Billionaire Ray Dalio thinks the best investing strategy is to build a portfolio of uncorrelated assets — investments that don’t all move in the same direction at the same time, according to motivational speaker Tony Robbins.
“He said, ‘Tony, you have to understand all investing is risk-reward,'” Robbins said on “The Iced Coffee Hour” podcast in January. “He said, ‘The more you can reduce your risk but have upside reward, the better.’ And he said, ‘I call it the holy grail of investing.'”
Robbins, who called Dalio a “dear friend,” said the billionaire shared this principle with him during what was supposed to be a 30-minute interview that stretched into four hours.
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If you can find eight to 10 uncorrelated but quality investments, you can significantly reduce overall risk while still preserving upside potential, Dalio purportedly told Robbins.
“I worked on it for 30 years to refine this principle for myself,” Dalio said, according to Robbins.
Dalio founded Bridgewater Associates in 1975 from his New York apartment, building it into one of the world’s largest hedge funds before exiting the firm last year.
Dalio’s approach is reflected in his famous All Weather strategy, which he developed to build a portfolio that can hold up across different economic conditions. Bridgewater’s All Weather fund gained 20% last year, Reuters reported, citing a person familiar with the fund’s returns.
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Tony Robbins on Private Equity
Dalio’s principle is getting harder to apply in today’s public markets, where everything is connected and assets often move in the same direction when stress hits, Robbins told hosts Graham Stephan and Jack Selby.
The S&P 500 has delivered an average annual return of about 9.5%, while private equity has historically averaged closer to 15.5%, Robbins said. That means $1 million in private equity can grow to about $140 million over roughly 36 years, compared with around $26 million in the S&P 500 over the same period.
“If you look at the history in the last 36 years, every stock market in the world has underproduced private equity,” Robbins said. “And when stock markets crash, these guys don’t have to sell.”
Dalio’s focus on uncorrelated assets has helped fuel broader interest in alternative investments that don’t always move in lockstep with public markets. Some investors have increasingly looked beyond stocks and bonds into areas like private equity, real estate and even blue-chip artwork as part of a diversified portfolio strategy.
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