Ray Dalio’s investing mantra to build an ‘all-weather’ portfolio — Here’s how he balances risks in volatile markets
Ray Dalio, billionaire investor and founder of hedge fund Bridgewater Associates, shared his simple investment mantra for creating an all-weather portfolio that can offset risk in a volatile stock market.
Speaking to Investopedia on a number of topics, including how he achieves risk balance and stable returns, Ray Dalio stated that his mantra is “investing in 15 risk-balanced, uncorrelated streams of good returns.”
An uncorrelated asset is an investment that has little or no relationship to traditional asset classes such as stocks and bonds, thus balancing your portfolio during a market downturn. Over the years, Ray Dalio has played a big role in safe-haven options like gold.
How does Ray Dalio ensure return on investments?
Speaking to Caleb Silver on ‘The Investopedia Express’ on December 5, 2024, Ray Dalio shared how he evaluates his investment choices.
“My investment mantra is: 15 streams of good uncorrelated returns, risk balanced. I want to start there because I know that if I pick good investments and they are uncorrelated investments, I’m not going to reduce my return. (That’s because) I’m going to average those returns. And I’m going to reduce my risk by up to 80%,” he said.
Dalio stated that investing is always risky, and that the first method of ensuring returns is to balance risk, and called it a “combination basket” and an “all-weather portfolio”.
What should you consider when creating an ‘all-weather portfolio’?
According to Ray Dalio, the current stock market is unpredictable and full of disruptors. Therefore, it is wiser to build your portfolios around all possible economic scenarios that can weather both rising and falling economic growth.
On the channel, Ray Dalio suggested that he is turning to gold and commodities, long-term bond investments and a small number of short-term bonds to offset overall risks.
Here’s how much gold Ray Dalio recommends you keep on hand
Speaking to Zerodha co-founder Nikhil Kamath for the WTF podcast on December 21, Ray Dalio said that gold remains bullish and he recommends allocating 5-10% to the asset but not more than 15% and also holds the yellow metal.
Gold has a low real return of around 1.2% per annum, but is quite diversified, according to the 76-year-old successful investor, “Because when other parts of the portfolio are performing very poorly for some reason, like stagflation or debt issues, then gold is performing very well.”
The billionaire was proven right. Gold and silver have been on a bull run since last year and there are no signs of slowing down in the new year. As of January 19, MCX gold prices rose to a new record level ₹1,46,328 per 10 grams. Meanwhile, the MCX silver rate rose to a new high today. ₹3,19,949 per kg.
