Free download principles ray dalio

Without them, Bridgewater would not have been nearly as successful as it turned out to be. The first microcomputers what would later be known as personal computers had come on the market during the late s, and I had been using them as econometricians did, applying statistics and computing power to economic data to analyze the workings of the economic machine. Rarely, but still too often, the system would be dead wrong and I would lose a lot.

In order to do that, I would have to have a vast store of economic and market data to draw on—and as it happened, I did. From very early on, whenever I took a position in the markets, I wrote down the criteria I used to make my decision.

Then, when I closed out a trade, I could reflect on how well these criteria had worked. It occurred to me that if I wrote those criteria into formulas now more fashionably called algorithms and then ran historical data through them, I could test how well my rules would have worked in the past. Then I would run historical data through the systems to see how my decision would have performed in the past and, depending upon the results, modify the decision rules appropriately.

Doing this helped educate me and led me to refine my criteria so they were timeless and universal. Once I vetted those relationships, I could run data through the systems as it flowed at us in real time and the computer could work just as my brain worked in processing it and making decisions. Most of the time, it was because I had overlooked something. In those cases, the computer taught me. We helped each other. This was great, because it was like having a chess grandmaster helping me plot my moves, except this player operated according to a set of criteria that I understood and believed were logical, so there was no reason for us to ever fundamentally disagree.

And, because it had such a great memory, it could do a better job of compounding my knowledge and the knowledge of the people I worked with as Bridgewater grew. Rather than argue about our conclusions, my partners and I would argue about our different decision-making criteria. Then we resolved our disagreements by testing the criteria objectively. The rapidly expanding power of computers during that era was like a constant stream of gifts from the gods to us. It was fun to put it up against each of my clients so they could see how hard it was to beat computerized decision making.

They could also include timing rules. We believe that market movements reflect economic movements. Economic movements are reflected in economic statistics. Over the last three decades of building these systems we have incorporated many more types of rules that direct every aspect of our trading.

Now, as real-time data is released, our computers parse information from over million datasets and give detailed instructions to other computers in ways that make logical sense to me. As you will see later, I am now developing similar systems to help us make management decisions. But clearly there was a growing demand for our research, and I realized we could sell it to supplement our consulting and trading income. We worked with all sorts of corporate, financial, and government institutions that had market exposures—banks, diversified international businesses, commodities producers, food producers, public utilities, and more.

For example, we would build a plan to help a multinational company deal with the currency exposure it faced from operating in different countries. My approach was to immerse myself in a business until I got to a point where I felt that the strategies I was handing off were the ones I would use were I running the company myself. I would break each company down into distinct logical components and then come up with a plan for managing each part, using a variety of financial tools, especially derivative instruments.

The most important components to separate were the profits coming from the core business and those that were speculative profits and losses coming from price changes. I would advise them to deviate from this position only when they wanted to speculate, which they should only do in measured ways and with full knowledge of the effects it could have on their core business.

This approach was eye-opening for most of the firms we worked with. It gave them clarity and control, and yielded them better results. Sometimes they wanted us to speculate for them, which we would do for a share of the profits.

The return of a market such as the stock market itself is called its beta. Alpha is the return that comes from betting against others. With alpha overlay, we were offering a way of making bets independent of underlying market performance. Approaching the market in this way taught me that one of the keys to being a successful investor is to only take bets you are highly confident in and to diversify them well.

One of our clients in the mids was Alan Bond, an audacious entrepreneur who was one of the richest people in Australia. Like Bunker Hunt, he eventually bet badly and was forced to declare bankruptcy. I advised him and his team on their way up and stayed on through his downfall, so I watched the tragedy unfold from up close.

His was a classic case of confusing business with speculation and only hedging when it was too late. Bond borrowed U. He did that because U. When the U. Before long, the Australian dollar plunged to new lows and they called me in for an emergency meeting. Seeing one of the richest and most accomplished men on the planet lose everything made a huge impression on me. We also did one-off consulting projects related to the markets.

I also worked with the New York Futures Exchange to help design and market their CRB futures contract a tradable index that tracks the price of a basket of commodities. Unlike most people who work in the markets, I never had any desire to build investment products, especially conventional ones, just because they would sell well.

