Billionaire investor Ray Dalio, founder of the world's largest hedge fund Bridgewater Associates, recently shared his investment strategy, emphasizing the role of cryptocurrencies in a portfolio. He declared cash as the worst investment and urged investors to think in inflation-adjusted terms.
Cash Is Trash: Inflation Eats Purchasing Power
In an interview with Yahoo Finance, Dalio stated: “Cash, which most investors think is the safest investment, is, I think, the worst investment.” He pointed out that in the current year, cash loses 4% to 5% of its purchasing power due to inflation. “The one thing I would say to investors is don't judge anything in your returns or your assets in nominal terms. View it in terms of inflation-adjusted dollars,” he added.
Dalio expressed significant concern about inflation because of the massive increase in money and credit production. “Cash is depreciating in real terms, and holding cash is losing money.”
Crypto as Alternative Money: Bitcoin Like Gold
Dalio views cryptocurrency as “an alternative money in an environment where the value of cash money is depreciating.” He praised Bitcoin for its resilience: “It's very impressive that for the last 10, 11 years, that programming has still held up. It hasn't been hacked and so on. And it has an adoption rate.” He compared Bitcoin to gold, noting that gold is the well-established blue-chip alternative to fiat money.
The billionaire revealed he owns both Bitcoin (BTC) and Ether (ETH), though not in large amounts. “I don't own a lot of it,” he said, adding, “I think it has some merit as a small portion of a portfolio.” However, he warned: “Bitcoin has a number of other issues. If it is a threat to governments, it will probably be outlawed in some places when it becomes relatively attractive. I don't believe that central banks or major institutions will have a significant amount in it.”
Diversification Beyond Asset Classes
Dalio stressed the importance of diversification: “I'm very big on diversification. The important thing is to diversify one's portfolio well.” He explained that different asset classes move with correlations — bonds outperform stocks when the economy goes down. He extended the concept to international diversification: “Keep looking at it in real terms, not nominal terms. And that diversification should be also international diversification from countries, not just asset classes, in order to have a truly well-diversified portfolio.”
He concluded that crypto should only be a small piece of that diversified mix. His core message: measure returns in real terms, not nominal dollars, and avoid holding cash as a primary asset.