GO
Loading...

Investors Ready to Put Cash in Market This Year: Dalio

Hedge fund titan Ray Dalio told CNBC Thursday that 2013 is likely going to be the year that investors start to move money out of large cash positions and into higher-return, riskier assets.

"The next big moves in the markets, the next big moves in the economy, will be based on how that cash moves," Dailo said in a "Squawk Box" interview from the World Economic Forum in Davos, Switzerland. He predicted it will go into financial assets as well as economy-boosting goods and services.

(Read More: World Economic Forum in Davos Special Report)

But Dalio, founder of Bridgewater Associates with $142 billion under management, advised investors not to chase headlines or try to predict the direction of the markets.

"You're not going to win by, sort of, trying to get what the next tip is," he said. "What most [of] the investor[s] need to do is have a balanced, structured portfolio. A portfolio that does well in different environments."

Dalio said investors should have:

—A quarter of their portfolios in assets that do well when economic growth is faster-than-expected

—A quarter for when growth is slower-than-expected

—A quarter for when inflation is higher-than-expected

—A quarter for when inflation is lower-than-expected

This "all-weather"-type portfolio is one of the two basic approaches at Bridgewater. "This has nothing to do with bets. It has to do with how to make all the assets the same risk parity."

Betting on any market is like poker, "a zero-sum game," he said, adding that the deck is stacked against the individual investor in favor of big players like Bridgewater, which has about 1,500 employees. "We spend hundreds of millions of dollars on research … and we don't know that we're going to win. We have to have diversified bets."

"It's very important for most people to know when not to make a bet. [Be]cause if you're going to come to the poker table you are going to have to beat me.

"So the nature of investing is that a very small percentage of people take money, essentially in that poker game, away from other people who don't know when prices go up whether that means it's a good investment or if it's a more expensive investment."

Dalio is a global macro investor, who's credited with anticipating the financial crises of 2008. "What happened in 2007 was we had a bubble. Credit growing much faster than … income. So now we're going through an adjustment."

In a white paper, he explained that funding gaps can be reduced by a mix of three factors: austerity, debt write-downs, and printing money.

Under the heading, US Deleveraging, 2008-Present, he wrote:

"Like the US deleveraging in the 1930s, the lead-up consisted of a debt driven boom, and the deleveraging has transpired in two stages: a contraction in incomes followed by reflation and growth. However, because of a swift policy response from the Fed, which was prompt in guaranteeing debt and aggressively printing money, the contractionary period only lasted six months (versus over three years in the 1930s), and since then there has been reflation and debt reduction through a mix of rising nominal incomes, default and debt repayment."

—By CNBC's Matthew J. Belvedere at @Matt_SquawkCNBC and Maneet Ahuja at @WallStManeet.

World's elite gathers for Davos 2014

  • Argentina, Buenos Aires

    The global elite have stumbled on an emerging market sell-off that served as a reminder of the risks the global economy still faces.

  • A logo sits on a sign at the World Economic Forum in Davos, Switzerland, on Thursday, Jan. 23, 2014.

    Sure there was talk of women's issues at Davos but this female CEO says one of the questions she got asked a lot was: Are you here as a spouse?

  • The World Economic Forum logo in Davos, Switzerland.

    Here’s a five-point reality check for why people need to stop bashing Davos as an irrelevant gathering of the elite. By the executive director of Wharton's Risk Management Center.

Videos

  • Maria Bartiromo and Steve Liesman discuss what they are looking forward to at the 2013 World Economic Forum.

  • Steve Liesman and Andrew Ross Sorkin discuss staying warm in twelve degree weather (hat or no hat...) at Davos.

  • CNBC's Maria Bartiromo reports from Davos, Switzerland, at the World Economic Forum, where CNBC will be interviewing some of the biggest names in business. She will be talking to George Soros, Jamie Dimon, Bill Gates and others.

Davos 2013: Behind the Scenes