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Billionaire Ray Dalio says retail investors should not make this big mistake

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Billionaire Ray Dalio has two pieces of advice for the average investor

Billionaire hedge fund manager Ray Dalio wants the average investor to learn from the errors of others.

In fact, the "biggest mistake" he sees investors make is thinking that markets that went up recently are "better bargains rather than expensive bargains."

"Don't make the mistake of buying those things that have gone up thinking they're better rather than more expensive," Dalio recently told CNBC's Leslie Picker at the Greenwich Economic Forum in Connecticut.

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He certainly knows the ins and outs of the stock market. His firm, Bridgewater Associates, is the largest hedge fund in the world, managing about $160 billion in assets.

The stock market is now enjoying the longest and best bull run in history, a 10-year boom that started in March 2009.

On Friday, the Dow Jones Industrial Average hit a new all-time high, reaching 28,000 for the first time. The S&P 500 and Nasdaq Composite reached new highs as well, climbing 0.8% to 3,120.46 and 0.7% to 8,540.83, respectively. Last week, the S&P posted its sixth straight weekly gain, its longest winning streak since 2017.

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Dalio also has a second piece of advice for retail investors: Know how to diversify your portfolio well.

"Through diversification, you could reduce your risk without reducing your return," he said.

The general rule of thumb has been the "60-40" rule, which means a portfolio should be made up of 60% stocks and 40% fixed-income assets. The stocks are riskier, yet higher-yielding than bonds, while fixed income is generally a safer, more secure investment.

However, you should assess your specific situation and how far or close to retirement you are when deciding how to diversify your portfolio.

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Watch CNBC's full interview with Bridgewater founder Ray Dalio

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.