Who is Ray Dalio, biography, style and basic principles of investing

Ray Dalio is an American billionaire hedge fund manager at Bridgewater Associates.

Who is Ray Dalio, life and work, his basic principles in investing

Ray Dalio is one of the richest people on the planet today. He is known not only for his ability to make a profit, but also for his special approach to doing business. This man was born in the family of a jazz musician in New York in 1949. He was introduced to securities at the age of 12. At this time, he bought his first share. The teenager worked part-time at a golf club and constantly heard conversations related to stock exchange topics. He saved up $300 and used it to buy stock in Northeast Airlines. When choosing, he was guided by two rules:

1. It must be a reputable company.
2. The value of one share cannot exceed $5.

For three years he did not take any special action. The issuing firm then received a merger offer, after which the share price rose from $300 to over $900. This showed the young Ray Dalio that it was possible to make good money in the securities market, and this further determined his life path to a large extent. Even in his youth, the future great investor accepted for himself as the main principle of activity the need to make independent judgments, to seek the truth with his mind. Throughout his career, he will consider having an open mind, a willingness to accept new ideas for work, a prerequisite for success in business. In 1971, he began his studies at Harvard Business School. During this time, he worked as a clerk at the New York Stock Exchange. He was engaged in trading in shares, currencies, as well as consignments of goods. The latter happened during an internship with one of the directors of Merrill Lynch. At that time, exchange activity was not popular and many considered it unpromising. In 1974, Ray Dalio became director of commodities at Dominick & Dominick LLC, soon moving on to work as a broker and trader at Shearson Hayden Stone. After leaving in 1975, he realized that he had accumulated enough knowledge and experience to start his own business – Bridgewater Associate. By this time, he had already received an MBA from Harvard Business School. In 1974, Ray Dalio became director of commodities at Dominick & Dominick LLC, soon moving on to work as a broker and trader at Shearson Hayden Stone. After leaving in 1975, he realized that he had accumulated enough knowledge and experience to start his own business – Bridgewater Associate. By this time, he had already received an MBA from Harvard Business School. In 1974, Ray Dalio became director of commodities at Dominick & Dominick LLC, soon moving on to work as a broker and trader at Shearson Hayden Stone. After leaving in 1975, he realized that he had accumulated enough knowledge and experience to start his own business – Bridgewater Associate. By this time, he had already received an MBA from Harvard Business School.
Headquarters Bridgewater Associate [/ caption] This firm is still developing, becoming one of the largest hedge funds in the world. In 2018, the company managed $160 billion in assets. During this time, Ray Dalio’s personal fortune exceeded $18 billion. At first, this company had difficult times. Dalio had to lay off all employees and ask his father for $4,000 to cover his debt obligations. After a bad start, the investor rethought his attitude to life and came to the need to follow certain principles.

The reason for his problems at the initial stage, he sees the desire to see himself right in any situation. In the future, as he says: “I changed the joy of being right for the joy of understanding the truth.” Healthy relationships in the team are aimed at ensuring that everyone shows their strengths, and the best idea wins, regardless of who expressed it.

The investor attaches great importance to meditation. He believes that spiritual perfection is the foundation of business success. In his opinion, meditation gives him more strength than sleep, promotes a creative approach to life and work.

Ray Dalio’s investing style

The great investor implemented in his company special principles that helped him to achieve today’s success and continue to be applied today. One of the main he considers openness. Ray Dalio tries to ensure that his employees have objective information about the state of affairs and can independently determine their attitude towards the company.
The focus is on improving relationships between employees within the company, creating and developing a unique corporate culture. When making decisions, it is important to consider that events are often not unique. Similar things have happened in the past, and there are lessons to be learned from them. By studying them, you can determine patterns that can become the basis for making decisions in a particular situation. The company uses three investment portfolios for asset management: Pure Alpha, Pure Alpha Major Markets and All Weather. The last of them, the all-season portfolio, includes the bulk of the assets. Ray Dalio’s portfolio consists of the following parts:

1. 40% long-term bonds;
2. 15% medium-term debt securities;
3. 30% shares of various companies;
4. 7.5% gold;
5. 7.5% commodities of various kinds.

