Raymond Thomas Dalio is the definition of the American Dream. He was born in New York to a jazz musician and a housewife.

He wasn’t exactly born in a wealthy family.  Ray worked many small jobs to be able to earn a few bucks. One of them might have been life-changing.

At the age of 12, he caddied at The Links Golf Club. Many Wall Street professionals and veterans spent time there.  He listened to them and learned.

That same year, Ray bought his first investment for $300, which saw a 200% profit. By high school, his investment portfolio reached a few thousand dollars. How many of us have achieved the same early success? It can sound very cliché to read about the life of someone who made his fortune from nothing. However, there is always a lesson we can learn and apply to our own life. It is never too late to change some habits, no matter our age or social class. I’m sure readers of all ages can find something interesting in Ray’s life. Also, Paul Tudor Jones.

Studies

His high school years weren’t his best. Ray had trouble concentrating and finding a passion in his studies. He kept trading stocks throughout his studies. Once in college, he found his groove. Something new also grabbed his attention: commodity futures. He quickly understood how he could profit more than from only stocks. After excelling in his college studies, Ray was accepted to Harvard Business School. 

Work

Throughout his early studies, he was exposed to work in the financial world. Ray interned in a trading firm and had a job as a clerk for the NYSE. After Harvard, he kept working in the industry. Working for someone frustrated him and reminded him of his early studies. Ray wanted to be free to do whatever pleased him. He already had numerous contacts and clients from his securities firm.

What Is Bridgewater Associates?

Let’s shift our attention to a more interesting part of Ray Dalio’s life. Bridgewater Associates was founded in 1975 from his New York apartment. 

Bridgewater Associates’ first clients were mostly Ray’s contacts from his securities firm.

However, the early 1980s proved to be troublesome. Ray saw a crash coming.

He was right in the beginning and bought a lot of gold and bonds. He thought he could predict the market flawlessly. Boy was he wrong!

The market began an incredible bull run and Bridgewater went almost broke. Ray had to lay off all his employees and take multiple loans to stay afloat. Fortunately, he learned from his mistakes.

Rebounding

Just like in any sport, when you get a rebound, you get another chance. Computers became available to the public. Their use greatly propelled the industry. Bridgewater had 3 business strategies.

1. Selling its research and market analysis.
2. Consulting fees for businesses
3. Investment managing

The last strategy proved to be the most successful. The company began maturing when they signed McDonald’s and began managing the pension fund for the World Bank, Mobil Oil and Eastman Kodak.

When I said Ray learned from his mistakes, he absolutely did. Instead of putting his eggs in one basket, he realized that market diversification is the key to long-term success.

Creating a portfolio with uncorrelated investments became his most successful strategy. It’s all about balancing risk. This was called the Pure Alpha fund. 

Clients began to see that it’s not about earning the most every single year. Instead, beating the market over time was a better strategy. Between 1991 and 2005, Bridgewater ended the year with negative returns only 3 times with the worst being -4%.

To put that in perspective, markets lost double digits during the DotCom bubble in the early 2000s. In 2005, Bridgewater Associates became the largest Hedge Fund in the world.

What is a hedge fund? It is an investment fund that trades complex trading techniques to attempt to improve performance and reduce risk.

2008 Crisis

By 2007, Bridgewater Associates had $50B worth of Assets Under Management (AUM). Its credibility was increasing by the quarter. Ray Dalio saw the incoming worldwide crisis. This time, he was also right and he came better prepared than the first time around.

He met with the White House staff, but his findings were ignored. How many investors and fund managers saw their portfolios plummet in 2008? Not Bridgwater.

Clients’ profits after fees were a solid 9.5%. However, in 2009, the economy rebounded. The DJIA rallied by 19%, but Bridgewater portfolios earned between 2 and 4% only. Not the best, but overall positive.

Today

Ever since 2005, Bridgewater Associates has been the largest Hedge Fund in the world. Today, their AUM reaches over $200B. Almost 60% of its clients are outside of the US. The company is currently exploring investment opportunities in a growing Chinese market. 

In order to be a client, one must be an accredited investor. Furthermore, a minimum net worth is required depending on the product desired. It can range between $500,000 to a few million. 

Extracurriculars

Let’s take a look at a few side projects and personnel habits Ray Dalio has adopted throughout his life. We’ll start out with transindental medidation.

Can I get more cliché? Meditation….really? Ever since 1969, Ray has been meditating daily.

He was cool before it became cool. Many successful personalities attribute their success to a daily meditation session. For Ray, this translates to a 20-minute session at the start of the day and another before dinner. His mantra: the syllable ‘’Om”. 

Can it be as simple as this? Can we focus our attention away from Instanonsense and Tweeter for such a long time? Is it a coincidence that so many successful people practice it?

Maybe we should all spend some time away from the screens surrounding us. You definitely have my approval. Take a moment to relax, forget about all the stressful things in your life and see the positive ahead. It may be difficult and frustrating in the beginning and at times, but hopefully, the benefits will come.

2005: Principles for Success

He also wrote a boook. The 5-step process to succeed in life: goals, problems, diagnosis, design and doing. Basically, the book tells how to grow as a person.

Cultivating meaningful relationships, learning from our mistakes, constantly evolving as a person and a critical thinker, etc. It is a very utopic way of thinking.

I find it a bit ironic from such a capitalist. However, building the biggest hedge fund in the world requires all these skills and more.

It’s a quick and easy read. It is also available on YouTube as an animated video.

2017: Principles

2018: Principles for Navigating Big Debt Crises

Principles for Dealing With the Changing World Order

As you can see, principles are the main subject here. Whether it is on a personal level, or on a global scale. If life was as simple as reading a book and becoming successful, we would all do it.

However, it is not always easy to apply a theory to the real world. It may come naturally to a select few, but it is time-consuming and difficult for others. Watching an Instagram post about cats is a better use of our time… duh!

Conclusion

Ray Dalio is one of the most successful people in the world. He followed the principles of the American Dream. He founded Bridgewater Associates and has been CEO until recently. Now, he is still on the board. Ray also spends his time sharing the things that helped him become successful. He didn’t become one of the Top 100 richest people on earth with a click of the mouse. Hard work paid off. 

Investing is not the easiest job in the world. It comes with a lot of hard work and it is full of ups and downs. Fortunately, Ray’s story does not only apply to investors. Becoming good and original in any field requires hard work. As cheesy as Ray’s principles may sound, they work.

If you want to learn more about how you can profit from the stock market, head on over to our free library of educational courses. We have something for everyone, including trading options for those with small accounts.