Dalio explains his 'Holy Grail of investing': diversifying across roughly 15 uncorrelated return streams cuts risk dramatically while preserving returns, which became the foundation of Bridgewater's strategy. ✦ AI generated
Ray Dalio · My First Million · 2026-07-17 · original ↗
starts at this moment · 2:55
Find 15 good uncorrelated return streams... if you can get out to 15, you can get down to about reduce about 80% of your risk without reducing your return. That means that you increase your return to risk ratio by something like a factor of five.
verbatim transcript · starts at 2:55
2:55investing. You want to be successful th this will um this is the uh holy grail of investing. Find 15 good uncorrelated return streams. >> How did you come up with 15? >> Well, I just looked at the math of it. Okay. So in other words, what are the marginal benefits of diversification given the different levels of correlation? And I I have that on a chart that keeps reminding me. Okay, if
3:27you can get out to 15, you can get down to about reduce about 80% of your risk without reducing your return. That means that you increase your return to risk ratio by something like a factor of five. Okay? In other words, wow. So that means you can get the upside without having the downside. Okay? And then humility, you know, I wanted people to kick the [ __ ] out of whatever I thought,
3:58you know, to try to do that and then have that. And that change in that approach was the basis of Bridgewater going from, you know, be having to borrow $4,000 from my dad to the largest hedge fund, most successful hedge fund in the world. >> If we wanted to be better investors, what do you think the most common mistake smart guys can make when it comes to investing? They don't have a
4:21game plan. >> So, what's a good game plan look like? How do you know if you have a good game plan? >> Well, the way that I did it was um um every time I would make a decision, but this is the building of all principles I did, but particularly in the markets, every time I would be make a decision, I would go back and study if I made that
4:39decision in these circumstances, how would it have worked in the past? And I would know the track record of that decision. And it that would give me also greater understanding of how things work. And so then I would have a decision rule and then I would program it into the market into the computer and when this thing come along then I started to realize okay now I've got