Ray Dalio's INVESTING Strategy & Advice - #MentorMeRay

hey believe nation its Evan my one word is believe and I believe in you and I want to see that thing you've got inside of you come out and have a big impact on the world I started that meant to me serious - hang on people who've done more than us and hopefully we can learn from them the way they think their mindsets their beliefs to help us be the best version of ourselves so today we're going to learn from Ray Dalio and some of his best investment advice mentor me ray rule number one is my personal favorite and I'd love to know which one you guys like the best and as always guys as you're watching if you hear something that really resonates with you please leave it down the comments below put quotes around it so other people can be inspired as well and when you write it down it's much more likely to stick with yourself - joy [Music] when I was 12 I hated school but I fell in love with trading the markets I carried at the time earned about five dollars a bag and I took my catting money and I put it in the stock market and that was just because the stock market was hot at the time and the first company I bought was a company by the name of northeast Airlines northeast Airlines was the only company I heard of that was selling for less than $5 a share and I figured I could buy more shares and if we went up I'd make more money so there was a dumb strategy right but I tripled my money I tripled my money because I got lucky the company was about to go bankrupt but some other company acquired it and I tripled my money and I was hooked and I thought this game is easy with time I learned this game is anything but easy in order to be an effective investor one has to bet against the consensus and be right and it's not easy to bet against the consensus and be right one has to bet against the consensus and be right because the consensus is built into the price and in order to be an entrepreneur a successful entrepreneur one has to bet against the consensus and be right I had to be an entrepreneur and an investor and what goes along with that is making a lot of painful mistakes so I made a lot of painful mistakes and with time my attitude about those mistakes began to change I began to think of them as puzzles that if I could solve the puzzles they would give me gems and the puzzles were what would I do differently in the future so I wouldn't make that painful mistake and the gems were principles that I would then write down so I would remember them that would help me in the future you know from a very early age the whole idea of being right is so rewarded whereas learning from mistakes doesn't have its place right.you so a kid studies they're all you're smart smart smart you take the examination and okay you do badly and but life's not like that life is mostly a matter of making your mistakes and knowing how to evolve past those mistakes and learn you guys have an extraordinary track record of winning yeah is it harder to compete in the markets today than it has been since you found her Bridgewater no I don't think so really not the way we do it and the reason I'm saying not the way we do it is we don't take systematic biases I think for a lot of people they're systematically long everything you know and so we have a world in which there when the world gets bad it's bad for them in 2008 it was great for us I don't know we had nearly 10 percent return in 2008 so we have the opportunity to go either way we just may be wrong if we're wrong so so I'm so scared about being wrong that it has helped reduce my chances of being wrong because I'm so scared I won't take debts that on you know that I don't feel good about and we diversify our portfolio and that's how we we we got the track record I was just commenting in terms of I see let's say so um you asked me about investors so I'm trying to go back what animal should do well absolutely and what you think is appropriate so here's what you guys are doing well I want to just convey to investors I think in the average investor most everybody don't compete against pros like ourselves or other people don't making tactical asset allocation bets or moving around in the markets because you're probably going to lose it's difficult for us points no you have to have a devout a balanced portfolio in other words think about how you how you're going to have a balanced portfolio what you know is that asset class as a whole over a period of time we're going to outperform cash mm-hmm okay that's the most thing that you could be most comfortable with if they don't you have a depression the only times that hasn't happened but to know how to achieve a balanced portfolio and that's a whole other subject I don't know that you want to go through if you're talking about tactical bets in other words I can come on this show on I could say I think this is good but then what happens is if I come a month later and I then change my mind because something has happened now I'm gonna leave some I'm gonna mislead people so that the tactical bets I don't think are gonna be helpful I would say that we're in an environment in which it's very important to have a well diversified and that'll include assets like to some extent maybe a little bit of gold in your portfolio in other words what could I tell investors try to achieve balance in various ways that's a whole subject about how to do it and also I think that the you know a gold you know at five percent of your portfolio five or ten percent of your portfolio under the circumstances would be also a prudent thing to do prudence is the important thing to do the reason I'm also referring to that is we have a situation where a debt is money in other words we have a Fiat monetary system too and so we're having problems as these central banks operate and so that it's a think of it as another form of cash and when cash now has zero or zero percent interest rates or less think of it as one of those possibilities in terms of how do you how do you create diversification well we break it into two parts we have two basic portfolios there is the strategic asset allocation mix which we call all-weather and that just has nothing to do with bets it has to do with how to make all the assets the same risk parity on the core risk parity the problem is when people try to diversify and they own some equities and equities has a volatility right that's large or they own assets that do well when the economy does well and do badly when the economy does badly they have a concentration of their risk in some assets right they need to have they need to change the portfolio they need to buy longer duration bonds or leverage the bonds or bring up so that bonds and commodities and pieces have comparable impacts so that whatever happens in the economy will then have a balancing effect because the one thing you could be most confident is that asset class is on average will outperform cash okay so if you have that's a strategic