Trading and Investing Lessons From Ray Dalio. Risky things are not in themselves risky if you understand them and control them. If you do it randomly and you are sloppy about it, it can be very risky.-Ray Dalio.
The biggest mistake investors make is to believe that what happened in the recent past is likely to persist. They assume that something that was a good investment in the recent past is still a good investment. Typically, high past returns simply imply that an asset has become more expensive and is a poorer, not better, investment.
You can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus, there’s a significant probability you’re going to be wrong so you have to be humble.
On what moves markets and how to profit from them, Trading and Investing Lessons From Ray Dalio
At the foundation of this framework is the Transactions Approach, which is a different way of looking at transactions and price discovery compared to classic economic supply-and-demand models.
Every time you buy something, you create a transaction, and transactions are the building blocks of the economic machine. Understanding transactions is the key to understanding the whole economy. An economy consists of all of the transactions and all of its markets. Adding up the total quantity of transactions in all markets gives you everything you need to know to understand the economy. The biggest buyer and seller is the government, which a) through a central bank controls the credit in the economy and b) collects taxes and spends money.
These transactions form markets and markets form economies. One of the keys to successful trading and investing is to understand who the buyers are, what their motivation is and what the Trading and Investing Lessons From Ray Dalio credit/liquidity picture looks like.
Life is like a game where you seek to overcome the obstacles that stand in the way of achieving your goals. You get better at this game through practice. The game consists of a series of choices that have consequences. You can’t stop the problems and choices from coming at you so it’s better to learn how to deal with them.Trading and Investing Lessons From Ray Dalio.
If you can stare hard at your problems, they almost always shrink or disappear because you almost always find a better way of dealing with them than if you don’t face them head on. The more difficult the problem, the more important it is that you stare at it and deal with it.
Unlike in school, in life you don’t have to come up with all the right answers. You can ask the people around you for help – or even ask them to do the things you don’t do well. In other words, there is almost no reason not to succeed if you take the attitude of One: total flexibility – good answers can come from anyone or anywhere. Two: Total accountability. Regardless of where the good answers come from, it’s your job to find them.