The Holy Grail of Stocks
Posted August 30, 2021
Ray Dalio bought his first stock in 1961, at the age of 12.
He put almost every penny he made as a caddy into stocks.
While the other kids in his middle-class Long Island neighborhood were reading comics… riding bikes… playing baseball… Dalio took an unusual interest in investing.
He was hooked.
By 1975, at the age of 26, he jumped into the ring with the heavyweights. He launched Bridgewater Associates from his two-bedroom apartment. Dalio grew that tiny living room venture into the largest hedge fund firm in the world.
How’d he do it? Sticking to simple principles.
In his recent book Principles, Dalio outlines what he calls the “Holy Grail” of investing.
Simply put, you reduce your risk without impacting returns. Easier said than done, sure. But there’s a shortcut: focus on picking assets that have little to no correlation.
This simple model betrays how most investors think about diversification.
Most pick a variety of different assets, largely within the same asset class… believing they’re“diversified.”
And yet, says Dalio, “Individual assets within an asset class are usually about 60% correlated with each other, so even if you think you’re diversified, you’re not.”
Brass tacks, Dalio’s favorite investment strategy comes down to this:
“Making a handful of good uncorrelated bets that are balanced and leveraged well is the surest way of having a lot of upside without being exposed to the unacceptable downside.”
But if you’re like me, you don’t have the time -- nor, frankly, the desire -- to hunch over a desk 6-12 hours a day balancing your portfolio.
That’s why we’ve embraced something even better: Tradesmith.
It’s like having a trading legend managing your portfolio on autopilot, every single day, without even a lunch break.
In the featured article below, Keith Kaplan, the founder of Tradesmith, will show you exactly why Tradesmith is a paradigm shift for retail investors.
In short, it’s because Tradesmith hooks right into your current portfolio, combining many of Dalio’s greatest insights -- and those of many other trading legends -- all into one simple software tool.
In case you haven’t heard…
Tomorrow is the big day… a FREE event we’re calling “Turning Point 2021.”
We’ve invited Kaplan to reveal how you can generate up to 3X more profits from your current portfolio using the SAME models as legendary investors like Dalio.
Now, the choice is yours.
You’ll either remember tomorrow night as the day your investment strategy changed forever… potentially even putting you on track for early retirement.
Or you’ll spend tomorrow night doing what you usually do… and getting the usual results.
(I know where I’ll be.)
For a taste of what’s to come…
Check out Keith Kaplan’s write-up on how Tradesmith can boost your portfolio below.
By Keith Kaplan
I love buying stocks. After all of these years, it’s still a rush.
That’s because I’m looking to amplify my gains and love every minute of it.
But today, I’m much more regimented than I’ve ever been when it comes to investing. I used to just buy single stocks (or funds or cryptos) without any process or planning.
I’m happy to say that nowadays, I spend less time figuring out what to buy because I use a system.
The VQ (Volatility Quotient), which measures the inherent movement in a stock, is “the single most important number in investing.”
You can use this number to know exactly when to buy, how much to buy, and when to sell any stock, fund, or crypto.
It’s really powerful.
But we built a bigger, better system for figuring out how to deploy money into a basket of stocks, funds, or cryptos. (I’ll just say ‘stocks’ for ease from here on out.)
We call it the Pure Quant Portfolio Builder. Don’t let the nerdy name fool you; it’s not as complicated to use as you might think, and it’s the only way I buy stocks now! You literally just tell it a source of stocks, a dollar amount, and how many stocks you want to buy.
This tool is like the holy grail of investing. It gives you a portfolio of healthy stocks that is diversified, risk-adjusted, and reads like a recipe for investing that you can execute in your own brokerage account.
When I say diversified, I’m talking about performance. We want to build a basket/portfolio of stocks that can weather storms and grow over time while minimizing risk/loss.
So the diversification algorithm we built takes stocks and puts them together in a way that takes advantage of “uncorrelated” performance. This gets you real diversification to allow some stocks to fall while others gain.
In a real raging bull market, perhaps all the stocks are rising at the same time. In a bear market, a performance level of diversification (versus just being in every sector or asset class) can protect you from loss and generate gains at the same time. That’s what we want – lower risk and greater gains.
I’m not saying you should avoid investing in risky stocks; what I’m saying is that you should invest wisely and in a risk-adjusted way for better gains.
In our system, we cover almost 30 billionaires, taking their publicly released 13F reports that track all of their trades and loading those trades into our system as well. This includes people like Ray Dalio, Warren Buffett, George Soros, and many more. In total, our system includes about 2,000 investment ideas that the world’s greatest investors put to work.
I just ran a quick Pure Quant portfolio taking the 2,000+ investment ideas from the billionaires we track and said I wanted five diversified, risk-adjusted positions spread across $50,000.
Here are the results …
You can use any source of stocks with this tool, including:
- Your favorite newsletters.
- Random stocks you like.
- All of the billionaires we follow.
- Specific sectors.
- Even the whole stock market.
And the Pure Quant Portfolio Builder will do all the hard work for you. It picks the healthiest stocks from those sources, diversifies them, and builds a perfectly risk-adjusted portfolio based on the VQ that you can model in your own portfolio.
Notice I said “picking the healthiest stocks” above? That’s because Pure Quant will, by default, only show you stocks that are in our Green Zone (i.e., healthy and in an uptrend).
Pure Quant is fun and powerful. It’s the only way I buy stocks now.
[Ed. note: Pure Quant is just one aspect of what you’ll discover during tomorrow’s event. If you haven’t already, click here to reserve your seat. See you there.]