Ray Dalio, founder of Bridgewater Associates and a billionaire investor, stated that the rapid increase in global debt poses a growing risk for investors, and that more weight should be given to assets such as gold and Bitcoin.
According to Dalio, recent movements in the US Treasury bond market indicate that the long-term “Big Debt Cycle” has entered its advanced stages. As government borrowing increases, more bonds are being supplied to the market, but investor demand is not increasing at the same rate, putting pressure on interest rates and currencies.
The renowned investor argued that if debt burdens continue to rise, governments may face two difficult choices. The first is to keep interest rates high to increase demand for bonds, thereby suppressing economic growth. The other option is for central banks to create more money, resulting in a weakening of the purchasing power of currencies.
Dalio stated that the US federal debt has reached approximately $32 trillion, with annual interest payments amounting to around $1 trillion. He predicted that if current trends continue without significant policy changes, the US debt could rise to $55-60 trillion within the next 10 years.
In this risky environment, Dalio advises investors to diversify their portfolios across different asset classes and countries, particularly emphasizing the need to invest in economies with strong income structures and robust balance sheets. He suggests reducing the weight of debt instruments like bonds in portfolios, while conversely increasing positions in gold and a limited amount of Bitcoin.
Dalio argued that allocating approximately 10-15% of a portfolio to Bitcoin could reduce overall risk and positively impact returns. Regarding Bitcoin, he adopted a more cautious approach, recommending that only a small portion of the portfolio be allocated to it.
*This is not investment advice.