio believes that instead of attempting the impossible and trying to predict the current market environment, it’s a wiser choice to build portfolios across all possible economic scenarios. He calls it an “all-weather” system where he builds his portfolio that can survive both rising and falling economic growth.

He suggests that investing in gold and certain commodities during rising economic growth is a good bet. Similarly investing in long-term bonds works well during falling economic growth. Intermediate bonds are a good option to balance your overall risk, irrespective of the market conditions.

Weigh risks instead of returns

In order to manage his risks well, Dalio follows a method called “risk parity” in which he weighs the pros and cons of each investment on its risk level, not just its potential return. This essentially means that if one portion of your portfolio is riskier like stocks, try and reduce its portion and move the money to safer assets like bonds. This strategy keeps your investments safe during a major market blowup.

Disclaimer: This article is for educational and informational purposes only and should not be considered investment advice. Readers are encouraged to consult a licensed financial advisor before making any investment decisions.