All I wanted was to trade the markets and build relationships, doing for our clients exactly what I would do if I were in their shoes. But I also loved building brand-new things, especially if they were great and revolutionary.

By the mids, a couple of things were clear to me: First, we were making good calls in the interest-rate and currency markets, and the institutional investment managers who were buying our research were using it to make money.

With those two things going as well as they were, I figured we could become successful institutional investment managers ourselves. That was a huge turning point for us, as it was the start of Bridgewater as we know it today. The strategy we used for the World Bank shifted between holding cash and holding twenty-year U.

Treasury bonds, because these positions would give us leveraged bets on the direction of interest rates. When our systems indicated that the pressures on interest rates would cause them to fall, we would hold twenty-year Treasury bonds, and when the system pointed to rates rising, we would stay in cash.

We did very well, and before long other large institutional investors gave us money to manage as well. Mobil Oil and Singer were our next two accounts and others followed in rapid succession. We went on to become the top-performing U. The more unusual a place, the more interesting I found it. This curiosity drew me to Beijing in Beijing was filled with wonderful and incredibly hospitable people who introduced us to the tradition of drinking shots of Moutai while shouting Ganbei!

Bottoms up! This first trip, which I made with my wife and a few other people, began an incredibly rewarding thirty-plus-year journey that has had a profound impact on my family and me. There were no financial markets in China at the time; eventually a small group put together by seven Chinese companies including CITIC known as the Securities Executive Education Council began to develop them.

They started in , just before the Tiananmen Square incident, which set them back because such market developments were still seen as too capitalist. They operated out of a small hotel room and hardly had any financing. I can still picture the big garbage bin under the metal stairway going up to their office. I really respected the risks these young people were taking by doing this at such an unsettled time, so I made a small donation to give them a hand and was excited to share my knowledge with them.

In , I set up a company called Bridgewater China Partners. By then, I was convinced that China was poised to become the greatest economy in the world in the twenty-first century, but hardly anyone was investing in China yet; good deals could still be struck. I could bring money to the table by introducing my institutional investment clients to opportunities, and I could provide know-how by introducing Chinese companies to American ones. In exchange, we would get a stake in these companies.

Essentially, I was setting up the first U. When we got back, we agreed to move forward by setting up a jointly owned merchant bank in Beijing. While I knew that entering a territory where few had been before would require a lot of experimentation and learning, I soon realized I had sorely underestimated the complexity of the task we had set for ourselves and the amount of time it would take. I learned that if you work hard and creatively, you can have just about anything you want, but not everything you want.

Maturity is the ability to reject good alternatives in order to pursue even better ones. We loved it, especially the people. In , my wife, Barbara, our eleven-year-old son, Matt, and I decided together that Matt would spend a year in Beijing, attending an all-Chinese school and living with our friend Madame Gu, who had stayed with us in America during the Tiananmen Square days and whom Matt had visited in China with us when he was three.

Standards of living in China were very different from what Matt was accustomed to in Connecticut. All of this was not just a huge adventure for Matt; it was completely unprecedented and required special permission from the Chinese government. I was excited for Matt because I knew he would see a different world and broaden his mind.

Barbara needed a little convincing and a couple of visits to a child psychologist for reassurance, but she had lived all around the world herself and knew how it had benefited her, so she was ultimately receptive to the idea, even if she was less excited about being separated from her son. Because he fell in love with China he says that he became part Chinese that year and because he learned the value of empathy relative to the value of material wealth, he started a charity called China Care to help Chinese special-needs orphans when he was just sixteen.

I in turn learned a lot from Matt, especially about the joys of philanthropy, and we both learned the deep pleasures of great personal relationships. Over the years, I and in turn Bridgewater have also built meaningful relationships with many wonderful people in China, and we have helped its financial institutions grow from fledgling organizations to sophisticated giants. The experiences I have had, the perspectives I gained, and the help I was able to provide all added up to a package of rewards as large as any of the others that I got out of my career.

There was and still is no leader I admire more than Lee Kuan Yew, who transformed Singapore from a mosquito-infested backwater to a model economy.

