Ray Dalio’s top 20 Quotes on Investing, Principles and Bitcoin! 2021

Ray Dalio is the Billionaire founder of the worlds largest hedge fund, Bridgewater associates. 

Dalio got his first taste of investing during the “nifty fifty era” this was a major bull market and everyone was talking about stocks. 

He overhead many conversations while caddying at a golf club & thus saved up his wages before investing.

He bought his first stock, North East Airlines which immediately increased in price. After which Dalio was hooked on investing & fell in love with the opportunities.

Ray Dalio & his Principles Quotes

Ray Dalio wrote a best selling book called Principles, which is like a handbook for life and business. He developed these fundamental principles which you can use to improve your business, life, relationships and of course your investing returns.

I have compiled together my favorite quotes form Principles and also included a few quotes from recent interviews with Ray Dalio.

1. “Don’t let your ego stand in the way…”

“Don’t let your ego stand in the way of your learning” . Your ego can be dangerous if you think you “know everything” or are very confident on an investing decision without merit.  Conversely if you have a big ego it may not a allow you to admit you’ve made a mistake.

All these factors can hamper your learning experience, which is the only true pathway to success. From Ray Dalio to Warren Buffett they are all extremely humble and admit what they don’t know, for example Buffett often states he doesn’t invest into “technology stocks” as “I can’t write a story for those businesses”.

2. Diversification is the only free lunch

“The Key to successful investing is to diversify across stocks, industries and countries”. This stems from the age old wisdom of “don’t put all your eggs in one basket”.

Nobel Prize laureate Harry Markowitz. says “Diversification is the only free lunch” in investing. Modern portfolio theory is built on the concept of diversification and reducing volatility (beta) through the combining of different asset classes. 

3. Holy Grail of Investing

Ray Dalio states the “Holy Grail of Investing” is a combination of uncorrelated Low risk, High Reward bets. He states if you combine “12 to 15” of the these asset classes and bets then you can create a low risk, high reward scenario. Whereas in most cases investors are taking greater risk with the hope of higher returns.

4. Nobody can predict the future consistently 

This is one of my favorite quotes, “he who lives by a crystal ball…will eat shattered glass”. Ray Dalio believes nobody can consistently predict the macro economic forces at play from interest rates to the economy. Many other Legendary investors agree with this, for example Howard Marks quotes, John Kenneth Galbraith (Harvard economist):

“There are two types of forecasters, those who don’t know, and those who don’t know they don’t know,” 

The Legendary Investor Peter Lynch also agree’s “if you can predict interest rates right three times in a row…you’d be a billionaire” and “since there aren’t that many billionaires” “I doubt you can predict interest rates” of course this won’t stop the “experts” on CNBC from trying to predict these factors because it is something people want to know.

5. “The Market Moves in cycles…”

Ray Dalio is a bigger believer in market cycles and the economic machine. He stated we are coming to the end of the long term debt cycle and this could have major implications for the stock market. In the words of another legendary investor Howard Marks, 

“It’s hard to know where we are going…but we should know where we are” 

Paraphrasing Howard Marks in his book Mastering the Market cycle, “The stock market is like a pendulum which form pessimism to optimism” . The Legendary contrarian investor Sir John Templeton also believes the same and offers the advice to “Be a realist, buy from the pessimists and sell to the optimists”.

6. “Seek Opinions from credible people who disagree with you…”

We live in a society where everyone has an opinion whether on sports teams, how the country is run, how a company is run, the stock market etc.

Now there is a saying which I think fits perfectly with this although I will tone it down for the snowflakes out there, “Opinions are like A**holes, everyone has one and most are full of sh*T” .

Luckily Ray Dalio has a solution “Seek opinions from credible people who disagree with you”.  Ray Dalio applies this in his business, investing decisions and daily life, for example in the book principles he talks about a medical condition which one doctor says was “impossible” to fix.

Dalio then triangulated this opinions with many more “credible” doctors to find out it was in fact possible.

7. Filter the Signal from the Noise

Seeking credible opinions as mentioned previously is a useful tool to filter the noise out of daily life, for example I will listen to the doctor for medical advice but not for plumbing advice (I will ask a plumber) and triangulate various opinions from experts in the space.  

This can also be useful in meetings with colleagues, if one believes strongly about a certain subject ask them “what expertise or experience do they have in this area?” this often surfaces the truth, that they really are not in a suitable position to have very strong opinions on a subject, this doesn’t mean their opinion isn’t valid but “credible opinions” should be found ideally.

