Ray Dalio is one of the most famous traders in the world. Lately, he has been in the spotlight for his opinions on politics and economics. Due to his communication skills and the disruptive content of his statements, he is considered one of the most influential gurus. It's no coincidence that the famous Time 100 magazine included him in the list of the 100 most important people in the world. His credibility is primarily based on his history as an investor but also on the dissemination of some concepts that are halfway
between philosophical and financial.
The story of Ray Dalio
Ray Dalio, born Raimondo, was born in Jackson Height, Queens County, New York, in 1949. The son of a jazz musician of Italian origin, Dalio began investing at the age of 12 when he bought shares of Northeast Airlines for $300, which soon became $600 when the airline merged with another company. After this initial success, he enrolled at Long Island University and earned a degree in finance. He completed his education with an MBA from Harvard Business School.
His first work experience was at
Dominick & Dominick LCC, where he quickly became the director of the Commodities department. In 1974, at just 25 years old, he founded
Bridgewater Associates, a Connecticut-based management company specializing in hedge funds. He would make history with Bridgewater: the hedge fund it managed would become the largest in the world in 2012, with
$160 billion under management.
The successes of Ray Dalio
Bridgewater's fund is closed. No one can enter it anymore. The physiological limit of managed assets has been reached. However, to understand its importance, just one fact is enough. During the last year of opening (2014), the entry level was
$100 million.
The growth rate is very sustained, 3% per year on average. Other funds of his company, perhaps smaller, perform even better. The All Weather, which has a slightly higher risk percentage, grew by 12.9% in 2016.
Meditation and finance
Ray Dalio's numbers are amazing. However, it is not the only particular element of his life experience. Super trader Ray Dalio is in fact primarily known as a guru, that is, as a person able to dispense advice, almost as if he were a master (and from a certain point of view he is). This advice is popular because it is not only useful, but also disruptive. It invites investors to make use of lateral thinking, creativity, even within a framework in which rationality plays a leading role, especially with regard to probability calculation and risk management.
One of the most "disruptive" concepts concerns risk itself. Or, to put it better, a tool that makes risk its most important feature:
leverage.
Well, Ray Dalio advises using high leverage. He is therefore in sharp disagreement with the mainstream, which considers leverage as a double-edged sword, capable of providing some satisfaction but also of seriously endangering capital. The concept is actually more difficult than it may seem.
It is not an invitation to squander money and to consider investing as a gamble. Quite the opposite. This is evident in one of his statements.
"If, once you have calculated the risk, you decide that certain activities have more or less equivalent returns, essentially you want to balance these activities in your portfolio after considering the correlations between them. To get to this point and allow yourself to create the optimal portfolio, it is necessary to use leverage to lift lower-risk activities. Many people still confuse leverage with risk, but the reality is that by leveraging low-risk activities - so that you can diversify away from risky investments - you are actually reducing risk."
But the concept that really made Ray Dalio famous is that of
transcendental meditation. He was in fact the first to bring an element of Eastern philosophy into the world of finance. Ray Dalio's meditation follows the dynamics of the known one, he has not made changes, except for the (epochal) one of using it to increase his performance as an investor.
He has put into practice the teachings from the East. Above all, he has shared this way of doing things with the world, starting with his management company. Those who enter BridgeWater, for example, must learn the techniques of transcendental meditation. Moreover, since 2008, all employees with a mandate of at least six months must attend an official 1,000 euro course, lasting four months. Ray Dalio uses the technique - which has little to do with the East - of "satisfied or reimbursed". If participants do not find the lessons useful, he returns the entire cost of the course out of his own pocket.
