Ray Dalio is an American billionaire who runs hedge fund Bridgewater Associates.
Who is Ray Dalio, life and work, his basic principles in investing
Ray Dalio is one of the richest people in the world 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 into the family of a jazz musician in New York in 1949. He got acquainted with securities at the age of 12. During this time, he bought his first share. The teenager worked part-time in a golf club and constantly heard conversations regarding stock exchange topics. He saved up $ 300 and used it to buy stock in Northeast Airlines. When choosing, he was guided by two rules:
- It should be about a well-known company.
- 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 one can make good money on the securities market, and this later largely determined his life path. Even in his youth, the future great investor accepted the need to make independent judgments, to seek the truth with his mind as the main principle of his activity. Throughout his career, he will consider having an open mind, a willingness to accept new ideas for work, a prerequisite for business success. 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 stocks, currencies, as well as consignments of goods.The latter took place during an internship with one of the directors of Merrill Lynch. At this time, stock exchange activity was not popular and many considered it unpromising. In 1974, Ray Dalio became Director of Commodities at Dominick & Dominick LLC, and soon moved on to work as a broker and trader at Shearson Hayden Stone. After being fired 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 his MBA from Harvard Business School. In 1974, Ray Dalio became Director of Commodities at Dominick & Dominick LLC, and soon moved on to work as a broker and trader at Shearson Hayden Stone. After being fired 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 his MBA from Harvard Business School. In 1974, Ray Dalio became Director of Commodities at Dominick & Dominick LLC, and soon moved on to work as a broker and trader at Shearson Hayden Stone. After being fired 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 his MBA from Harvard Business School. aligncenter “width =” 492 “]aligncenter “width =” 492 “]
Bridgewater Associate Headquarters [/ caption] This firm is still growing, becoming one of the largest hedge funds in the world. The company managed $ 160 billion in assets in 2018. At this time, the personal fortune of Ray Dalio exceeded $ 18 billion. At first, this company had a difficult time. Dalio had to fire all employees and ask his father for $ 4,000 to cover the debt obligations. After a bad start, the investor rethought his attitude to life and came to the need to follow certain principles.
At the initial stage, he sees the reason for his problems as a desire to see himself right in any situation. Later, as he says: “I have exchanged the joy of being right for the joy of understanding the truth.” Healthy relationships in a team are aimed at ensuring that everyone shows themselves from the strongest side, and the best idea wins, regardless of who expressed it.
The investor attaches great importance to the practice of meditation. He believes that spiritual improvement 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 apply now. He considers openness to be one of the main ones. 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 main focus is on improving relations between employees within the company, creating and developing a unique corporate culture. When making decisions, it is important to keep in mind that events are often not unique. Similar things have happened in the past and certain lessons can be learned from them. Studying them, you can determine patterns that can become the basis for making a decision 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 these, the all-season portfolio, includes the bulk of the assets. Ray Dalio’s portfolio consists of the following parts:
- 40% long-term bonds;
- 15% medium-term debt securities;
- 30% shares of various companies;
- 7.5% gold;
- 7.5% commodities of various kinds.
In portfolio management, 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 been performing well 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 the corresponding calculation was made. For example, in the 1929 crisis, the portfolio would lose only 20%, but then compensate for this drawdown. It is also worth noting that in terms of profitability, it overtook the S&P index in terms of profitability during 2008-2017. Ray Dalio’s Principles of Success (in 30 minutes): https://youtu.be/vKXk2Yhm58o Pure Alpha Major Markets focuses on more liquid assets. They usually avoid working with emerging markets. In structure, it is largely similar to an all-weather portfolio. Pure Alpha pays more attention to emerging markets compared to Pure Alpha Major Markets,but in structure it differs little from it. Pure Alpha was 12% profitable until 2019, but it suffered a 7.6% loss in 2020. Ray Dalio said that the portfolios were created with the expectation of continuous global economic development. Due to the problems caused by the pandemic, the investor began to pay more attention to the most reliable securities. In his interviews, Ray Dalio talks about his attitude towards life and business:
- The main reason for his success, he calls his curiosity and the presence of adventurism . While doing something new, he tries to understand it and learn how to work with it.
- He calls the formula for success a combination of dreams and a sober assessment of a real situation . He also considers it important in the event of pain or failure to be able to overcome the problem by finding an appropriate way as a result of analyzing the situation.
- When hiring employees, he recommends paying attention to his values, abilities and skills . By choosing the right team, you can make sure that some employees complement others, making up a coherent team.
- Democracy and authoritarianism should be avoided in decision making . In the first case, it is assumed that everyone’s opinion is equally valuable, but in fact it is not. In the second, it is assumed that the boss alone knows the answers to all questions. In Dalio’s company, decisions are made collectively, but the opinions of those people who have already proven themselves are of greater weight.
In the firm, criticism is encouraged. This is necessary to create an atmosphere of openness and create the most creative atmosphere when making decisions.
Ray Dalio Book Review
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 as she really is, and not to pass off your wishes as reality. To achieve this, you need to pay sufficient attention to the following issues:
- First, you need to determine exactly what the desires are. This is necessary so that in the future it is possible to understand exactly what corresponds to them and what does not.
- It is necessary to determine which realities have the greatest impact on the achievement of goals. You need to study them constantly in order to know: what can help, what constitutes an obstacle, how they work.
- Ray Dalio attaches great importance to the independence of thinking. He believes that the opinion accepted by the majority is far from always true. Self-made decisions are more likely to be successful. If your opinion contradicts the generally accepted one, this does not give a reason to abandon it without sufficient grounds.
- 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 life consists of constantly making a variety of decisions. He collects information on the criteria applied to this, which he calls principles. Having realized and developed these rules, he taught himself to them and implemented them in his company. It is necessary to constantly learn, never stopping it. Ray Dalio says that he has been learning all his life and intends to do so in the future. The book sets out in detail its principles to which detailed explanations are given. This gives readers an opportunity 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 peculiarities of doing business. It complements the first book, providing a better understanding of the investor’s life and business strategy.
Ray Dalio’s new book is devoted to reflections on the fate of the modern world. It’s called “How the World Order is Changing. Why do states win and fail ”. According to the author, the following reasons prompted him to write the book:
- Significant amount of global debt.
- The gap in level and lifestyle between the richest and most ordinary people.
- Trends in the development of relations between countries, which led to a significant increase in China’s influence.
Popular book by Ray Dalio “Big Debt Crises Principles of Overcoming” – download and read an excerpt from the book:
Big Debt Crises Principles of Overcoming 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 examination of the history of mankind in different periods, he comes to certain assumptions about what will await mankind over the coming decades.