- Ray Dalio says he owns gold partly to hedge against debt and inflation risks.
- The legendary hedge fund founder cast another warning on rising debt balances around the world.
- He's warned investors of a US debt crisis, which could push the economy into a balance sheet recession.
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Ray Dalio is holding onto gold as a buffer against risks stemming from higher inflation and a potential debt crisis hitting the economy.
The billionaire investor and former Bridgewater Associates CEO has pointed to mounting debt balances around the world, with the US debt notching $34 trillion for the first time ever this year. Debt problems have also plagued China, Japan, and European nations — which poses a big risk for the currencies in those nations, he wrote in a post on LinkedIn this week.
"History and logic show that when there are big risks that the debts will either 1) not be paid back or 2) be paid back with money of depreciated value, the debt and the money become unattractive," Dalio wrote on Thursday.
When nations are deeply indebted, central banks are likely to print out more cash to pay off the debt, he noted, which is itself a problem.
"This prevents a big debt squeeze from happening by devaluing the money (i.e., inflation)," Dalio warned. "Gold, on the other hand, is a non-debt-backed form of money. It's like cash, except unlike cash and bonds, which are devalued by risks of default or inflation, gold is supported by risks of debt defaults and inflation."
That's the main reason Dalio says he has gold in his own investment portfolio, he added, calling it a "good diversifier" against the backdrop of high debt levels.
Gold has been on a record-setting run in recent weeks. Investors have been keen to buy the precious metal amid the looming risk of recession and inflation remaining stuck at elevated levels, as well as fears of wider geopolitical turmoil out of the Middle East.
Dalio has sounded the alarm on the US debt balance before. Previously, he warned markets of a coming debt crisis, which could end up sparking a balance sheet recession — a downturn that occurs when people and companies spend money to pay off their debts instead of stimulating the economy.
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FAQs
Ray Dalio says he owns gold partly to hedge against debt and inflation risks. The legendary hedge fund founder cast another warning on rising debt balances around the world. He's warned investors of a US debt crisis, which could push the economy into a balance sheet recession.
How does Ray Dalio invest in gold? ›
A well-known Dalio investment strategy, the All Weather portfolio, contains a 7.5% allocation of gold. The All Weather portfolio is Dalio's signature allocation for managing wealth during troubled economic times. Bridgewater holds gold funds as well as the stocks of gold miners and producers.
Who is Ray Dalio hedge fund billionaire? ›
Raymond Thomas Dalio (born August 8, 1949) is an American investor and hedge fund manager, who has served as co-chief investment officer of the world's largest hedge fund, Bridgewater Associates, since 1985. He founded Bridgewater in 1975 in New York. New York City, U.S.
How did Ray Dalio start his hedge fund? ›
The son of a jazz musician, Dalio began investing at the age of 12 when he bought shares of Northeast Airlines for $300, tripling his investment when the airline merged with another company. In 1975, at age 26, he founded Bridgewater Associates in his two-bedroom Manhattan apartment.
What is Ray Dalio's strategy? ›
The strategy focuses on diversification across assets based on how volatile each is, and often uses leverage to optimize returns relative to the risks taken. It flourished after the 2008 financial crisis as investors sought a way to protect themselves from the next big cataclysm.
How does investing in gold hedge against inflation? ›
Inflation typically has an indirect impact on the prices of commodities like gold. As prices rise across the economy, investors may buy more gold and other precious metals to preserve the purchasing power of their dollars. In the first half of 2022, for instance, demand for gold increased 12% year over year.
How do you hedge gold investments? ›
Hedging can - and usually is - done using derivatives - futures or options. For instance, if gold futures have 5x leverage, you can either buy gold for $1000 or buy gold futures for $200, and when price moves, the end effect will be the same for your portfolio (at least in the short term).
What was Ray Dalio's famous quote? ›
He who lives by the crystal ball will eat shattered glass.
What is the most successful hedge fund of all time? ›
Citadel has now made $74 billion for investors since its inception in 1990, more than any other hedge fund firm.
Who is the richest hedge fund billionaire? ›
Who Is the Richest Hedge Fund Manager? Ken Griffin of Citadel is both the richest hedge fund manager and the highest paid. In 2022, he earned $41. billion, and by the beginning of 2023 his net worth was estimated at $35 billion.
Ray graduated with a BS in Finance from C.W. Post College in 1971 and earned an MBA degree from Harvard Business School in 1973.
Did Warren Buffett own a hedge fund? ›
Warren Buffett is no stranger to hedge investing. In fact, he owned and managed his own hedge fund before he took charge of Berkshire Hathaway.
Why are hedge fund owners so rich? ›
Hedge funds seem to rake in billions of dollars a year for their professional investment acumen and portfolio management across a range of strategies. Hedge funds make money as part of a fee structure paid by fund investors based on assets under management (AUM).
What does Ray Dalio think of China? ›
Dalio worries that China's credit excesses are diverting resources, focus and energy from broader development needs. “When the debt becomes too large to pay off and there are big wealth gaps, that causes the cycle to reverse," he said. Not that Dalio thinks it'll be easy.
What is Ray Dalio's average return? ›
As of Jun 25, 2024, the Ray Dalio All Weather Portfolio returned 4.11% Year-To-Date and 5.09% of annualized return in the last 10 years.
How does Warren Buffett invest in gold? ›
The answer to whether Warren Buffett invests in gold is a simple “no.” This probably doesn't surprise the “Oracle of Omaha” followers, as he's been very outspoken and open regarding his investment style, strategies and ownership.
Do billionaires invest in gold? ›
Gold in Rich Investors' Portfolios
It turns out the average ultra-high net worth individual (UHNWI) with a net worth over $30 million does own a little gold. They just don't own giant vaults and swim in gold like Scrooge McDuck. The average UHNWI holds about 2% of their net worth in gold.
How much money do you need to invest in Bridgewater? ›
The firm does not have any individual clients. It generally requires clients to have a minimum of $7.5 billion of investable assets. Bridgewater has several strategies: Pure Alpha, Pure Alpha Major Markets, All Weather and Optimal Portfolio.
How do you really invest in gold? ›
There are various ways. These include investing in bullion (i.e., gold bars), mutual funds, futures, mining companies, and jewelry. With few exceptions, only bullion, futures, and a handful of specialty funds provide a direct investment opportunity in gold.
