Principles: Life and Work

by Ray Dalio

I knew what drove asset returns, but I also knew that no matter what asset class one held, there would come a time when it would lose most of its value. This included cash, which is the worst investment over time because it loses value after adjusting for inflation and taxes. I also knew how difficult it was to anticipate the swings that cause those losses. I’ve devoted my life to it and I’ve made my share of bad calls; anticipating these swings wasn’t something I’d bet on others doing well when I wasn’t around. Finding investors who have done well in all economic environments—when inflation rises and when it falls, when there are booms and when there are busts—is like finding needles in a haystack, and they don’t live forever so that’s not a viable path. I didn’t want the wealth I had created to protect my family to be wiped out after I was gone. That meant I had to create a mix of assets that could be good in all economic environments.