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Wednesday, April 9, 2014

Ray Dalio: The Steve Jobs of investing

LEARN FROM THE GENERALS OF THE MARKETS - PART 47

“We are easily deceived when we are told exactly what we want to hear.” – Malcolm Robinson

Ray Dalio was born in August 1, 1949, in Jackson Heights, Queens, New York, United States. He’s an American hedge fund guru. Being a son of an artiste (the only child of his parents), he began to deal with the markets at the age of 12. He’s both a BA and an MBA from reputable universities.

After his university experience, he worked at NYSE. Then he worked as director of commodities at Dominick & Dominick LLC; after which he was both a broker and trader at Shearson Hayden Stone. In 1974, he founded an investment firm named Bridgewater Associates. This firm has been playing the markets triumphantly since then. In the year 2012, it became the largest investment firm in the world; with assets that were worth $120,000,000,000. His firm’s website is: Bwater.com.

In 2007, Ray accurately forecasted the credit crunch – which his firm survived with profits. Since he was worth $10,000,000,000, he was named the 31st richest person in the USA (88th in the world), in March 2012. In the recent years, top magazines have included him in the list of the world’s most influential people.

He lives in Greenwich, Connecticut. He’s married and blessed with 4 children

Lessons
Here are some of the great trading lessons that can be learned from Ray:

  1. Ray Dalio is one of the richest hedge funds managers on this planet, yet his firm’s performances are not always great. There were years he made good profits, and there were a few years in which the results were either small negativity (which was easily recovered), flat or breakeven. Despite this, he stands firm as an investor. Do you quit trading when your performances don’t go according to your expectation? Do you abandon your good strategy during periods of flat performances, fleeting negativity or results that are below expectations? This isn’t the right action to take; for all strategies, whether manual, semi-automated or automated would eventually experience the aforementioned phases, but good ones will soon resume bringing profits. Bad market conditions may try hard to discourage you and wreck your determination. Sadly, the trading course is littered with those who had a determined start but did not keep going. Negative thoughts may haunt you, but you’ll stand firm and stick to your goals.

  1. It’s best to accept that your trading methods don’t know what will happen in future. This would enable you to take measures that can safeguard your portfolios in worst-case scenarios. Traders that do well are those who accept that the future can’t be predicted.

  1. It’s better to be active in the markets than to be reactive. It’s great for traders to trade in the moment. The markets – just like an economy – aren’t that complicated unless we make them so for ourselves.

  1. According to Ray, one of the biggest problems facing traders is ego sensitivity which prevents us from working on our weaknesses and encouraging our strengths. Traders who want success should do the opposite.

  1. One journalist wrote that in spite of the fact that Euro was once dropping like a stone and the markets went maniacal, Ray was able to discuss mosquitoes at that moment.  There are many things Ray’s interested in (like meditation) apart from markets. Don’t be occupied only by the markets, there’s life outside trading. Trade and prosper, but don’t forget to enjoy other aspect of life.

  1. Bridgewater once made around 13% per annum for about 19 years: sometimes 9.4%, sometimes 11%, or sometimes 2%. Hear me, greedy traders, gamblers and money-doublers, do you need to make hundreds of percentage per annum to be called successful? If you think so, well, it’s possible, but I doubt if you can enjoy lasting success in the markets with that approach.

  1. Like Malcolm who’s quoted above, people are really harmed when they’re told what they want to hear. What can help people are the truths they mayn’t want to hear. Ray believes that a notion that’s a brutal honesty, no matter how uncomfortable, yields the best results. He once commented that telling him what he wanted to hear created sugar addition. There’s no need to shy away from the truth because truthfulness is mandatory when it comes to independent thoughts and useful knowledge. In my articles, I’ve been making attempts to reveal the truths about trading; howbeit with blatant honesty. Illusions and fantasies that others peddle can’t help you.

  1. Even if your grades were poor while at school, you can still become great in life. You can still become a successful trader. Ray said he was a very ordinary kid who was a substandard high school student.

  1. It pays to be exposed to the markets when one is very young. I’ve always mentioned this in some of my past articles. When you become older, you’ll find the art of speculation easier. Ray started speculating when he was 12. Then he purchased some Northeast Airlines shares for $300 and he later made over 200%.

  1. If you’re successful in the markets, please share your lessons with other traders so that they can benefit too. After past hesitation, Ray Dalio has started sharing his trading secrets. There are many frustrated traders out there who need our help. Please let’s try to help them. If you’ve killer trading secrets which have made you very rich, they won’t be useful for you in your grave. Please let the world benefit from the secrets.

  1. Ray says: “In return, society rewards those who give it what it wants. That is why how much money people have earned is a rough measure of how much they gave society what it wanted.” Ray’s foundation is helping many organizations. If you’re rich, you can learn from that.

Conclusion: We appreciate experts who started the trading race before us and just continually, consistently, steadily kept running until they passed on. Others started trading before us and they are still trading now. We must determine to keep going until we reach permanent financial freedom. There would be distractions and challenges from time to time. There would be instance along the way when the markets seem to ‘disappoint’ us, but we will be rewarded if we remain steadfast.”

This article is ended with a quote from Ray Dalio:


“I worry about another leg down in the economies causing social disruption because deleveragings can be very painful - it depends on how they're managed.”

Eye-opening trading lessons: Lessons from Expert Traders

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