Amid heightened volatility in domestic as well as global stock market, even as investors look to tweak their asset allocation, billionaire hedge fund manager Ray Dalio says that gold should form a part of every portfolio. In an interview to ET Now, Ray Dalio, the founder of the world’s largest hedge fund, Bridgewater Associates said that explained the importance of diversification into various asset classes. “Gold is a diversifying asset and should make for 5-10% of a person’s portfolio. This share could go up later into the cycle,” he said.
Dalio explained that debt has been increasing at a rapid pace across the globe, leading to bonds becoming a risky proposition as an asset class. “Our choices are money and there is a lot of debt. If you take a look at debt and money, bonds are a promise to deliver currency and there is a lot of debt around. If you look at the US borrowing, the US financial position which is the main reserve currency, not only do we have a lot of debt, we are going to need to borrow a lot more money because the fiscal policies that existed created a lot of corporate tax cuts which is are stimulative for the economy, we are experiencing those now,” Dalio explained, adding that a lot of currencies worldwide are experiencing high volatility.
“Look at the world reserve currencies, the dollar in a sense is risky, the euro is risky. We are dealing with a whole set of things that makes the euro risky. The Japanese yen is risky in terms of that money. There is a lot of debt around and there is a challenge in terms of that money,” he said. Given these risks, the investors could get into a situation where bonds, stocks and currencies don’t appreciate, as stocks and bonds are tied to a similar financial structure. Hence, gold may act as an important hedge.