Ray Dalio is the billionaire founder of the largest hedge fund in the world, Bridgewater Associates.
In this short clip, Ray talks about the need to do diversification “well” in your portfolio.
“The Shartru Way” requires that the correlation of assets is of paramount consideration during portfolio construction. This ensures “well” diversification is achieved thus providing superior risk-adjusted returns. This in turn provides you with a basis for demonstrating that you have provided advice which is in the client’s best interest as required by the law.
He discusses the importance of not extrapolating the past and the fact that diversification doesn’t cost you anything. Reducing risk without reducing expected return is exactly what “The Shartru Way” is built on.
Are you achieving sufficient diversification for your clients or are the portfolios composed of different assets that in the main will behave the same way?