• AI-powered chatbot asks Ray Dalio what his top investment lesson is
• Dalio calls the “holy grail” of investing
On his YouTube channel Principles by Ray Dalio, the founder of the world’s largest hedge fund Bridgewater Associates recently addressed his 2.17 million subscribers with an unusual video. The investor responded to the question, “What is the most important lesson you have learned about investing in your career?”. What was unusual was not the question itself, but the questioner: the request came from ChatGPT after a user had asked the OpenAI chatbot to ask the famous investor a question.
Dalio gives investment advice
In fact, Dalio responded to the chatbot’s request in a video, but stressed that you could probably get a similarly good answer to this question on ChatGPT.
The “holy grail” for investors is diversification. “If you have ten or 15 investments that don’t correlate with each other, you can reduce your risk by up to 80 percent without reducing your profits,” emphasizes the 73-year-old. The investment expert calculates that you reduce your “risk-return ratio” by a factor of 5. “Risk reduction is key,” Dalio continued.
If you diversify your portfolio well, you can make a fortune. Contrary to popular belief, becoming wealthy is not just a question of the upside potential of returns, but rather is about limiting downside risk. “A lot of people think that you make a lot of money by betting on the best single bets or few bets. That’s wrong. If you approach the game like that, you’ll be knocked out.” Investors should realize that what they don’t know is more than what they do know. “The power of diversification is really an important power”.
When building up a portfolio, investors should therefore be aware of what they are good at, what they know and what they don’t know. If you then diversify your investment well, you have the chance of a good return relative to the risk. “That’s the most important principle,” Dalio concludes his YouTube video.
Other star investors also rely on diversification
Dalio is not the only well-known investor advising investors to diversify their portfolio extensively. In the past, the oracle of Omaha, investment legend Warren Buffett, has advised those investors in particular who do not have extensive knowledge of the market to diversify their investments widely. According to Buffett, diversification is a “protection against ignorance”. Against this background, Buffett also considers ETFs to be suitable investment vehicles, as they help to decimate the risk in the portfolio.
Editorial office finanzen.net
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