Davos WEF
Davos WEF

Ray Dalio says 'cash is trash' and advises investors hold a global, diversified portfolio

Key Points
  • Investors shouldn't stay on the sidelines in the 2020 market, Ray Dalio said Tuesday, because "cash is trash."
  • The billionaire investor thinks "there's still a lot of money in cash," saying that "everybody is missing out, so everybody wants to get in."
  • Dalio doesn't think there will be a recession this year and he said investors should look beyond the 2020 U.S. presidential election.
Ray Dalio: 'Cash is trash' in the 2020 market

Ray Dalio, founder of investment firm Bridgewater Associates, said Tuesday that he thinks investors shouldn't miss out on the strength of the current market and that they should dump cash for a diversified portfolio.

"Everybody is missing out, so everybody wants to get in," Dalio said on CNBC's "Squawk Box" at the World Economic Forum in Davos, Switerzland.

Dalio advised having a global and well-diversified portfolio in this market and said the thing people can't "jump into" is cash.

"Cash is trash," Dalio said. "Get out of cash. There's still a lot of money in cash."

Dalio's firm, Bridgewater, manages about $160 billion. His declaration that investors should not stay on the sidelines is one he's made before, as in 2018 he declared that those holding cash were "going to feel pretty stupid" for missing the market's run-up.

"You have to have balance ... and I think you have to have a certain amount of gold in your portfolio," Dalio said, reiterating his call last year that the precious metal will be a top investment in the years to come.

While he endorsed buying a bit of gold, he warned against more speculative investments like bitcoin.

"There's two purposes of money, a medium of exchange and a store hold of wealth, and bitcoin is not effective in either of those cases now," he said.

Dalio's warning for the next five years

Dalio doesn't think there will be an economic downturn this year and he said investors should look beyond the 2020 U.S. presidential election.

"If you get a downturn – and there's a good probability in the next [presidential] term you'll get a downturn – and you don't have effective monetary policy and you have people at each other's throats, I'm worried about that," Dalio said.

"I would say there's a 20% chance every year [of a downturn]," he added.

Dalio believes the Federal Reserve is now in a position where it can no longer stimulate the U.S. economy like has in the past, notably by lowering interest rates.

"You used to push a button and it would go up," he said.

But if U.S. interest rates continue to fall, and politics remain highly divisive, Dalio worries that the economy won't be able to bounce back like it has in the past.

"We're going to have larger deficits which we're going to print money for," Dalio said. "At a point in the future, we still are going to think about what's a store holder of wealth. Because when you get negative-yielding bonds or something, we are approaching a limit that will be a paradigm shift."

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