That says a lot, as I have gotten to know and admire several world leaders. One of my most thrilling moments was a dinner I had with him at my house in New York, shortly before his death in Lee requested the dinner to discuss the state of the world economy. I invited former Fed chairman Paul Volcker another hero of mine , former Treasury secretary Bob Rubin whose breadth of experiences gave great perspective , and Charlie Rose one of the most curious and insightful people I know.

Besides answering his questions, we probed Lee on world affairs and world leaders. He rated Angela Merkel as the best leader in the West and considered Vladimir Putin one of the best leaders worldwide. He explained that leaders must be judged within the context of the circumstances they encounter and then went on to share his view of how difficult it is to lead Russia and why he thought Putin was doing it well. He also reflected on his unique relationship with Deng Xiaoping, whom he regarded as the best leader of all.

I love getting to know interesting people from interesting places and seeing the world through their eyes. This is true whether they are rich or poor. Encounters like these have taught me that human greatness and terribleness are not correlated with wealth or other conventional measures of success. I urge you to be curious enough to want to understand how the people who see things differently from you came to see them that way. You will find that interesting and invaluable, and the richer perspective you gain will help you decide what you should do.

Juggling work and family has been as much a challenge to me as to anyone else, especially since I wanted both to be great, so I combined them whenever I could. For example, I took my kids on business trips. When at first I brought my son Devon and later Matt to my Chinese business meetings, our hosts were always very kind—they would give them cookies and milk.

By the mids, Bridgewater had grown to about ten people, so I rented a big old farmhouse. Bridgewater occupied part of it and my family occupied the rest. It was extremely informal and family-like: Everyone parked in the driveway, we met around the kitchen table, and my kids would leave the door open while they sat on the toilet.

The people I worked with would wave as they walked by. Eventually, the farm was put up for sale so I bought a barn on the property and renovated it. My wife, our kids eventually there were four , and I lived in a small apartment inside the barn, and I made the unfinished hayloft usable as an office by putting in electric baseboard heat, which I chose because it was cheapest to install. It was a great space for parties and there was enough land for us to play soccer and volleyball and have outdoor barbecues.

The night always ended with a lot of dancing. You get the idea: Bridgewater was a small community of friends who worked hard and partied hard. Bob Prince joined Bridgewater in when he was still in his twenties, and more than thirty years later we are still close partners as co-chief investment officers. We still love doing that and will until one of us dies. He is also a great teacher, both to clients and co- workers.

Over time, he became like my brother as well as one of the most critical builders and pillars of Bridgewater. Soon, Bridgewater began to look like a real company. We outgrew the barn and moved into a small office in a strip mall; there were twenty of us by the end of the s. But even as we grew, I never thought of anybody I worked with as an employee. I believe that all organizations basically have two types of people: those who work to be part of a mission, and those who work for a paycheck.

I wanted to surround myself with people who needed what I needed, which was to make sense of things for myself. I spoke frankly, and I expected those around me to speak frankly. I fought for what I thought was best, and I wanted them to do so as well. When I thought someone did something stupid, I said so and I expected them to tell me when I did something stupid.

Each of us would be better for it. Operating any other way would be unproductive and unethical. We got a lot of attention because we were up 22 percent when most others were down a lot. I had grown up in an era of high volatility and had learned that the best way to play it was to get a hold of a big move and ride it.

We used our indicators to catch shifting fundamentals and our technical trend-following filters to confirm that price movements were consistent with what the indicators were suggesting.

When they both pointed in the same direction, we had a strong signal; when they were at odds, we had little or no signal.

But as it turned out there was hardly any volatility in , and so our technical filters whipsawed us and we ended up giving back a bit more than half our gains. That stung, but it also taught us some important lessons and prompted Bob and me to replace our technical trend-following filter with better value measures and risk controls. Until then our systems had been completely discrete—we would flip from a fully long position to a fully short one when we crossed a predetermined threshold much as we switched from bonds to cash for the World Bank.

That drove Bob crazy. I can remember him running laps around the office building to calm himself down. So at the end of the year, we moved to a more variable system that allowed us to size our bets in relation to how confident we were.

These and other improvements Bob made to our systems have paid off many times since. Not everyone at Bridgewater saw things as Bob and I did.

