 Good day, fellow investors! Ray Dalio, a person that we follow closely on this channel, has recently declared his performance for 2018 and many were surprised because he was up 14.6% over 2018, while most others have been down. So in this video we're going to discuss why is he up, what can we learn from his strategy, from what he has been saying constantly over the long term about the stock market, about diversification. Then we're going to discuss the importance of short-term performance and how to put that into a long-term view and then at the end I'm going to show you my short-term performance just to put all the cards on deck. So let's start with Dalio's performance. So Bridgewater Pure Alpha Fund returned 14.6% last year. We recently had a nice discussion with Jeremy from the financial education channel back in November when he was asking about Dalio's underperformance over the last five years. I replied that Dalio's focus and why the reason why he's managing 180 billion is on risk because those billionaires, you need to have 1 billion to be a member of his fund and the minimum entry is I think 100 million, those people don't like risk. They need something that will work well in every environment. And this is what I also explained in the comment for Jeremy, focus on risk. 2008 when all stocks went down 40%, Ray Dalio's fund went up. Similarly this year when everybody was down, most people were down, Dalio's fund was up. And this is what the fund is actually designed. When you sum everything up, since its inception in 1991 the Pure Alpha strategy has had an average annualized net return of 12%. So we have one year of 14.6% but the performance in 2017 and 2016 was from 1 to 2%. So it was terribly as Jeremy would say when you compare it to the market. However over the long term and that is what matters Ray Dalio has performed very well or we could say extremely well given his risk management because 12% per year it's great comparable to the SAP 500 I think from 1991 when Dalio started should be also 10-11%. But the SAP 500 has no risk management, absolutely nothing. If stocks crash the SAP 500 crashes. However you have seen that when the markets crash when there is volatility Ray Dalio gains. And an interesting fact here is that up till the end of October Ray Dalio for 2018 was up just again 1-2%. So therefore Jeremy's video in November. Nevertheless in the last two months given the volatility given his hedges given his positioning everything worked very well for Dalio for 2018 and that's his job and that's what he has been doing all along. And if you wish to have such a similar strategy that does well then you have to create a portfolio a diversified portfolio that works well in most economic environments market environments and you have to rebalance accordingly between different asset classes. Let's discuss more about Dalio's strategy. As Dalio says about the commotion that created his 14% return over the year and something very important which we will dig in as soon as he publishes it is that he will publish his economic and investment principles. I can't wait for that to come out. If it will be free great if not we'll buy it immediately and make a summary on the channel. So Ray Dalio starts before going into strategy Ray Dalio discusses the mentality. If you are worried when the stock market goes down and happy when it goes up it probably indicates that your portfolio is unbalanced. And that's the key. If your income is also tied to how the economy does you are doubly at risk because your portfolio can go down when your income is worst which is scary. So even further people borrow money to buy cars to buy houses. Yesterday I saw Lamborghini SUV or things like that so late part of the cycle and that is what makes the financial roller coaster up and down so big and dramatic. For Dalio the key is not to have any systematic biases by structuring your portfolios and your incomes so that they hedge each other and are in balance. Achieving good balance is the most important thing. So for most people they are happy when stocks go up their income is strongly related to the economy. They use that and usually take it at the wrong time in the cycle because in the later part of the cycle it's easy to get that debt because the collateral values are higher banks are more willing to lend and then you get trouble down the road. And few people have really balance in their portfolios. Balance I have been talking a lot about having a little bit of gold for the balance etc. Diversification good assets good quality businesses bonds for a lot of investors also something good and that's what Dalio is saying. Let's see more about the environments and what this balance really means how to invest. So four environments which Dalio focuses on and this is something crucial to understand also for the stock market. We have an environment with growth economic growth higher than expected or lower than expected and other environments with inflation higher than expected or lower than expected. Now we compare Dalio's performance with the stock market but we have to take into account this. When you look at the interest rates since Ray Dalio launched his fund those went from six to two percent currently. So an environment with declining interest rates an environment with declining interest rates and economic growth is excellent for stocks. So that's one asset class. However Ray Dalio is positioned to