8. “Bitcoin has no Intrinsic Value, only perceived value”

In a 2021 interview with CNBC Ray Dalio stated “Bitcoin has no Intrinsic Value, only perceived value” .

9. “I own bitcoin but it’s a small portion of my portfolio”

Before the bitcoin bulls dislike this post Ray Dalio also stated “I own some bitcoin but it is a very small portion of my portfolio” As a rule of thumb, many intuitional investors invest around 5% of assets in speculative hedges such as Bitcoin.

10. Invest into Gold

“If you don’t own gold you know neither history or economics” . Gold has been an alternative to cash for thousands of years from the Egyptians to the Romans.

Ray Dalio is a major bull on gold and considers this a hedge against inflation of the US dollar. As 1 in 5 dollars were printing in 2020 this can devalue the currency. 

11. “Meditation was the biggest ingredient to whatever success I had” 

Everyone say “Ommmmmmm”….just joking meditation is a powerful force. Ray Dalio stated in an interview “it was the biggest ingredient to whatever success i had” , it helps to slow things down and see things differently.  “

Steve Jobs was also famous for meditating before major presentations such as Apple Product showcases. Other health benefits of meditation include reduced stress, lower anxiety, increased self awareness, increased attention span, improves sleep etc. 

12. Choose your Habits well

“Choose your habits well, they are the most powerful tool in your brains toolbox”. Your habits of last year form who you are today, thus ideally it’s best to start creating new habits. A trick I use to aim to stick to a habit for at least 30 days, then extend it to 60 days then before you know it is embedded in your brain.

The more you do a certain action the more your brain fires neural connectors creating a “highway” to that action, if you treat yourself after the habit this can also reinforce it. As we are pleasure seeking creatures who seek the dopamine and endorphin hits in our brain. This is how addiction is caused, thus ideally it’s best to become addicted to positive habits. 

“Neurons that fire together, wire together” – Neuropsychologist Donald Hebb 

13. Put what you value above money

We live in a society which is constantly chasing money and for some reason has linked this to expected happiness. According to Ray Dalio “The purpose of money is to get what you want so think about what you value, put that above money”. 

Many studies such as one by Princeton show Money only substantially increases happiness up to a salary of approximately $75,000 per year and the Harvard study shows close relationships with family, friends and the community result in greater happiness. 

14. “To be successful you have to bet against the consensus and be right”

“To be successful you have to bet against the consensus and be right” . If you wish to be more successful than others in the stock market (& usually in life), you cannot do the same things as others. To go against the tide requires an immense contrarian streak but also valuable & unique insight which will help you to be right.  

The stock market is an auction based system similar to horse racing, most people can identify the favourite (best company) but when most bet the odd’s change (valuation) and the risk/reward ratio is not so good.

15. Buy low, Sell high!

When a stock or asset such as crypto goes up and mainstream media gets hold of it more people want to invest, when that is the most risky time. However, when stocks crash and fear reigns that is the BEST time to invest generally as stocks are on sale.  

16. Be aggressive or defensive 

“if your not aggressive your not going to make money, if your not defensive your not going to keep money”. It would be nice to be able to float through life for some, but true success often requires taking a strong position on a high conviction trait or disciplined investment strategy.

But conversely to save your money, a strong defence is needed. Just like soccer, if you don’t try to score early on you will actually be in a more risky position later in the game. 

17. Possible or Probable

“Don’t mistake possibilities for probabilities…anything is possible but probability is what matters”.  Is the decision you make “probable” to achieve high returns with low risk or just possible. Many people confuse these two especially in speculative penny stocks, yes the company could change the world…but how probable is it.

18. Focus on what moves the needle

“It’s more important to do big things right, than small things perfectly”. I have realised there are two types of people in life “big picture thinkers/high level” and “detail orientated people/low level” .

Now one is not better than the other and you need both types of people to succeed. Much of this thinking style depends upon your role for example a CEO’s job is to be a “big picture thinker” and set the vision and direction for the company. However, then he needs to pass plans to someone more detail orientated to execute.

Many entrepreneurs and founders have to do both types of thinking. I have personally found productivity to improve when I focus on “what moves the needle” and doing big things well rather than being a perfectionist on something insignificant. 

19. Be an independent thinker

“To make money in the markets you have to think independent and be humble”. With lots of the noise in the world, thinking independently and being humble is the key.

20. “Be wary of the arrogant intellectual”

“Be wary of the arrogant intellectual who comments from the stands without playing on the field” . It is very easy to criticise but be wary of those people who aren’t playing on the field.  

 

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