It took a lot of reasoning to persuade some of the people I worked with to press on. All great investors and investment approaches have bad patches; losing faith in them at such times is as common a mistake as getting too enamored of them when they do well.

Because most people are more emotional than logical, they tend to overreact to short-term results; they give up and sell low when times are bad and buy too high when times are good. Despite our relatively poor investment performance, was a great year for Bridgewater, because by reflecting on and learning from our poor performance, we made systematic improvements.

I have come to realize that bad times coupled with good reflections provide some of the best lessons, and not just about business but also about relationships. One has many more supposed friends when one is up than when one is down, because most people like to be with winners and shun losers.

True friends are the opposite. I got a lot out of my bad times, not just because they gave me mistakes to learn from but also because they helped me find out who my real friends were—the friends who would be with me through thick and thin. Bob introduced me to Giselle Wagner in She would be my partner in running the noninvestment side of the business for twenty years. Dan Bernstein and Ross Waller joined in and , respectively, both fresh out of Dartmouth College.

It seemed to me, young people were creating sensible innovation that was exciting. Older folks who did things in the old ways held no appeal. The Kodak portfolio was heavily invested in equities and Rusty was worried about what would happen in an environment in which the value of his assets fell badly. He had been trying to come up with a way to hedge himself against this risk without reducing his expected return.

Getting a client this prestigious and innovative would make a big difference to us. We knew we could do a uniquely great job for Kodak, because we knew a lot about bonds and financial engineering, and we had a historical perspective unmatched in the industry. Bob Prince, Dan Bernstein, and I worked nonstop through the weekend, analyzing the Kodak portfolio and the strategy Rusty was considering.

Then we wrote him a long memo laying out our thoughts. That was a game changer. Not only did it bring us a lot of credibility, it provided us with a reliable source of revenue at a time when we needed it. If I could build a portfolio filled with high-quality return streams3 that were properly diversified they zigged and zagged in ways that balanced each other out , I could offer clients an overall portfolio return much more consistent and reliable than what they could get elsewhere.

By then I was terribly fearful about what would happen if my assumptions were wrong, so I wanted to understand diversification in a very simple way. It was so simple but it would be such a breakthrough if the theory worked as well in practice as it did on paper. This was another key moment in our education. Whether you own a hotel, run a technology company, or do anything else, your business produces a return stream. Having a few good uncorrelated return streams is better than having just one, and knowing how to combine return streams is even more effective than being able to choose good ones though of course you have to do both.

At the time and still today , most investment managers did not take advantage of this. They managed investments in a single asset class: equity managers managed equities, bond managers managed bonds, and so on.

Their clients gave them money with the expectation that they would receive the overall return of the asset class e. But individual assets within an asset class are generally about 60 percent correlated with each other, which means they go up or down together more than half the time. It would be easy to beat those guys by balancing our bets in the way the chart indicated.

Thanks to my process of systematically recording my investment principles and the results they could be expected to produce, I had a large collection of uncorrelated return streams. In fact, I had something like a thousand of them. I worked with Bob and Dan to pull our best decision rules from the pile. Once we had them, we back-tested them over long time frames, using the systems to simulate how the decision rules would have worked together in the past.

We were startled by the results. On paper, this new approach improved our returns by a factor of three to five times per unit of risk, and we could calibrate the amount of return we wanted based on the amount of risk we could tolerate.

The success of this approach taught me a principle that I apply to all parts of my life: Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to unacceptable downside. As excited as we were about this new approach, we proceeded cautiously. We gave the system a 10 percent weight initially and it made money in nineteen of the twenty months in our test period. I knew that asking these institutional investors to invest such relatively modest amounts would make it hard for them to turn us down.

Its returns depended only on how good we were in outperforming others. We also showed them how we expected the cumulative performance to unfold and what the expected range of performance around that would be.

For our clients, it was a bit like being presented with the design of a plane that had never flown before but looked radically better than any other plane on paper. Would anyone be courageous enough to get on board? Frankly, we were thrilled that any of them were willing to try. For over twenty-six years now, that new type of plane has flown exactly as we anticipated, making money in twenty-three of these years having only modest losses in the other three and making more money in total for our clients than any other hedge fund ever.

