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There is probably only a handful of investors in the world that almost everyone looks to for tips, wisdom and advice when it comes to stock market investing. Warren Buffett is an obvious one. But another stocks guru is Ray Dalio.
Ray Dalio is one of, if not the, most famous hedge fund managers in the world. His firm Bridgewater Associates was founded in the 1970s and today is one of the largest hedge funds on the planet, counting billionaires and sovereign wealth funds among its clients.
So when Dalio speaks, investors tend to listen.
Our Fool colleagues over in Dalio’s own United States have recently covered Dalio’s appearance at the Milken Institute Asia Summit in Singapore. When asked how investors would navigate today’s volatile markets, Dalio gave us four tips. Let’s discuss them today.
Ray Dalio’s four investing tips for today’s volatile stock market
Look for performance in different markets
Dalio told investors in Singapore that they should look beyond the traditional US markets in the search for returns. It’s not as easy to invest in markets like South America, Africa or the Middle East on the ASX as it is in the United States.
However, there are still many exchange-traded funds (ETFs) on the ASX that one can use to gain access to markets that most investors might not realise are available. The iShares MSCI South Korea ETF (ASX: IKO) and the iShares MSCI Japan ETF (ASX: IJP) come to mind. In the latter’s case, this ETF is already up 22.7% in 2023 to date.
If you really want to get adventurous, many US brokerage firms here in Australia might offer you access to more exotic US-listed ETFs such as the iShares Latin America 40 ETF (NYSEMKT: IFL).
Dalio: Don’t forget your diversification
Dalio also told investors that diversification of one’s investment portfolio is more important than ever. He told investors to not just look at diversification amongst different industries like we all should be doing in our own portfolios, but diversification amongst market capitalisation as well as geographies (see above).
In terms of different asset classes, Dalio is a lot more bullish on cash than he has been in the past, reportedly saying “Temporarily, right now, cash, I think, is good”.
However, he wasn’t so generous with bonds and fixed-interest investments, particularly those with long durations. He stated that, “I don’t want to own debt, you know, bonds and those kinds of things… I personally believe that the bonds longer term are not a good investment”.
Dalio: Keep an eye on disruptors
In today’s modern, hyper-changing world, investors are always on the lookout for disrupter companies. But for every disruptor, there must also be a disrupted business model. We can see this in Bridgewater’s own portfolio.
While this portfolio reportedly contains several blue-chip stocks, it also houses some of the most famous disruptor companies of the 21st century. That includes Google owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), as well as the pioneer of ‘move fast and break things’, Meta Platforms Inc (NASDAQ: META).
Both of these companies arguably continue to be at the forefront of innovation in the technology space. Both Alphabet and Meta are leading the charge on concepts such as artificial intelligence (AI) and the ‘metaverse’.
Invest in assets that are creating new technologies
This is an extension of our last point. Dalio told investors in Singapore that they should focus their attention on asset classes that “are creating new technologies”.
This obviously rules out cash (although see tip two), bonds, property and precious metals. But it most definitely includes stocks (Alphabet and Meta), and could possibly extend to cryptocurrencies like Bitcoin (CRYPTO: BTC).