Why Finding the "Best" Investment is a Trap

When markets turn red, true portfolio construction is put to the test. In this classic breakdown, billionaire investor Ray Dalio explains his “Holy Grail” of investing, focusing on the sheer mathematical power of diversification.

The secret is not just picking winning stocks. Dalio argues that the magic lies in finding 15 to 20 good, uncorrelated return streams. By doing this, you can drastically reduce your risk without giving up your expected returns. When your assets do not move in lockstep with one another, a drop in one area will not wipe out your entire portfolio.

This principle is precisely why the Bear Hunter returns in negative markets are highly valued. While traditional, highly correlated portfolios bleed during a downturn, a properly diversified approach is designed to weather the storm and even capitalize on the chaos.

Dave Johnson

TradingTimeMachine.com

Via https://backtest.substack.com/p/why-finding-the-best-investment-is