Introducing Ray Dalio
I was introduced to Ray Dalio by Anthony Robbins via Anthony’s book ‘Money – Master the Game‘. Anthony introduces a number of the world’s greatest investors and money managers but reserves his highest praise for Ray.
Ray’s All Weather Strategy and Portfolio
Ray applied his own unique approach to problem-solving to create the ‘All Weather’ investment strategy. He analysed the economy over the last century and was able to narrow its performance down to 4 basic states, per the matrix below.
He rightly assumed that no-one can accurately predict which direction the economy will go in with any degree of accuracy, and concluded that a portfolio that was optimised for each quadrant would balance the risk/reward ratio the most effectively. Backtesting and analysis have supported Ray’s thesis.
Translating Ray’s advice into a traditional investment portfolio looks like this.
‘Principles’ by Ray Dalio
I was keen to go beyond Ray’s financial advice to examine the thinking that guided his insights. He has written a couple of books, the first, ‘Principles‘ outlines the lessons he has learnt over a lifetime and provides some solid and accessible advice for all of us.
His most recent publication ‘A Template for Understanding Big Debt Crises‘ is a more focused examination of the economy and is available as a free download for anyone who’s up for 457 pages of economic analysis (yes, I’m reading it!).
Ray’s website includes an animated 30-minute video that outlines his basic principles, it’s an easy watch (especially on 1.5 times viewing speed).
Briefly, Ray summarises his current approach to life as:
- Set some goals, everyone who wants anything beyond an ‘ordinary life’ needs to set some ambitious goals,
- Acknowledge that achieving goals inevitably involves facing challenges and problems, get ready for some pain!
- Welcome the pain as a sign that you’ve stepped out of your box and are attempting something worthwhile. Examine the root cause of the problem you’re facing from an objective, analytical point of view. Ray draws a lot of inspiration from nature but also notes that everything, including us, can be described as a system or, more simply, a machine.
- Once the problem is understood, design a plan to address it (fix the machine)
- Do it!
Barriers
Ray notes that it is important to be aware of a couple of barriers we all face:
- Ego – we tend to think we know it all and have all the answers, we don’t. Be humble and aware.
- Blind spots – everyone has their own unique perspective on life and views the world in a unique way. No-one can see the full picture at any one time.
In response to these barriers, Ray advises working with a talented and diverse team. Invest in them so they can support you and think beyond your own needs and wants to a larger goal or legacy. Once you’re on your way to achieve your ambitious goals, you will realise that it’s not the goal that is important, it is the growth of you and your team that brings joy and satisfaction.
Conclusion
Ray is one of the world’s ‘hyper-achievers’ but it is comforting to realise that he came from humble beginnings and attributes his success to some basic, easy to follow, principles.
Discliamer #NAFA
NAFA – Not a Financial Adviser!
I am definitely not a financial adviser and this does not constitute financial advice. Please do your own research, complete all appropriate due diligence and seek professional advice from a qualified professional.