perform well in all four economic environments. Stocks are not positioned to perform well in all four economic environments and this is where Ray Dalio's greatness comes afloat. When the environment changes and when interest rates go up for 10 15 years Ray Dalio will do again amazingly well. However stocks those who are long stocks and only stocks will not do that well because maybe bonds will do well maybe commodities gold etc will do well and that is called diversification and balance. That is Ray Dalio's message. Please subscribe to the channel because we are really following Dalio we are trying to learn as much as we can from him because he's now in an age when he willingly shares everything he does everything 1500 very smart people at Bridgewater do to help let's say the globe to help the financials with the people and to improve this world. So thank you Dalio we'll be following you for a long long term. Now to put all cards on deck we said okay let's see about Sven and his performance over the last three years. Even if three years one year is not that important one year is absolutely not important let's see my performance over the last three years. So as said SAP 500 minus 4% in 2018 emerging markets minus almost 20 bitcoin minus 74% Dalio plus 14.6% and Sven that was invested in Nevsoon was up 22%. However let's see three years Dalio's fund is up just 20% which is why he was bombarded by many like underperforming and things like that. SAP 500 is 40% up emerging markets 40% up bitcoin 813% up so bitcoin wins in this case and Sven is up 50%. In a recent video last week I discussed my current portfolio that I'm currently 90% in cash and this is because over the last three years 2016 I launched a fund in the Netherlands we liquidated I had two investors so I learned a lot about the fund industry how to do the cost of having such a small fund in the Netherlands increased due to regulation European Union so we decided to liquidate and we liquidated in a way that from 2018 January we held on to Nevsoon some other small positions but we slowly liquidated as Nevsoon went up. When I'll be starting a fund again the investors were happy the two of them I hope there will be more we're happy to we'll be happy to join again but let me show you my performance over the last few years I wasn't really happy about what I was doing as an investor except for Nevsoon where there was value over the last three years because I was a full-time teacher I was a full-time content writer so there wasn't too much time over the last three years became a father bought a house things like that so therefore I'm happy with what I did over the last three years it is in line with what I did over the last 16 70 years 16 17 years but for the future given that from the last six months everything is based on my strong research full-time researcher now I expect better risk reward opportunities in the long term better optionality which makes me invest much much easier and on a stronger basis with stronger fundamentals let me just show you the performance for the last three years which is important so over the last three years launched the fund fund in 2016 it did very well during 2016 then Nevsoon didn't do very well in 2017 some other positions so 2017 was a negative year under performing the market and then as we went into liquidation Nevsoon was the biggest position really big position but I'm calculating also the part in cash that was liquidated if not this performance would go much higher but that's not the story now so Nevsoon I was buying first time 2016 I sold a little bit at the peak a few months later then buying a little bit more selling a little bit buying more buying more buying more even lower selling before the dividend cut then buying buying even more buying even more in January 2018 when the position was really really large in the fund but I calculate also my cash that I had on the side and then everything went well and also the fund improved performance significantly so since then I said okay I really need time to devote research I need a year and a half to do proper research and then we can really manage a fund properly so the key is okay each one of us has a different strategy I'm focused on value investing business returns Delio is focused on doing good in any environment so let's say I'm more inclined to buff it with a little bit of Delio trying to combine the two things I own commodities commodity producers that are good businesses that I think there are good businesses and then we have the majority of people that are not balanced you see my balance I give time research try to balance everything out over the next year do working hard on it for the last six months and you can see everything on my stock market research platform however these three components are the key Buffett investing in great businesses Delio investing in a way to balance risk no matter what happens and then you have the market who just invests in the market and that's also a good strategy if you do it constantly month after month you invest in the market no matter what you invest especially when the market is down that's also a good long-term investing strategy the key is always okay what is my investing strategy what works best for me and then you simply apply that stick to that for a long long term and then you'll do well thank you for watching looking forward to your comments and I'll see you in the next video