Ray Dalio is the founder and current co-Chief Investment Officer Bridgewater Associates, one of the world’s largest hedge fund, Bridgewater Associates, which manages more than $150 billion in global investments. Dalio’s uber-impressive track record has made himself and his investors untold fortunes by adhering to finely tuned principles, unique methods, and an unconventional personal belief system (at least by stuffy Wall Street standards) that lends hope to aspiring traders and investors that there’s more than one way to make a killing on Wall Street.
A native of Queens, New York City, Ray Dalio was an only child. His father was jazz musician who played clarinet and saxophone and was famous on the NYC nightclub circuit, part of the reason Dalio remains an avid music lover to this day.
When he was 12, Ray started caddying for wealthy locals and guests of an exclusive Long Island golf club, and it is here that he developed his affinity for and skills in stock trading. Eventually, he took $300 he had saved and invested it in Northeastern Airlines because it was the only stock he could afford at $5 a share. It proved a good move, though lucky, as shares tripled in value soon after when the company was taken over.
Dalio continued investing through high school and college at Long Island University. He eventually became interested in commodity trading and the futures market because he could buy large positions with less money due to lower margin requirements. After graduating from LIU, Dalio decided to go to Harvard Business School.
In 1971, the summer before Harvard, Ray Dalio worked on the floor of the New York Stock Exchange, which would prove significant in his later development of his investing principles. He learned on the floor of the NYSE about the importance of currency exchange rates. He experienced firsthand the effects of then-President Nixon’s decision to disconnect the dollar from the value of gold – the next day, stock prices rose by over a third. Ray was immediately hooked and began learning all he could about currency exchange, which would serve him well later on.
Once Ray finished grad school, he was also a hot commodity, as a Harvard MBA with expertise in commodities trading was a Wall Street unicorn at that time. His first job after Harvard was at Dominick & Dominick as commodities director. About a year later, he moved to Shearson Hayden Stone to work in the commodity futures department advising investors on hedging, or protecting, risk, but he was fired after a disagreement with his boss. Freed from the strict hierarchy at Shearson, under which he felt stifled, Dalio formed his own hedge fund.
The Humble Beginning of Bridgewater Associates
You probably know that both Apple and Microsoft started inauspiciously in garages. The world’s largest, most successful hedge fund, Bridgewater, had similarly humble beginnings – in Dalio’s 2-bedroom apartment in 1975 when he was 26.
His first clients were corporate ones whom he advised on risks with interest rates and currency exchange; McDonald’s and one of its big suppliers were among these first clients, which helped the firm’s initial growth. Eventually, Dalio moved Bridgewater out of NYC in 1981 and into Connecticut, where Dalio and his wife had already moved to raise their family.
From there, the firm grew as it took on clients such as the World Bank and Eastman Kodak. In fact, its growth continued as major clients around the world began to join Bridgewater – central banks, pension funds, foreign governments, and university endowments, among others.
Ray Dalio began forming his investment strategies as a teenager and continued to hone them through college, grad school, and his early career. He learned early on that even the best research and due diligence can result in mistakes, so he eventually boiled his core principle down to this: to produce astronomical winners, be right when everyone else is wrong.
Dalio is a global macro investor. His aim is to profit from expected worldwide economic trends by expertly piecing together seemingly unrelated economic and financial events from around the globe. Global diversification is an important cog in his strategy so as to avoid the inherent, overt, and increased risks that staying within one sector too often brings.
Although Bridgewater had brought Dalio worldwide acclaim with its successes through the last two decades of the 20th century and early 2000s, it was the massive windfall from the 2008-09 financial crisis that made Bridgewater legendary, something Dalio had predicted in 2007 would happen. Even the Federal Reserve has praised Dalio for his acumen in connecting worldwide events that almost no one else notices until it’s too late.
The average lifespan of a hedge fund is thought to be five years, so many observers feel that Bridgewater’s four-decade, phenomenally consistent track record is theoretically impossible. As such, critics have had a field day with Bridgewater, even going so far as to label the firm as a type of cult due to the following:
· A charismatic leader with a unique worldview – Dalio is a devoted practitioner of Transcendental Meditation, or TM, on which he became hooked in the 1960s when The Beatles made headlines for traveling to India to study it
· A well-defined core of principles – Dalio published a manual detailing his values and guidelines for investing and corporate management
· The firm’s off-the-beaten-path location – the office is located in a secluded, wooded area
Dalio, of course, sees it differently. He encourages his staff to challenge any and all viewpoints, to have open dialogue, and to remove their ego when making decisions. He attributes his successes to insights from meditation, which help him better understand the psychological factors influencing corporate leadership and market decisions.
Whatever Ray Dalio is doing works. He’s as successful as he is unconventional, as evidenced by his giving up his CEO title in 2011 and to serve as Co-CIO and “Mentor” (yes, that’s his official title). He’s proven that there’s no one way to have wild success on Wall Street.