Bridgewater's Ray Dalio says cash is still trash. Here's what he says to do with it

Published Wed, Sep 15 20219:48 AM EDT

Ray Dalio , founder of Bridgewater Associates, says rising inflation while central banks keep interest rates low with extraordinary stimulus is raising all kinds of big risks for investors, but they should not deal with it by hiding out in cash. "Know cash is trash. Don't keep it in cash," Dalio said on "Squawk Box" from the SALT conference in New York City. More than a year after saying "cash is trash," the hedge fund billionaire still feels that way. Dalio said, "The most important thing I think that an individual investor, or any investors, can do is know how to diversify well." "Diversify across countries, currencies, assets classes and so on, so you have that balance. You can take your tactical moves from there," he said, adding "all those assets classes will outperform cash." Dalio said most investors are not diversifying. "Most people think, 'OK, it's the stock market.' And the stock market, I think, is relatively attractive in relationship to the alternatives." "But that dynamic is going to start to change as monetary policy gets tighter," he added. Dalio explained that as the Federal Reserve and other central banks around the world start to pull back their extraordinarily accommodative Covid-era monetary policies, stocks could get squeezed. The Fed meets next week against the backdrop of hotter inflation and an accelerating economy. Fed Chairman Jerome Powell believes that rising prices are temporary and won't overheat the economy. Regardless, economists largely believe the Fed will start tapering its bond purchases sometime later this year. Powell said any consideration of hiking near zero-percent policy rates is on a separate track to tapering. U.S. stocks opened relatively flat Wednesday, one day after the Dow gave up gains at the open and closed down 292 points, or 0.8%. The 30-stock average fell for a sixth day in the past seven sessions despite tamer-than-expected consumer inflation data , which was seen as possibly keeping the Fed at bay a little longer. The S & P 500 on Tuesday also saw its sixth decline out of the past seven sessions as the rough September on Wall Street continued.

Ray Dalio of Bridgewater Associates speaking at the World Economic Forum in Davos, Switzerland, January 21, 2020.

Adam | CNBC