Billionaire investor Ray Dalio, known for co-founding Bridgewater Associates, one of the world’s largest hedge funds, has stated that the “cash is trash” mantra, which he popularized in the past, is no longer true in the current macroeconomic environment. According to Dalio, recent shifts in financial conditions have made cash a “relatively attractive asset class” for the time being.
Dalio pointed out that when he previously declared “cash is trash,” it garnered significant attention, but that was when cash returns were negligible. However, he noted that the expected returns on cash have changed, making it more appealing in the current landscape. He mentioned that cash now offers a relatively decent real return of around 1.5% and doesn’t carry the price risk associated with other assets.
In the past, Dalio had advised minimizing cash exposure due to concerns about currency debasement and the erosion of purchasing power. He emphasized that investors should assess their assets in inflation-adjusted terms rather than nominal dollars to understand their true value.
Ray Dalio’s Perspective on Cash Shifts Amid Changing Economic Conditions
This shift in Dalio’s perspective on cash reflects the evolving economic conditions and the need for investors to adapt their strategies accordingly. It’s essential for investors to stay informed about changing market dynamics and adjust their portfolios accordingly to achieve their financial goals.