Geopolitical tensions in 2017 are at an all-time high, with North Korea, Iran, and ISIS adding to the strain, and US debt is climbing to an all time high. With that in mind, Ray Dalio, the founder, chairman, and CIO of Bridgewater Associates (the largest hedge fund on the planet) is making a very specific suggestion to his investor clients: Move 5% to 10% of your assets to gold in order to hedge these risks.
With about $160 billion spread across different investing strategies, the hedge fund firm based in Bridgeport, CT, released the notes they recently sent to clients, suggesting gold as an investment, even as they admit that they’re not geopolitical experts. (They simply know that, during wartime, the value of gold and other precious metals has historically increased since the 1970’s.)
It’s all in the notes
In their notes, penned by Dalio as well as staffers Bob Elliott, Steven Kryger, and Neil Hannan, Bridgewater Associates speaks to the growing worldwide tensions due to a growing nationalistic trend. They also refer to another possibly huge financial problem with the US debt ceiling, stating that “the odds of Congress failing to raise the debt ceiling are high (leading to a technical default, a temporary government shutdown, and increased loss of faith in the effectiveness of our political system).”
Gold is better than “safe” assets like the dollar, the yen, the yuan, and treasury bonds
It’s quite refreshing to see the largest hedge fund in the world shooting so straight with their clients. They admit that they’re not sure what’s going to happen, but that, if something does happen, more gold in your portfolio is a very good thing to have for protection of your finances. They also refer to the fact that, if things do go south, gold will benefit more than most other “safe” asset classes, saying that “[i]f the above things go badly, it would seem that gold (more than other safe-haven assets like the dollar, other global currencies, and treasuries) would benefit, so if you don’t have 5–10% of your assets in gold as a hedge, we’d suggest you relook at this.”
Bridgewater goes even further, advising their clients to “[not] let traditional biases, rather than an excellent analysis, stand in the way of you doing this (i.e., investing in gold).”
The fact is, Dalio told Business Insider earlier in 2017 that all investors should have at least some gold in their portfolio, and, in their aforementioned notes, he said that “[i]f you do have an excellent analysis of why you shouldn’t have such an allocation to gold, we’d appreciate you sharing it with us.”
Sounds like Dalio is offering some solid investing advice to heed during these very turbulent times.