Ray Dalio: The one rule that cuts investment risk by 80%

TL;DR

Ray Dalio describes the investing holy grail: finding 15 good uncorrelated return streams to reduce risk by ~80% without cutting returns. His recovery from near bankruptcy in 1982 taught him humility and systematic diversification, leading Bridgewater from a $4,000 loan from his father to the world’s largest hedge fund.

Key insights

• The holy grail of investing is 15 good uncorrelated return streams; diversification at that level reduces risk by ~80% and increases return‑to‑risk ratio by ~5x, delivering upside without downside.
• After losing everything in 1982, Dalio learned two things: humility to balance audacity, and how to diversify bets to reduce downside without capping upside.
• A game plan for investing requires writing decision rules, backtesting them historically, and automating them in computer code for consistent execution.