Ray Dalio’s Trading and Investing Wisdom – 12 of His Best Tips

Ray Dalio is well-known in the trading and investing worlds, and is currently 32nd on the Forbes 400 list and 71th on the Forbes Billionaires list. His net worth at time of writing, in 2022, is $19.1 billion.

He founded the asset management firm Bridgewater Associates in 1975, which currently has $150 billion invested in its portfolio. He has given more than $1 billion to his philanthropic projects.

Who is Ray Dalio and what can we learn from his long career in trading and investing?

Dalio was born in 1949, in New York City, and grew up on Long Island. He became interested in the markets from the age of 12, and tells the story that as a caddy for local golfers, he started listening to their tips on the stock market.

He earned an MBA from Harvard Business School in 1973. While at Harvard, he became more interested in the stock market and started trading stocks, moving on to commodities futures.

Once he left Harvard, Dalio started trading commodities futures on the New York Stock Exchange, founding Bridgewater Associates in 1975. The firm broadened its research, to include currencies and interest rates.

Is Bridgewater Associates really the biggest hedge fund in the world?

Yes, Bridgewater Associates is considered the biggest hedge fund in the world, with more than $150 billion under management in 2022. It has produced a net gain of $45 billion, which according to LCH Investments, is the most in hedge fund history. To offer some perspective, its Pure Alpha Fund has returned an annual average of 13% since 1991.

Ray Dalio's Trading and Investing Wisdom

There are certain principles that Ray Dalio talks about again and again. He is proud of the ethos of transparency he has overseen at Bridgewater Associates and has shared these trading rules through various books about investing, including his most famous book: Principles: Life and Work.

Here are 12 of his best tips:

1. Diversity your portfolio as much as possible.

This ensures resilience through different market cycles. Finding non-correlated instruments and investing in a variety of classes spreads the risk, protects capital and maintains a smoother equity curve.

"Diversifying well is the most important thing you need to do in order to invest well."

2. Consider the impact of inflation on your portfolio.

Always factor in inflation risk.

“There are two main drivers of asset class returns - inflation and growth.”

3. Learn what moves interest rates, rather than trying to predict what future interest rates will be.

“It all comes down to interest rates”.

4. It is important to find a balance between aggression and defence, between making money and keeping money.

“In trading you have to be defensive and aggressive at the same time. If you are not aggressive, you are not going to make money and if you are not defensive, you are not going to keep money.”

5. Be prepared to take profits once a stock has made sizeable gains.

It’s better to sell after a big move and reinvest the profits than hold onto the stock for too long.

"Rotate the portfolio.”

6. Avoid bias.

Everyone comes to the markets with preconceptions, but it is important to trade the reality of what is in front of you, rather than what you think should be happening.

“It’s important not to let our biases stand in the way of our objectivity. To get good results, we need to be analytical rather than emotional.”

7. Writing a daily ,trading journal is hugely beneficial.

“The main reason I write the daily observations is because I want to know where I’m wrong”.

8. Don’t be afraid of failing.

Fear of failure will stop you trying.

“If you’re not failing, you’re not pushing your limits, and if you’re not pushing your limits, you’re not maximising your potential.”

9. Be aware of who it is you’re listening to.

Don’t believe everything you hear, especially in the world of trading and investing.

“Listening to uninformed people is worse than having no answers at all.”

10. Keep a perspective on what is happening, especially if events (and prices) are moving fast.

It’s too easy to get caught up in the moment and start making rash decisions, ones you wouldn’t make with a bit of perspective.

“I think so many people are reactive, they see things in a short term way when they’re up against it.”

11. Mistakes are fine, as long as we reflect on those mistakes and move towards a better way of doing things in the future.

A ,trading journal is a great example of a tool to help with this process.

“Pain plus reflection equals progress.”

12. Success comes from being independent of spirit, following your heart and confidently doing the work.

Get help and assemble a team if needs be, but get on with achieving your goals.

“I believe that you can probably get what you want out of life if you can suspend your ego and take a no-excuses approach to achieving your goals - and rely on the help of people who are strong in areas that you are weak”.

Ray Dalio is very open about how approaches the markets. He is active on social media and has written a number of books about investing and success in work and life. Traders and investors the world over look to him for pearls of wisdom, and here we have tried to distill this vast knowledge into 12 of his best tips.