Ray Dalio gives 3 financial recommendations for millennials

well I do want to talk about my generation the Millennials we were really coming of age during the crisis so how would you advise us to prepare and and what would you tell our generation we feel scarred from the crisis yeah first of all I think one of the problems is that the experience that you had is the last experience is the one that's going to stick in your mind and probably will not be the one that's going to get you so that the next experience will be very very different I know my my parents went through the Great Depression and then they missed out on the boo because that they were always thinking about that and so I think I think that what they need to do is see all of those crisis's that's why you can see inflationary ones and see all of those and once you get that perspective I would say three things to your generation okay three recommendations the first recommendation is to is to think about your savings and how much money do you have for savings and the best way to think about that is to think how much money do I spend each month and how much money do I have saved so that I can how many months am I going to be okay without that and to value savings right and in calculate it because savings in that is freedom and security and think about what that is so that's that's the first what how much do I have for that the second thing is how do I save well what should I put my saving in and when thinking about what you should put your saving in realize that the least risk investment that you think from volatility is the least risk investment it which is cash is the worst investment over a period of time and you could judge that by judging the rate of inflation in relationship to the after-tax income you're going to earn so if you have an inflation rate that's 2 or 3 percent and you're earning 1% and you have to pay taxes on that 1% or the 1 or 2 percent that you're going to get you're going to get taxed essentially at 2% a year and that's going to be a problem so you have to move move into assets that are other assets that are going to do better over a period of time and when you do that the most important thing I can convey to you is to diversify well because I can guarantee you that one of those assets and you won't be able to pick the right one will be disastrous in your lifetime that you will lose half of that savings if you're in the wrong one and you won't know what the right one is and so pick different countries pick different asset classes and I could probably take too long explaining how you might do that but but so that would be the the second thing to learn first thing is think about how to save be cautious about debt when you're thinking about debt think about is that debt going to help my savings or is it going to produce an income sometimes debt like buying a house or buying an apartment or buying an asset it produces forced savings forced savings is a good thing or if you're taking on debt and you're thinking am I going to have that debt in an asset that asset better produce more income than the asset then the cost of your debt if you're using debt for consumption that's not a good thing to do okay you're giving up that that safety so I want so number one is think about how much you save and think about whether that should be and what how you borrow number two make sure that you think about the diversification of that not in cash and number three do the opposite of what your instincts are if you're going to play the game it has to be the opposite of what your instincts in the crowd says because the market reflects the crowd so you want to buy when no one wants to buy and you want to sell when no one wants to sell right so and that's emotionally difficult and probably you're not going to play that game well because it takes a lot of resources to play the rich huh we spend hundreds of millions of dollars each year to try to play that game well and it's a tough game to play well so I would caution you about the market timing game but I would say that if you're going to do it in the ways that are uncomfortable because their opposite your instincts that's really good advice story one more thing that really resonated with me in the book was if in the next downturn some of the implications could be the impact on pension obligations health care is my generation are going to be on the hook for that yeah so we pay a lot of attention to debt and we should but pension obligations and health care obligations are just like that there are obligations that require cash to fund those things and when you think about that we don't have enough money to fund those things and so there'll be a squeeze and I think that's also part of this political conflict because when you say to somebody that you're not going to be able to fully fund their pension or how are you going to fund it what are you going to take it away from in order to fund it or if you think about the health care issues and so on with the demographics and those require taking things away from people that have been promised to people and/or do you print the money these are issues that will be important for your generation and you know not only are you an incredible money manager but you're also a really big philanthropist and when you're talking about the next downturn you're also bringing up some big social issues the wealth gap how do you think about that how do we address this issue because it sounds like it's going to be a very big problem yeah I think capitalism has got to work for all the people and democracies got to work for everybody and and we're in a situation right now because of a lot of things that it's not working for a large portion of the bottom 60% I separated the averages to the bottom 60% of the top 40% I could have done it the 80% or even 95% yeah and it's not working for a large percentage of the population we don't have adequate education we don't create bottoms in many cases my wife works in Connecticut to try to help what are called discing disengaged and disconnected youth give you a picture etiquette which is the richest state in the country or or equal to the richest state in the country has 22 percent of its high school students are disengaged or disconnected disengaged means they attend high school but they don't really study they just sort of get through and disconnected means they don't even know where they are 22 percent those students those people are going to be on the street that's a problem there are school districts in which they have to share books or in some cases even have to share pencils they literally will break a pencil in half and shut on sharpen it from both ends or pass it around and so on and those that issue about opportunity in terms of education or even income opportunity there's a population that in that bottom 60% we're opiate use is rising and and suicides are rising that I think there has to be considered a national emergency in which we create metrics what are those conditions and that there should be a dealing with that I think that these things can be done dealt with much much better but it has to be treated in a way that that's dealt with and that has by making them productive I don't mean by giving money or by giving welfare but by doing certain things probably in private public partnerships in which the private sector that could be business sector together with the government sector can funk can do the checks and balances to make those things productive I see many of these cases i fund for example microfinance Grameen America is one but a number of those and and the capacity to lend somebody a thousand dollars and get paid back not 99 percent 98% payback rates and that thousand dollars can create a the purchase of a rug cleaning piece of equipment and that person's in business to be able to be productive those kinds of things need to be thought about because if we don't have capitalism working for the majority of people it's not it's going to be Retin and the same thing is democracy the democracy is based on the notion of compromise to be able to bring people together and so on I think if we have too much fragmentation I think that these are the biggest risks I think debt crisis is can be managed but when you get into a bad situations as a basic principle if you have rich and poor living together and they have to decide how they're going to spend a budget how they divide a pie and you have a economic downturn you're probably going to have a conflict and I think that has to be dealt with

Channel: Yahoo Finance

Views: 903,950

Rating: 4.9036837 out of 5

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Market Movers, Midday Movers, The Final Round, Ray Dalio, investing, Wall Street, #Ray Dalio, #Julia LaRoche, #Yahoo Finance

Id: 9RrMcq-zJcU

Length: 9min 29sec (569 seconds)

Published: Wed Feb 20 2019