asset allocation that's what the all-weather piece is then there's the bets the bets are zero-sum right in order for you to beat me in the game you're going to you it's like poker it's a zero-sum game I have we have 1500 people at work at Bridgewater we spend hundreds of millions of dollars on research and so on we've been doing this for 37 years and we don't know that we're going to win in other words we work that we have to have diversified bets we have a lot of diversified bets and so on so it's very important for most people to know when not to make a bet because if you're gonna come to the poker table you're gonna have to beat me and you're gonna have to beat those who take money so the nature of investing is that a very small percentage of the people take money essentially in that poker game away from other people who don't know when prices go up whether that means it's a good investment or if it's a more expensive and desperate i sat down with the famous Ray Dalio right right and I prepared for 18 hours for that interview because he's a genius there's not that much on him I wanted to absorb it all so I got every little bit of it sat down well then it turned out ray was a fan of my work which I was touched by 20 years ago I guess he listened to my programs he was very generous with his time and we spent these three hours and in the three hours when I got to the end I said to Ray and said listen I really want help the average person so I got a question for you I did this with everyone I said if you couldn't give your money to your children any of it and all you could do would be give them a portfolio or a set of investment strategies or instructions and they were gonna start over and build it what would it be nice to Tony I spent a decade figuring that out all my money is already there my kids money is there my money philanthropy when I'm gone is there because I'm not gonna be here and I want something little do well in the future and I don't know what the future is gonna be markets are gonna always change I need something that could work in any mark and I call it my all-weather fund most of us in the business are familiar with it a little bit and so he explained it to me and I have a good understanding and I said I get it so what you're saying is the reason why this was obsessed him why is he defined the balanced portfolio in 2008 I got nailed on both sides why did that happen in 2000 everybody says portfolio theory this is supposed to protect me and it didn't work but he said as soon as things get better no one talks about it we just forget about it happens again happened in 2000 happened in 2008 he said I figured it out when you have a 50/50 portfolio right that's 50/50 of where you put your money in assets 6040 5050 however you look at portfolio right but he said the problem is that's not balanced risk this is where people are crazy I've seen people write things up they see this in the book and say Tony Robbins is promoting first I'm not promoting anything every word in this book is from the best investors on earth anything that's from me is about the emotions that I know for 36 years that's about my expertise these are their views but I'll tell you what's amazing he's a Tony when you have stocks and bonds half and half you're not equal because equities are three times more volatile so your risk is ninety five five he said so that's why people get killed in a 2008 he said I try to get this through to people he said but all of our people handle it you know you manage money for countries the largest you know pension funds on earth he said what people don't this and they look at and go oh this is bond heavy the bond days are over because inflation is going forward he said it's not true Tony this fund in the 1970s it was the worst time for bonds it was an extraordinary time for all weather because it isn't it looks over balanced because we only get the same level of risk you have to go for more long-term bonds or you have to use more leverage on the bond side and so when he was all done it was you know for the average person complex I'm seeing financial people look at this and write things up that are just silly saying you know this is this is never gonna work this we're in the you know interest rates go the only place to go if you treats go up it's a balanced fund the other areas kick in but here's what's interesting after he told the whole thing to me I said to him I said look I said this is wonderful he'll give me something that very few people understand on the planet I think I really got it and I played it back he said you got it I said there's two probably how much person is never gonna know what to do with this and I said I'm trying to help somebody that needs to know what to do I said tell me you're telling me to make this beautiful chocolate cake and you're saying Tony you're sod to do it use some sugar right use some chocolate use some dairy products I need to know the amounts you know give me the amount see who's Tony that's my secret sauce and that's when he told me he said well 10 years ago for you to even get him to talk to me it was 5 billion net worth 100 million dollars of getting in Aiko and he said and now for 10 years I haven't dig at anybody's money and she answered your own question I said you're not taking money anyway it's not gonna compete with you the average guy he said is never gonna make it talking to a wealth manager tell me what to do and he is so generous you know he's giving up half his net worth like many other people and and in the end he said ok said it but it'll be complex I said I can make it simple he said Wow I don't want leverage innocent design without leverage because it won't be perfect I said I don't care if it's not perfect you're idea bun perfect will be somebody else's ideas the best thing they could do and they lane up the numbers we ran the numbers and use the same back testing so you saw a year-by-year how it really did over the last 75 years of modern investing and here's what's amazing like all weather similar in 75 years it's been right 85 percent of the time what's even more extraordinary is the 15 percent what it wasn't doing well what it knew well it's average losses 1.6 percent not 50 40 30 20 the last 10 years a - 50 % hits his biggest loss in 75 years was less than 4% minus three point 95 and that was 2008 when the market exploded you know down to 51 percent here here in the allocations yes in the book which would make a normal person gag conditionally stocks only 30 percent that's right even though it's their stocks on average supposed to gain what 9% a year 9.2 long-term Treasuries 40% yeah intermediates 15 no gold 7 to have commodity 7 and a half yeah absolutely counter wisdom I know it's amazing you know when I read interviewed David Swensen he said he wrote a book and then he said the whole secret to success is to be contrary to what else believes but the math on this is what works here's what's interesting that looks