Ray Dalio: Smart Investment Strategies for 2025

Johnny HopkinsRay DalioLeave a Comment

In this interview with the All-In Podcast, Ray Dalio explains how investors often focus on buying great companies but overlook the importance of pricing, which can turn a great company into a poor investment if it’s overpriced.

This is particularly concerning in a high-interest-rate environment, reminiscent of the late 1990s when hot, overvalued assets dominated. Rising interest rates and asset pricing need careful attention.

Diversification is crucial since the market is heavily leveraged long, with many betting on asset appreciation. Considering uncorrelated assets like gold can reduce portfolio risk by improving balance and mitigating correlation. Investors must evaluate pricing, interest rates, and diversification to navigate market cycles effectively.

Here’s an excerpt from the interview:

Dalio: I think a lot of investors make the mistake of thinking I want to buy good things. You know, that’s a great company, but a great company that gets expensive is much worse than a bad company that’s really cheap.

So you have to look at pricing. This is all part of the cycle. Everybody says that’s great and it’s going to be great for the future.

Like the internet and dot.com, it’s great, okay, but the price has to be paid attention to. I’m particularly concerned about those companies at a time when we are in a situation with the interest rates operating as we are.

In other words, this looks quite a lot like 1998 or ’99, where the assets of the new hot thing, are hot and the prices are high.

You have a rising interest rate environment, that is a classic issue. So we have to pay attention to the interest rates and the pricing of those assets and you have to think where is next.

The other thing is I think diversification is very, very important because everybody’s leverage long. Everybody thinks, “I’m going to buy assets that are going to go up, and if they’re good, I’m going to do that in a leveraged way.”

The world is so leverage long. You have to pay at least as much attention to correlation.

That’s why when I look at something like gold or these uncorrelated assets, it’s interesting as you add it into the portfolio. It reduces the risk of the portfolio. So you have to pay attention to the uncorrelated assets in that kind of an environment.

You can watch the entire interview here:

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