Billionaire Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates, has shared his investment strategy with cryptocurrency as part of his portfolio. He warned that cash is the worst investment because it is eaten away by inflation.
In an interview with Yahoo Finance, published Friday, he explained that he sees cryptocurrency “as an alternative currency in an environment where the value of cash is depreciating in real terms.” Referring to bitcoin, he said:
I think it’s very impressive that over the last 10 or 11 years this programming has always held up. It was not hacked and so on. And it has an adoption rate.
When asked how concerned he was about inflation, Dalio replied, “I am very concerned about this. Because the amount of money and credit that needs to be produced and is budgeted for is a big increase.
The billionaire noted that “cash is trash,” adding: “Cash, which most investors think is the safest investment, is, I think, the worst investment, and it is important because it loses purchasing power. ”
He pointed out that “money, like this year, you will lose 4% or 5% because of inflation. And so watch out for these, because I think this will be the worst investment. The boss of Bridgewater Associates continued:
The only thing I would say to investors is not to judge anything about your returns or your assets in nominal terms, in terms of how many dollars you have. See it in terms of inflation-adjusted dollars.
Dalio then spoke about diversification. “I am very committed to diversification,” he said, adding that “The important thing is to diversify your portfolio well, because we know from the surprises in the balance.”
He detailed, “We also know that these asset classes, on average, dramatically outperform and will significantly outperform Cash and that they move between them in a way that has to do with correlations, because when the going goes down. – when the economy goes down – then bonds will do better than stocks, and so on.
The billionaire believes that cryptocurrency, like bitcoin, can help diversify portfolios. “I see crypto as a little piece of it. And the message is that cash is going to be a problematic asset and hold this other diversified portfolio of assets, ”he added, stressing:
Keep looking at it in real terms, not in nominal terms. And this diversification must also be international diversification from countries, not just asset classes, in order to have a really well diversified portfolio.
When it comes to cryptocurrency, he previously admitted to owning bitcoin (BTC). This week he reportedly said he also possesses Ether (ETH). “I don’t own a lot,” he said without revealing which cryptos or how much he owns.
Nonetheless, Dalio warned, “Bitcoin has a number of other issues. If it is a threat to governments, it will likely be banned in some places when it becomes relatively attractive. It may not be banned everywhere. I don’t think central banks or large institutions will have a large amount of it. “