While the investment management concepts that underlie Pure Alpha eventually changed our industry, the journey from conception to general acceptance took many years of learning and grinding work by a group of dedicated partners.

This included trading foreign government bonds, emerging market debt, inflation-linked bonds, corporate bonds, and the currency exposures that came with the foreign investments. In our most unconstrained bond portfolios, we would make about fifty different types of bets, way more than traditional bond managers traded.

Doing so gave us a big edge and landed us at the top of many investment performance tables year after year. Our Pure Alpha product was just the first of a number of innovative designs we brought to our clients. In , we had become the first currency overlay managers for institutional investors. At the time, institutional investors were placing larger portions of their portfolios into global equity and bond markets.

While investing internationally added valuable diversity, it also added unmanaged currency exposure. This was a big problem because the currency exposures added risk without adding any expected return. We had traded currencies for years and had developed expertise in portfolio engineering, so we were in a prime position to solve this problem. Eventually we became the largest active currency manager in the world. We also produced several other new and effective ways of managing money that flew exactly as they were designed.

With each one, we gave clients clearly stated performance expectations expressed in a chart that showed an accumulated profit line and the expected variations around that line.

We could do this because the systemization of our decision-making process allowed us to stress-test the performance of our decision making under a wide variety of conditions. What was great is that we made the most of our mistakes because we got in the habit of viewing them as opportunities to learn and improve.

By the time the mistake was discovered, the damage was several hundred thousand dollars. But since mistakes happen all the time, that would have only encouraged other people to hide theirs, which would have led to even bigger and more costly errors.

I believed strongly that we should bring problems and disagreements to the surface to learn what should be done to make things better. As we consistently tracked and addressed those issues, our trade execution machine continually improved. Having a process that ensures problems are brought to the surface, and their root causes diagnosed, assures that continual improvements occur. For that reason I insisted that an issue log be adopted throughout Bridgewater.

My rule was simple: If something went badly, you had to put it in the log, characterize its severity, and make clear who was responsible for it. If a mistake happened and you logged it, you were okay. This way managers had problems brought to them, which was worlds better than having to seek them out. The error log which we now call the issue log was our first management tool. I learned subsequently how important tools are in helping to reinforce desired behaviors, which led us to create a number of tools I will describe later.

Before long, things came to a boil. He is very bright and innovative. He understands markets and money management. He is intense and energetic. This Tantric e-book contains everything that one needs to know about the art and science of Tantra to transform his or her life. It explains the role of Tantra in achieving intimacy, mastering the five elements, improving your finances, controlling your food cravings, developing a unique spiritual identity, and much more.

It is a complete guide for people who want to use Tantra for personal development. However, it is best to acquire this pdf document through a licensed or legitimate website rather than downloading it for free. If you follow the principles contained in this free pdf document, you will realize that your life changes for the better. With original Principles , the page manifesto gave readers a glimpse into the billionaire's philosophies about living life and managing people and organizations.

According to the book's new website, the original Principles has been downloaded over three million times. You can download the old PDF of Principles here. I want you to do that in a clear-headed thoughtful way, so that you get what you want. I wrote this book to help you do that. Principles is a required read for all Bridgewater employees which hints at how core he believes these guidelines are to their investment strategy and resulting performance.

Soon, Principles will be available in print. Ray Dalio also gave a recent TED talk that discussed how he converted his principles into a computer algorithm that now helps him make decisions:. In the Form 13F, managers have to disclose their holdings, giving intelligent observers a sneak peek into their strategy and investments. Last month, on August 10th, , to be exact, Dalio's firm Bridgewater Associates filed its quarterly Form 13F regulatory filing.

We reviewed the 13F filing to get a sneak peek at holdings in Bridgewater's massive portfolio. Quarter-over-Quarter Turnover QoQ Turnover is a measure used to gauge the level of trading activity in a portfolio.

QoQ Turnover is calculated by taking the lesser of the total value of new securities purchased or the total value of securities sold over the last quarter and dividing it by the total value of holdings. The Ideas section of finbox.

Access a free review of Principles, by Ray Dalio and other business. Not our full summary, there is no PDF version available for download at this time. Ray Dalio offers a philosophical take on work, living and even the meaning of life.