1 Billionaire Reveals 5 Simple Ways to Make Money From Stocks

Some  billionaires hold onto the secrets to their money-making success with a tight fist. But Ray Dalio is worth $14 billion and is more than happy to share.

His tips are helpful, successful, and best of all, easy to understand.

Ray Dalio. Source: www.insidermonkey.com

At last count Ray Dalio -- the man atop Bridgewater Associates that manages $150 billion -- was worth $14.3 billion, which made him the 76th richest person on the planet. This placed him ahead of Rupert Murdoch ($12.1 billion), Elon Musk of Tesla ($11.1 billion), and Eric Schmidt at Google ($8.9 billion).

In 2010, his firm made $15 billion -- which was more than the combined profits of Google, Amazon, Yahoo, and eBay -- and Dalio himself made $3 billion.  

Although he isn't a household name, he should be, as he's revealed the secrets to his success in a 123 page paper simply entitled Principles, that is chalked full of great investment advice. And there are five things we should remember when making our own investment decisions. 

Find what you enjoy

I worked for what I wanted, not for what others wanted me to do.

Like fellow-billionaire Warren Buffett, Dalio began investing at a young age, and while his first investment tripled in value, he notes, "I made the money because I was lucky."

From there his passion for investing began, and although he made his fair share of mistakes, he developed the early understanding of the intersection between his gifts and passions, which were clearly in investing.

For good reason Warren Buffett has continually highlighted the value of passive index funds for the purpose comfortably saving for retirement, but Dalio's first point is a helpful reminder that investing in specific companies should be something individuals seek because they enjoy it, not because they feel required to do it.

Stick to what you know

I came up with the best independent opinions I could muster to get what I wanted.

If the first piece of advice holds and investing is something you're passionate for, then Dalio suggests the next step is to sit down and figure out where your understanding is, and the industries and companies you'd be best suited to invest in. For some, it's energy, others financials, or maybe technology.

But regardless of where that may be -- Dalio believes it's critical to sit down and use your own time, energy, and effort, to do the research to learn and gauge an opinion about what you think of the companies and what their relative values should be.

Seek out advice from others

I stress-tested my opinions by having the smartest people I could find challenge them so I could find out where I was wrong.

After determining an opinion on the companies, it's then helpful to see someone who has the opposite opinion. Dalio noted "bad opinions can be very costly," so investing must not be sticking to personal conclusions about specific companies.

Even if you continue to disagree with their stance after carefully hearing their reason, it's important to hear their reasoning to better shape your opinion on the company.

You'll never know everything

I remained wary about being overconfident, and I figured out how to effectively deal with my not knowing.

Even after opinions are formed about specific stocks, it's always important to continue to gather information and sharpen an understanding. But remember that we'll never know everything about a company, an industry, or the broader market.

Although Dalio says he does his best to continually "gather information" about an investment, he notes he tries to limit them "to the limited number of things I am confident in."

Learning never stops

I wrestled with my realities, reflected on the consequences of my decisions, and learned and improved from this process.

Warren Buffett once said, "I insist on a lot of time being spent, almost every day, to just sit and think."

In the same way, we must see investing isn't something which is learned in a day or a week or a month. Instead, it is continually learned year after year, and so very rarely mastered.

Take time to revisit past successes and failures as it can be a helpful way to learn.

Dalio isn't perfect, and has made his own set of mistakes, but his advice on investing is sound, and things we must all remember when making our own investment decisions.

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Read/Post Comments (15) | Recommend This Article (92)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 10, 2014, at 9:31 AM, Charos wrote:

    I think he is pretty honest saying he made money and got started because he was lucky. I never was very lucky or made any money.

  • Report this Comment On August 11, 2014, at 5:44 PM, adasand wrote:

    Dalio is definitely one of the most underrated hedge fund managers.

  • Report this Comment On August 11, 2014, at 6:12 PM, GrumpyOldGuy wrote:

    Of course making 2 and 20 on money other people give you to invest will increase your personal net worth quickly even if your clients are getting smacked around pretty hard..

    <<But last year All Weather was down by about 4% as the U.S. stock market soared by more than 30%. The All Weather Fund’s loss in 2013 hurt Dalio’s reputation as a guy who could consistently deliver steady returns for institutional investors, particularly pension funds.>>

  • Report this Comment On August 11, 2014, at 6:33 PM, RockyMINER wrote:

    This article did little to enhance the learning curve of any small investor seeking a route to financial success! Buying stock with someone else's money and charging for it will earn you $15b a year!

  • Report this Comment On August 11, 2014, at 11:52 PM, mjillster wrote:

    Do you have a link to the Principles paper?

  • Report this Comment On August 11, 2014, at 11:53 PM, mjillster wrote:
  • Report this Comment On August 12, 2014, at 9:56 AM, phileo72 wrote:

    "chalked full of advice" really???

  • Report this Comment On August 12, 2014, at 10:05 AM, BarneyRubbel wrote:

    If you can't get something by reading these articles, maybe you should do something else.

  • Report this Comment On August 12, 2014, at 10:08 AM, ffbj wrote:

    I think he meant chocked full of advice, or maybe that is what you were pointing out. Funny. Still the advice seems good. Chalk it up to experience.

  • Report this Comment On August 12, 2014, at 10:09 AM, miotomadad wrote:

    Thanks for the informative article, Patrick.

    One minor spelling correction to offer regarding an expression used in the fifth paragraph: "chock-full" of great investment advice (not "chaulked full").

  • Report this Comment On August 12, 2014, at 10:16 AM, Mathman6577 wrote:

    Good idea to listen to a successful investor. Might have been good to put some specific investments in the article so we don't have to go looking elsewhere.

  • Report this Comment On August 12, 2014, at 10:16 AM, ffbj wrote:

    Thanks for being the 3rd person to point that out.

    My take is that it was not a spelling error but a hearing error. Like listening to a rock song on the radio and not quite understanding the singer. Get it?

    Chalk sounds like Chock.

  • Report this Comment On August 12, 2014, at 10:50 AM, pondee619 wrote:

    ffbj:

    The author was "listening" to a paper?

    "...revealed the secrets to his success in a 123 page paper simply entitled Principles, that is chalked full of great investment advice".

    Be nice if the author would correct the article. Perhaps the fools no longer respond to feed back. Perhaps, fool writers don't read the comments. Arrogance or apathy?

  • Report this Comment On August 13, 2014, at 5:04 PM, rhoop wrote:

    Ah man this guy's a freaking SALESMAN!! He's rich because of commissions! Are all his clients billionaires? HELL NO!

  • Report this Comment On August 13, 2014, at 11:20 PM, investor4450 wrote:

    Nothing very useful in this article.

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