Ray Dalio, founder and co-chairman of the Westport hedge fund Bridgewater Associates, is warning investors not to place too much faith in cash following recent volatility in the markets.
In a CNBC interview, Dalio warned that “cash is not a safe investment, is not a safe place because it will be taxed by inflation.” Instead, he advised to focus on a well-balanced portfolio.
“You can reduce your risk without reducing your returns,” he stated. “You will not market-time this. Even if you were a great market timer, the things that are happening can change the world, so it changes what could be priced into the market.”
Dalio also expressed concern on Federal Reserve policies, cautioning that an excess money supply in the system could lead to socioeconomic disruptions.
“You can”™t raise living standards by raising the amount of money in credit in the system because that”™s just more money chasing the same amount of goods,” he said. “It will affect financial markets in the ways we”™ve seen and it will affect the inflation rate. It won”™t raise living standards in an important way. As inflation then begins to bite, it has political consequences.”
Dalio added that the Federal Reserve”™s actions were a rehash of the central bank”™s response to earlier economic crises, lamenting, “What we are seeing happen has played out many, many times in history; it”™s like watching the movie over again.”
