Ray Dalio reveals the 'Holy Grail of investing'
Recently, ChatGPT, an AI platform that provides financial advice, asked billionaire investor Ray Dalio about the most important principle for investing. In a YouTube video posted on April 15, Dalio shared his response to the inquiry.
Diversification is the Key
According to Dalio, the 'Holy Grail of investing' is diversification, particularly in managing investment risks. The key is to invest in 10 to 15 uncorrelated assets, which reduces risk by approximately 80% without sacrificing returns.
While many individuals think that making concentrated bets is the best way to make money, such an approach often leads to significant losses, leaving investors out of the game entirely. Dalio advocates for diversification, as it is a powerful tool for risk reduction. He also advises investors to understand what they are good at, what they don't know, and how to diversify well to have a good return relative to their risk.
Dalio's View on Bitcoin
It is worth noting that Dalio has been a big advocate for diversification, as evidenced by his portfolio, which contains a small amount of Bitcoin. Previously, Dalio was skeptical about the maiden crypto; however, he has since noted that Bitcoin has made tremendous achievements over the last decade.
Although Dalio has a stake in Bitcoin, he remains skeptical about the sustainability of the asset, citing possible clampdowns from authorities. According to a previous Finbold report, the billionaire predicted that Bitcoin might be banned, similar to gold in 1934.
Conclusion
Overall, diversification is the key to successful investing, according to Ray Dalio. By investing in 10 to 15 good, uncorrelated assets, investors can reduce investment risk while increasing their return-to-risk ratio by a factor of five. Despite his skepticism about Bitcoin's sustainability, Dalio's portfolio contains a small amount of the cryptocurrency as he advocates for diversification.
