How Billionaire Ray Dalio invest? Follow this portfolio to achieve 10% return…

Question 1: How to invest

There are three potential market situations that could ever happen:

• Market going up
• Market going sideways
• Market going down

It is easy to make money when the market is going up, but 95% of people don’t make money (or even lose money) when the market is going sideways or down. And we can’t beat the market, nor predict the future. That’s what makes investing hard.

The question is: how to invest so that we can have unlimited upside (profit potential) during the upward market trend and protected downside (risk protection) during a market downturn or adjustment?

Question 2: How to choose

Another problem with investing is that there is simply too much information everywhere. News, advertisements, blogs, newsletters, social media…..we are exposed to ‘investment advice’ all day long and everyone claims that they have tips and strategies to beat the market and pick the right stocks.

One ‘expert’ asks you to put all your money in technology stocks, another say 50% stocks 50% bond, yet another say 40% stocks, 40% bond, 20% commodities. There are like millions of ways you can invest in the market and a hundred thousand investment products and funds available for your choosing. With technology, we can have access to these products fairly easily through an online trading platform with minimal fees.

The question is: how to choose the right investment products and tools for us?

How Ray Dalio answers the questions

Ray Dalio (billionaire, reputational founder of Bridgewater and sophisticated investor) worked with his colleagues to create the best asset allocation mix for preserving wealth over generations. They want to make money in all different market conditions — up, sideways, or down.

There are hundreds of people in his team and they studied the history, stock market pattern and how one change would have any implication on another. It was a huge undertaking and it costs money. The minimum investment amount with Ray Dalio was reported to be $500,000 to one million.

After many assumptions, hypotheses, and testing, he developed the ‘golden’ asset allocation — known as ‘risk parity’ investing.

‘Risk parity’ investing

‘Risk parity’ investing involves ensuring a mix of assets that are positioned to do well in all economic environments.

Along with his clients and other investors’ monies, Ray Dalio invested his own savings and monies in the products that fit the ‘risk parity’ algorithm. In a few years, the fund had over USD $3 billion and the ‘risk parity’ investing method was developed to be one of Ray Dalio’s major investment principles.

The ‘perfect’ asset allocation algorithm

Here is the breakdown of the ‘risk parity’ investment method:

30% invested in a fund that tracks the biggest companies’ stocks

15% invested in mid-term bond of 7–10 years

40% invested in long-term bond of 20–25 years

7.5% on gold

7.5% on other commodities

Whether this works?

Tony Robbins in his book “Money Master the Game” tested Ray Dalio method of investing tracing back to 30 years (i.e. 1983–2013) and found that following this allocation:

Out of 30 years, there would only be 4 years of losing. And the maximum loss is 3.9%.

For the rest of the years, this portfolio with Ray Dalio’s asset allocation algorithm would have achieved 10% compounded annual return. Not bad huh?

If you have no idea how to invest your money, or how you should allocate your investment, the algorithm could be something for you to consider.

Note: this is not investment advice. I’m not financial planning professional. Just sharing what is working for me as part of my investing strategy or what I have learned on my investment journey. Please be reminded to do your own research and consider your own circumstances before making any financial decisions. You could also check with your financial professional to understand what would be best for your situation.