like your heavy bronze 40 and 15 55% bonds and it looks that way visually in terms of volume you are panned in terms of risk you're not you're still you're making us you're equally way to think of it this way what triggers things to grow is inflation or deflation in terms of price certain things do really well in inflation certain to deflation growing economy shrinking economy and he's figured out which quadrant you need to put each to actually have equal risk and that's why it's not well this year this formula has done it's one percent better than the markets and 13 and the third right now and but more importantly three weeks ago in the market drop to gave up all of its entire benefits for the entire year and everybody's guts were checking there was no gut check because they went up a quarter of a point so the beauty of this is I'm sure you know there's Studies on with the last 20 years and the studies from 1993 to 2013 and spied Albar and they found that the market the S&P 500 during that time that 9.2 percent on average as you said but you know what the average mutual fund men now owner got investor 2.5 percent that's before tax why because we as investors always do the wrong thing emotionally that's right we sell we should hang on we buy when we shouldn't so the greatest thing that I think that Rey offers somebody the opportunity to do is actually stay in the market because if you yeah if you got 1.6 percent as your big here then 4 percent was the biggest hit you've ever seen at 75 years I think you could stay in and you can do a job talks about will just stay in that market through time this means resetting each year it's a reset once a year after one recalibration so 15 minutes a year and you're in the game ordinarily you're there with two ways of making decisions pretty much there's the boss has control and so on and kradic autocratic I'll call that autocratic takes in everything and then he makes a decision or there's democratic pretty much one man one vote but really the best decision making is believability weighted decision-making and if you think about it first conceptually you would say if you're gonna make a decision of what you have medical condition and you're going how are you going to get that you're gonna think who are the best doctors consult the experts right consult the experts but this one knows more and that one knows more less and how do you do it and then you have this triangulation and then you make that that's kind of the idea believability decision-making we have ways of assigning believability that we all agree are fair that we each assess each other and we get certain amount of believability points so now imagine that you had believability you're a believability on a subject matter maybe it's investing maybe it's accounting whatever the subject is that you have a certain amount of believability weighted points and you're together well those believability weighted points when you say okay what should I make is a decision now I'm responsible to something but I ask everybody else I and I take a believability weighted vote I can have a believability weighted vote when I have that believability weight about vote I really do believe that it's going to be a better decision than I would individually make that's believability weighted decision-making and it's fantastic when you have independent thinkers you know in order to be successful in the markets or as an entrepreneur one has to be an independent thinker that makes decisions better than the consensus decisions it's fair in the markets the consensus is built into the price it's paid it yeah so now you have to bet against the consensus to make money therefore you have to be an independent thinker the best dynamic is to have a bunch of independent thinkers now you've got a bunch of independent thinkers how we're going to have thoughtful disagreement and get past those disagreement how we have done that is the key to our success and it's outlined in the book so what happens what happens with meditation as you know it's it's just a simple exercise that allows you first to clear your head and then brings an equanimity to everything everything it eliminates the stress it eliminates the emotion what how often your busy guy yeah I I've been doing it for 44 years but I do it you know twice a day probably third of the time once a day probably a third of the time and not only 20 minutes twice a day yes you spend today as part of your oh it's such a great investment I would say that more than any other factor having any effect on my success it's been meditation because the equanimity and also the creativity because it opens between the literally the prefrontal cortex and the amygdala it opens the two sides of the brains and allows a spontaneity a creativity and open-mindedness and and so it's good for that not only the health because because it you get with stress as a terrible thing but it also is very good in terms of the clarity and you don't get the emotional hijacking and it's great for creativity so it's helped me a lot it's the biggest gift I can give okay so if you didn't understand the economic stuff meditated thank you guys so much for watching I hope you enjoyed I'd love to know what did you take from this video what was a single most important message that you are going to immediately apply somehow to your life or to your business leave it down in the comments below I look forward to hearing what you have to say I also want to give a quick shout out to Jay Leno's to Ross Scott thank you so much for picking up a copy of my book your one word and doing your review on your youtube channel as well as the interview we did together I really really really appreciate the support and I'm so glad that you enjoyed my book I'm super excited to bring a book review for you about a movie that I finished reading quite recently which is called your one-word by Evan Carmichael thank you guys so much for watching I believe in you I hope you continue to believe in yourself and whatever your one word is much love I'll see you soon [Music] the most important work ever if you had to think of one word that's most important to you or that sums you Apple that would be to like a little beacon pay believe nation if you want to know what the most important one word is for Tony Robbins Gary Vaynerchuk Oprah Winfrey will.i.am and Howard Schultz I have a very special secret video for you check the description for details [Music]

Channel: Evan Carmichael

Views: 552,560

Rating: 4.8392239 out of 5

Keywords: entrepreneur, ray dalio investing strategy & advice, ray dalio, ray dalio advice, ray dalio investing, ray dalio motivation, ray dalio speech, ray dalio interview, billionaire advice, investing advice, investing strategy, bridgewater, economics, investing, bridgewater associates, economic machine, ray dalio principles, Asset Allocation, Risk Parity, Diversification

Id: jVwna1aO3Dw

Length: 19min 56sec (1196 seconds)

Published: Sat Oct 14 2017