Ray Dalio: The 5-Step Formula For Investing Success

Johnny HopkinsRay DalioLeave a Comment

In his book, Principles Life and Work, Ray Dalio provides his 5-Step formula for investing success. Here’s an excerpt from the book:

So in 1975, after a quick two-year stint on Wall Street after school, I started Bridgewater. Soon after, I got married and began my family.

Through this time and till now I followed the same basic approach I used as a 12-year-old caddie trying to beat the market, i.e., by:

1) working for what I wanted, not for what others wanted me to do;

2) coming up with the best independent opinions I could muster to move toward my goals;

3) stresstesting my opinions by having the smartest people I could find challenge them so I could find out where I was wrong;

4) being wary about overconfidence, and good at not knowing; and…

5) wrestling with reality, experiencing the results of my decisions

I learned that the popular picture of success—which is like a glossy photo of an ideal man or woman out of a Ralph Lauren catalog, with a bio attached listing all of their accomplishments like going to the best prep schools and an Ivy League college, and getting all the answers right on tests—is an inaccurate picture of the typical successful person.

I met a number of great people and learned that none of them were born great—they all made lots of mistakes and had lots weaknesses—and that great people become great by looking at their mistakes and weaknesses and figuring out how to get around them.

So I learned that the people who make the most of the process of encountering reality, especially the painful obstacles, learn the most and get what they want faster than people who do not.

I learned that they are the great ones—the ones I wanted to have around me.

In short, I learned that being totally truthful, especially about mistakes and weaknesses, led to a rapid rate of improvement and movement toward what I wanted.

You can find a copy of the book here:

Ray Dalio – Principles Life and Work

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