Principles: Life and Work

by Ray Dalio

Truth be known, forecasts aren’t worth very much, and most people who make them don’t make money in the markets. . . . This is because nothing is certain and when one overlays the probabilities of all of the various things that affect the future in order to make a forecast, one gets a wide array of possibilities with varying probabilities, not one highly probable outcome. . . . We believe that market movements reflect economic movements. Economic movements are reflected in economic statistics. By studying the relationships between economic statistics and market movements, we’ve developed precise rules for identifying important shifts in the economic/market environment and in turn our positions. In other words, rather than forecasting changes in the economic environment and shifting positions in anticipation of them, we pick up these changes as they’re occurring and move our money around to keep in those markets which perform best in that environment.