Ray Dalio: Why Cash Is No Longer Trash

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In this interview with Bloomberg, Ray Dalio explains why cash is now a relatively attractive asset class. Here’s an excerpt from the interview:

Dalio: So number one is respect what you don’t know and know how to diversify well.

Because diversifying allows you to reduce your risk by up to 80% without reducing your income, without reducing your expected return. If you know how to do that, well, okay.

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Ray Dalio

Then I think then what you have to do is you have to look at the relative appeal of the asset classes.

So when I go through that calculation, the relative… cash now has a relatively attractive appeal. I’m sort of… people when I said cash, it’s trash, and that got a lot of attention, but that’s when cash was nil. Okay.

Now, when you look at the expected returns for this moment, cash is a relatively attractive asset class at this moment.

It’s not just attractive because it has a relatively decent, decent not great, but decent expect. In other words, it has something like a one and a half percent real return. Okay, not bad and not bad in comparison to the other things. And it doesn’t have price risk.

You can listen to the entire discussion here:

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Tobias Carlisle is the founder of The Acquirer’s Multiple®. He is also the founder of Acquirers Funds®. The Acquirer’s Multiple® is the valuation ratio used to find attractive takeover candidates.