Veteran Asset Manager Ray Dalio’s Investment Advice

Veteran asset manager Ray Dalio has advised investors to allocate at least 15% of their portfolios to gold and Bitcoin, amid increasing risks in bond and equity markets.

Speaking on The Master Investor Podcast, the Bridgewater Associates founder emphasized that macroeconomic risks relating to rising government debts—in the U.S. and other countries—have not been adequately priced into markets, which may eventually face a significant downturn.

Dalio stated that, “The U.S. Government is spending 40% more than it takes in, and it can’t really cut its spending.” He added that, “it’s accumulated a debt that’s six times the amount of money it takes in and in interest payments that is $1 trillion per year, which is half of its budget deficit.”

He further explained that the U.S. Government can pay its debts only by issuing more debt and by “the central bank [the Federal Reserve] printing the money.” This has created a scenario in which markets may become increasingly anxious. Dalio suggested that a major crash could be triggered by another round of quantitative easing or the Government taking control of the Federal Reserve.

Signals of such potential events are beginning to “flash or flicker,” according to Dalio, who reinforces these ideas in his newly published book, How Countries Go Broke.

Gold and Bitcoin

Due to these unpriced risks, Dalio advises investors to allocate a minimum of 15% of their portfolios to gold or Bitcoin, as they may serve as hedges against fiat currencies and cash equivalents such as bonds.

Dalio expressed a stronger preference for gold over Bitcoin, doubting that any central bank would accept the cryptocurrency as a reserve currency, because of its lack of privacy and transparency regarding transactions. He also raised concerns about the potential for Bitcoin’s code to be broken or altered, which could affect its efficacy as a store of value.

Thus, Dalio holds more gold than Bitcoin, stating, “I have gold and I have some Bitcoin, but not much.”

This cautious outlook on Bitcoin aligns with sentiments among conventional investors. AJ Bell’s Head of Investment Analysis, Laith Khalaf, compared investing in Bitcoin during economic uncertainty to “jumping out of the frying pan and into a red hot fiery pit.”

Khalaf confirmed that while investing in Bitcoin can be acceptable with a small, loss-prepared allocation, gold is a “more solid anchor” in times of risk. He pointed out, “Gold tends to increase in price when risk aversion is high” and can serve as a useful insurance policy within a balanced portfolio.

Conversely, some experts argue that gold can also carry more risks than commonly perceived. Cryptocurrency analyst and author Glen Goodman noted that gold holders during the inflation crisis of 1980 faced significant losses over two decades. He stated, “Gold didn’t start recovering until the turn of the millennium.”