Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, isn’t usually known for alarmist takes. But his latest warning is unusually stark.
“Right now we are at a decision-making point and very close to a recession, and I’m worried about something worse than a recession if this isn’t handled well,” Dalio said in a recent appearance on NBC News’ “Meet the Press.”
Recession warnings have been piling up as Trump’s sweeping tariffs and geopolitical tensions escalate. Even Nobel Prize-winning economist Paul Krugman recently cautioned there are “better than even odds” the U.S. will enter a recession this year.
But Dalio sees the threat as “much more profound.”
“We have a breaking down of the monetary order,” he said. “We are going to change the monetary order because we cannot spend the amounts of money… We are having profound changes in our domestic order, how ruling is existing. And we’re having profound changes in the world order.”
He pointed to a shift from the U.S.-led era of multilateralism to a unilateral world order, “in which there’s great conflict.”
To avoid a deeper crisis, Dalio believes Congress must reduce the federal deficit to 3% of GDP. “If they don’t,” he warned. “We’re going to have a supply-demand problem for debt at the same time as we have these other problems, and the results of that will be worse than a normal recession.”
In 2024, the U.S. budget deficit stood at 6.4% of GDP, according to the Congressional Budget Office — meaning there’s still a long way to go.
While it remains unclear how the uncertainty around tariffs will play out — or whether the recession warnings will prove correct — markets have already been whipsawed.
The silver lining? Dalio has long championed a strategy he calls the “Holy Grail of investing.” With volatility rising and risks mounting, now may be the time to pay attention.
“The Holy Grail of investing is to find 10 to 15 good, uncorrelated return streams,” Dalio explained in a video posted to his YouTube channel.
“If you find a number of return streams, a number of investments that are good and uncorrelated, you will have the average return of those so you don’t lessen your return… But at 15, you’ll eliminate 80% of your risk, so you’ll improve your return-to-risk ratio by a factor of five.”
Dalio added that there’s “no way” to improve your ability to pick winning investments by a factor of five because it’s a highly competitive game. But with his Holy Grail strategy, he said, investors can dramatically boost their return-to-risk ratio through smart diversification.
While he didn’t name specific assets in that clip, Dalio has long emphasized the importance of diversification — and recently, he singled out one time-tested asset as a necessary component of a resilient portfolio: gold.
“People don’t have, typically, an adequate amount of gold in their portfolio,” he told CNBC. “When bad times come, gold is a very effective diversifier.”
Long viewed as the ultimate safe haven, gold isn’t tied to any single country, currency or economy. It can’t be printed out of thin air like fiat money, and in times of economic turmoil or geopolitical uncertainty, investors tend to pile in — driving up its value.
Over the past 12 months, gold prices have surged by more than 35%.
Today, there are plenty of ways to gain exposure to gold. Investors can buy gold bullion — many online platforms offer a wide selection of gold and silver bars and coins at fair prices — own shares of gold mining companies, invest in gold ETFs, and even tap into potential tax advantages through a gold IRA.
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Dalio has a point: dramatically improving your ability to pick winning investments is extremely difficult. Even Warren Buffett — one of the greatest stock pickers of all time — doesn’t think that’s a realistic approach for most people.
“I do not think the average person can pick stocks,” he stated bluntly at Berkshire’s 2021 shareholders meeting.
Instead, Buffett champions a much simpler strategy, famously stating, “In my view, for most people, the best thing to do is own the S&P 500 index fund.”
This approach gives investors broad exposure to 500 of the largest publicly traded U.S. companies across 11 sectors — offering built-in diversification without the need for constant monitoring or active management. In that sense, it echoes Dalio’s emphasis on spreading risk across multiple strong investments.
These days, anyone, regardless of wealth, can take advantage of this strategy. Even small amounts can grow over time, and some apps even let you invest in an S&P 500 ETF with your spare change, making it easier than ever to build wealth alongside the world’s financial elite.
For those looking to diversify beyond the stock market, real estate offers a compelling alternative. While it experiences cycles like any other asset, real estate doesn’t depend on a booming market to deliver returns. Even during a recession, high quality, essential real estate can continue to produce passive income through rent. In other words, you don’t have to wait for prices to rise to see a payoff — the asset itself can work for you.
Buffett has often pointed to real estate — especially rental properties — as a textbook example of a productive, income-generating investment.
In 2022, he remarked that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check.”
The good news? You don’t need billions — or even need to buy a property outright — to tap into real estate’s income potential. Many crowdfunding platforms now allow everyday investors to own shares in rental properties without the large down payments or management headaches traditionally associated with real estate ownership.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
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