How Ray Dalio Made His First Million?

he runs the largest hedge fund in the world ray dalio is one of the most successful influential people alive he's returned more to his investors than anyone else in this space which would be amazing under any circumstance but becomes even more dazzling when you consider the fact that he started out as just another middle class kid from long island throughout his career he developed a unique view of how the world works it puts lessons out there for everyone to learn it's one thing when you're an economist in the college or university it's completely different when you have to bet your own money on your research i would choose to listen to retaliate any time of the day because he has skin in the game when dalio talks the world listens his advice and wisdom is eagerly sought on financial matters and economic matters by policymakers around the world in his pursuit of understanding how the economy works he became one of the richest people in the world worth 16.9 billion dollars ray dalio has led a successful life and career after retiring from bridgewater he has been sharing his principles of success regalia is someone who has a lot of dreams and ambitions but he's very realistic in terms of how to achieve his dreams with that mentality ray dalio managed to build a consulting business and made his first million all before the age of 30. born in new york dalia was a natural entrepreneur the world of finance fascinated him i got hooked on the markets when i was 12. well the first stock i bought uh i bought because it was the only company i ever heard of that was selling for less than five dollars this year and it worked and it worked because this company was about to go broke and somebody came along and acquired it then decided that i would be involved in the markets and this game is anything that easy he taught himself how to sell short and by the time he was in high school he had already created a stock portfolio worth several thousand dollars dalio thrived in college he did so well after graduating he got accepted to harvard business school although dalio flourished in business school he wanted to have more real real-world practice in 1972 the summer between dallas two years at business school he became an intern at merrill lynch as a commodity trader commodities in 1970s have very low margin requirements and relatively obscure it's kind of like cryptocurrencies today there's a lot of volatility and a lot of speculators in the space of the dollar into gold or other reserve assets except in amounts and conditions determined to be in the interest of monetary stability and in the best interest of the united states on august 15 1971 president richard nixon announced the u.s was stopped using gold standard to control inflation the breakdown of the monetary system in 1971 pushed commodity prices higher and created the first oil shock in 1973 to combat inflation the federal reserve tight monetary policy which brought the worst bearing market since the great depression more than ever dahlia wanted to take part in the commodity trading business after graduating from harvard he got a job at shiraz and hayden stone as a commodity trader at shearson dahlia was in charge of the hedging business advising clients on how to hedge their business risks hedging seems to be hard to understand for people who don't know anything about finance but it's actually a simple concept it's just like buying a insurance contract in commodities you can buy a contract that says you can buy say soybeans for ten dollars per unit in three months from now this will give you peace of mind because you don't have to worry about the fluctuations of soybean prices with this contract but dallas career was short-lived he was fired after having a drunken argument with his boss on new year's eve in 1974. it didn't last long okay so cheers okay so and that's how i started the firm in 1974 redallio started his company in his two-bedroom apartment in manhattan on new year's day he called it the bridgewater his business model was simple he would do his best to study the commodity market then share his insights with his clients in the late 1970s many american businesses started their global expansion as a result they exposed themselves to various currency and commodity risks dalio understood currencies interest rates and commodities while working at shearson dahlia has built a strong relationship with their clients who now continue to pay dalio for his advice that's how i started the firm because i was uh because the client still wanted to do business one year dalio built a reputation for quality research on macroeconomics he published his thoughts and daily observations his newsletter at that time it became widely read by corporate executives policymakers and central bankers around the world in a way ray dalio was a content marketer even to this day if you look at his social media he consistently publishes his findings to the world he understood the power of personal brand before the term even existed soon dalio has attracted a following of powerful players in business one of them was mcdonald he created a hedging strategy for mcdonald to minimize its exposure to volatility of chicken prices this allowed mcdonald to keep a stable price for the chicken mcnuggets dalio was content with his consulting business because it allows him to do what he loves the most research on how the economic machine works but in 1985 after benefiting from ray dalloo's advice many times the world bank decided to give dalio 5 million dollars as a test portfolio this is the beginning of radar's career as a money manager so this might surprise a lot of people uh dalio never wanted to build a hedge fund he was just happy doing his research and even to this day if you look at his videos online he seems very down to earth he will go on podcasts and he never comes off as a hedge fund billionaire in the meantime most money managers follow a benchmark say s p 500 to judge how a portfolio performs but ray dalio wanted a portfolio based on pure alphas and then we have what we call our pure alpha strategy because there's a separation between alpha and beta so every most investors make the mistake of separating those two and think that they're going to make money in the market and in this zero-sum game they're probably going to lose money from making those bets so when we talk about returns they can come from two sources the first source is beta this is the type of return where you get from uh the market so if the economy does well you make more returns from beta and the second return type is alpha this is the type of return you get when you have some kind of informational advantage suppose you notice there's more cars parked at walmart parking lot this year than a previous one and you expect that walmart's gonna beat its earnings uh for this quarter and the return to make from this trade is coming from alpha uh it's because you have that uh advantage of the information in probability theory is called independent events pure alpha portfolio is a collection of these independent bets all based on bridgewater's unique understanding of the market better than any other participants this strategy proved to be a success although it doesn't have the best annualized returns it is uniquely uncorrelated to the market proving to be a great alternative investment for investors in 2020 bridgewater has 138 billion dollars under management making it the biggest hedge fund in the world but dalio's ambition was never to become rich rather he views money as a byproduct of his desire to seek truth

Channel: FINAiUS

Views: 107,677

Keywords: ray dalio, hedge fund, first million, billionaire

Id: 9ZRGQxLtSWg

Length: 8min 50sec (530 seconds)

Published: Tue Dec 01 2020