It’s well known that Ray Dalio runs his colossal hedge fund in line with a now-famous set of management Principles.
So it’s not surprising the Bridgewater chief has drawn up an equivalent guide to investing.
According to a profile of Dalio in this week’s New Yorker, “Bridgewater has put together hundreds of “decision rules.” These are the financial analogue of Dalio’s Principles.”
While the Principles are entertaining to read, this set of investor tenets would be tantamount to trader gold: Dalio’s hedge fund is approaching $100 billion AUM, and while other hedge funds are struggling in 2011, Dalio’s flagship was up 11% through June.
The so-called Decision Rules — which are like Dalio’s own market indicators — are encoded in the firm’s computers. But back in the day, Dalio “used to write them down and keep them in a ring binder.”
“Some of these indicators are very general,” according to the New Yorker, which only gives 2 examples.
Here they are:
- “If inflation-adjusted interest rates decline in a given country, its currency is likely to decline.”
- “Over the long run, the price of gold approximates the total amount of money in circulation divided by the size of the gold stock. If the market price of gold moves a long way from this level, it may indicate a buying or selling opportunity.”
Of course what we’d really like to know are the Decision Rules that Dalio isn’t happy to release into the public.