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.
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.
Patrick Morris owns shares of Amazon.com and Google (C shares). The Motley Fool recommends Amazon.com, eBay, Google (A shares), Google (C shares), Tesla Motors, and Yahoo. The Motley Fool owns shares of Amazon.com, eBay, Google (A shares), Google (C shares), Tesla Motors, and Yahoo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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