Bridgewater Associates' Ray Dalio believes hiding out in cash doesn't bode well in today's environment, but buying equities could be worse. "Of course cash is still trash," Dalio said on CNBC's "Squawk Box" at the World Economic Forum in Davos Tuesday. "You know how fast you are losing buying power in cash? Equities are trashier." The founder of the world's biggest hedge fund said having a global and well-diversified portfolio in this market is important, and real assets — physical assets such as real estate, energy, and infrastructure — are where investors should consider going in an inflationary environment. "We've shifted into an environment where assets that do well, almost like in the 70s, are real assets. Real return assets in various ways are the best investments," Dalio said. The Federal Reserve and other central banks around the world have begun pulling back their extraordinarily accommodative Covid-era monetary policies, which could create an imbalance in the markets, the billionaire investor said. "The Federal Reserve is going to sell. Individuals are selling. Foreigners are selling and the U.S. government is selling because it has to fund its deficit," Dalio said. "So there's going to be a supply demand problem. That means it produces a squeeze." Dalio added that investors have not positioned themselves well enough to hedge against decades-high inflation , and they should look at various assets to diversify their portfolios, including bitcoin . "The world is not dealing adequately, I think, with the part of their portfolio that should be inflation-hedged assets. That's institutions and individuals," Dalio said. "Bitcoin has made a tremendous achievement over the last 11 years. It's a tiny percentage of my portfolio. I think you have to look at the broader set of assets that serve that purpose."