When managing a portfolio, Dalio applies the principle of analogy with similar situations in the past, trying to apply strategies that have already brought success. In practice, this portfolio has shown good results over the years.
The cover of one of the most famous books by Rey Dalio “big debt crises” [/ caption] It is interesting that when analyzing the effectiveness of such a strategy, various situations in the stock market were considered and an appropriate calculation was made. For example, in the crisis of 1929, the portfolio would only lose 20%, but then compensate for this drawdown. It is also worth noting that in terms of profitability, during 2008-2017, it overtook the S&P index in terms of profitability. Ray Dalio’s Principles for Success (in 30 minutes): https://youtu.be/vKXk2Yhm58o Pure Alpha Major Markets has an increased focus on more liquid assets. Emerging markets are usually avoided here. It is pretty much similar in structure to an all-weather briefcase. Pure Alpha compared to Pure Alpha Major Markets pays more attention to emerging markets, but structurally differs little from it. Pure Alpha’s return was 12% until 2019, but it made a 7.6% loss in 2020. Ray Dalio said that the portfolios were created with the expectation of continuous global economic development. Due to problems due to the pandemic, the investor began to pay more attention to the most reliable securities. In his interviews, Ray Dalio talks about his attitude to life and business:

1. He cites his curiosity and adventurism as the main reason for his success . Doing something new, he tries to understand it and learn how to work with it.
2. He calls the formula of success the combination of a dream and a sober assessment of the real situation . He also considers it important when pain or failure occurs to be able to overcome the problem by finding the appropriate way as a result of analyzing the situation.
3. When hiring employees, he recommends paying attention to his values, abilities and skills . Choosing the right team, you can make sure that some employees complement others, making up a complete team.
4. Decision making should avoid democracy and authoritarianism . In the first case, it is assumed that everyone’s opinion is equally valuable, but in fact this is not the case. The second implies that the boss alone knows the answers to all questions. At Dalio, decisions are made collectively, but the opinions of those people who have already proven themselves earlier have more weight.

Criticism is encouraged in the firm. This is necessary to create an atmosphere of openness and create the most creative atmosphere when making decisions.

Book Review by Ray Dalio

The investor outlined his understanding of life and the rules of doing business in the book “Principles. Life and work. Ray Dalio sees the basis for success in the correct perception of reality. It is important to try to see her for who she really is, and not pass off your wishes as reality. To achieve this, sufficient attention must be paid to the following issues:

1. First you need to determine exactly what desires are. This is necessary so that in the future it will be possible to accurately understand what corresponds to them and what does not.
2. It is necessary to determine which realities have the greatest influence on the achievement of goals. You need to study them constantly in order to know: what can help, what is an obstacle, how they work.
3. Ray Dalio emphasizes independence of thought. He believes that the opinion accepted by the majority is not always true. Self-made decisions are more likely to be successful. If one’s opinion contradicts the generally accepted one, this does not give a reason to abandon it without sufficient grounds.
4. In striving for independence in thinking, one should not forget that one’s own opinion is not always the most promising. It is important to be able to accept someone else’s point of view, if it is more correct.

Dalio believes that all of life consists of constantly making a variety of decisions. He collects information about the criteria applied for this, which he calls the principles. Having realized and developed these rules, he accustomed himself to them and implemented them in his company. It is necessary to constantly learn, never stop it. Ray Dalio says that he is a lifelong learner and intends to continue doing so. The book details its principles to which detailed explanations are given. This allows readers to decide how suitable they are for their life and work. In the next book, “Principles of Success,” the author continues to talk about his views on the world and the features of doing business. It complements the first book, allowing you to better understand the strategy of the life and business of the investor.
A new book by Ray Dalio is dedicated to reflections on the fate of the modern world. It’s called How the World Order is Changing. Why states win and fail. According to the author, he was motivated to write the book for the following reasons:

1. A significant amount of world debt.
2. The gap in the level and lifestyle between the richest and ordinary people.
3. Trends in the development of relations between countries that have led to a significant increase in China’s influence.

Ray Dalio’s popular book “Big Debt Crises Coping Principles” – download and read an excerpt from the book:
Big Debt Crises Coping Principles Ray Dalio – Big Debt Crises around the bend, book review: https://youtu.be/xaPNbYkOT- 4 The investor considers the current situation similar to that which took place in the period 1930-1945. He analyzes similar situations throughout world history and formulates the patterns of development that govern the history of the most developed countries. As a result of a detailed consideration of the history of mankind in various periods, he comes to certain assumptions about what will await humanity over the coming decades.