The holy grail for assets

Edward Ludbrook

Apr 29, 2020


With the troubles in the investment market, anyone with investment assets is looking at their portfolios. Anyone who thinks they should ‘stick it out’ is simply a fool and we all know the old adage about ‘fools and their money’… then new ‘risky’ is to do nothing.

Ray Dalio built the world’s largest hedge fund and is one of the richest self-made people in the world. Most importantly, he has made money through investing other peoples money.

Anyone with knowledge in this area, knows that the first principle of long term investing is diversification. Don’t put all money into one investment area. Ray Dalio explains his ‘Holy Grail of Diversification’ in a 5 minute video and it’s worth the watch:

The key is diversification with uncorrelated assets.

Before you run away, all this means is that your portfolio has assets that don’t move together very much. They are ‘uncorrelated’. So because they are uncorrelated, if one tanks, typically the others will be ok. It’s how you can achieve great returns with less risk!

We see that often shares are closely correlated with property. Thus in today’s unstable markets, when property drops, so do shares. Gold is not correlated. Shares down, gold up.

Key Point - Crypto is not correlated with shares, property and cash!

The table below compares the correlations of traditional asset classes with each other, versus their correlation with cryptoassets since the 2010 inception of the first bitcoin exchange. Ref3

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Why is this important?

Anyone with investment capital today must be smart enough to be looking for asset classes not correlated to equities (stocks) and property. Gold is good but crypto is better. Crypto is simpler to buy and has much big potential to grow.

This is exciting times for crypto. Just make sure you act now.