Lessons Learned from Inspiring Investors: Ray Dalio

Lessons Learned from Inspiring Investors: Ray Dalio

💸 Do you wish you had a framework to implement your plans, a better understanding of who you are and what you want, and a ‘bigger picture’ idea of the economy and how to be a better investor?

Today, we will give you a quick profile of American billionaire investor and hedge fund manager Ray Dalio. He is the founder of the world's biggest hedge fund firm, Bridgewater Associates, which manages $154 billion. He also offers incredibly valuable insights for how to achieve what you want in life as well as overall success.

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“Be radically truthful and radically transparent”

— Ray Dalio

Who is Ray Dalio?

• Ray Dalio, born as Raymond Dalio, is an American investor and hedge fund manager. He is the founder of Bridgewater Associates, one of the world's largest investment firms. He has worked at the New York Stock Exchange, Dominick & Dominick LLC, and Shearson Hayden Stone as well. Dalio is also an author and has published the essay ‘How the Economic Machine Works: A Template for Understanding what is Happening Now.’ He has published a book titled ‘Principles’ that details the billionaire investor’s philosophy on investments.

• According to Ray, there are 3 stages in one’s life. The first is the learning stage where you are dependent on others – we may call it the student stage.

• The second is the working stage where you are applying your knowledge to earn a living, and others (kids) are now dependent on you.

• The third is the giving back stage, where your responsibility is to help others to succeed without you. After a successful career, Ray is now in this third stage of life and shares all the lessons he learned in life via books, videos, and tools. Most of it is free. PDFs of his books are mostly available on the web.

Principles: life and work

• After Ray created his hedge fund in 1975, he almost went bust in 1982 following a wrong way bet on the stock market. Not only he had to let go of all his employees, but he had to borrow $4,000 from this father to pay personal bills.

• This was such a traumatic experience that Ray decided to learn from this experience by developing a philosophy that he details in his book called Principles: Life and Work. Every employee who joins Bridgewater is given a copy.

• This book is meant to give a framework on how to become more successful at pretty much anything. The key to that is to accept and face the truth/reality. Look at things as they are and not as you wish they were.

• This might seem simplistic, but it is a very important concept, especially in a world where the content we are exposed to daily can be biased, not reflect reality, and give false impressions.

• Ray recommends following these steps to achieve success:
  1 - know your goals
  2 - identify and don’t tolerate your problems
  3 - diagnose your problems to get at their root causes
  4- design a plan to get around them
  5 - implement your plan.

• In addition, throughout his life, he developed principles that helped him to achieve his goals. Here are few that I found particularly compelling: “Great partnership with mutual consideration and generosity are far more rewarding than money”, “Pain + Reflection = Progress”, “Be radically truthful and radically transparent”, “Evolve or Die”.

Understanding who we are

• Who are we really and what do we want? What makes us happy? Unfortunately, human beings never seem to be satisfied with what they have and always seem to want more.

• We always tend to think that the grass is always greener on the other side. It sometimes seems easier to focus on what others are doing rather than what you should be doing. While hard work is clearly key to success, it is also important to know what we are good at, what our natural strengths are.

• You want to make sure you give yourself all the help you can — understand others and help others understand you. This will take a little time and may either confirm what you know or give you a new perspective on yourself. It could be the start of a new beginning. But knowing your strengths and weaknesses will help you navigate rough seas as well as calm waters.

• Meditation plays a big role in Ray’s life. He has been practising meditation for over 50 years — it helped him with his decision process throughout his life, both personally and professionally. There are various forms of meditation out there, so find one that suits you.

• When it comes to investing, Ray developed all the frameworks we discussed before to help him make better decisions. He proposes a balanced and diversified portfolio approach. Don't make the mistake of buying those things that have gone up thinking they're better and two, through diversification you could reduce your risk without reducing your returns.

Resources:

• Ray’s assessment test: https://principlesyou.com/

• Books:

  • Principles: Life and Work

  • Big Debt Crises

*** Our podcast partners PensionBee are also offering you a £25 pension contribution (£20, plus £5 in tax relief) when you sign up. To claim the offer, follow this link: https://www.pensionbee.com/vestpod. Capital at risk. ***