Ray Dalio: “You’d be crazy to own bonds”

Leading global investor has said that you’d be crazy to own bonds right now. I can see why he believes that.

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Leading global investor Ray Dalio has said that you’d be crazy to own bonds.

Ray Dalio is the boss and founder of Bridgewater Associates that has been operating for over 40 years. Bridgewater says it manages US$160 billion of assets.

In a recent interview, Mr Dalio was very disparaging about government bonds.

They’re usually seen as attractive defensive assets that can usually provide a better return than cash. You can get various ones like government or business bonds. Why doesn’t Mr Dalio like government ones any more?

Why hold a bond that is going to give you almost no return, or even a negative return? Added to that, central banks are producing a lot of currency which could make them even less attractive.

So where does he think would be good to invest? Well, he’s been interested in gold for a while as a store of wealth which could also be a hedge against inflation. Shares is another obvious good choice. And specific corporate bonds could be attractive if they’re from safe businesses with good balance sheets.

What does these bonds thoughts mean for ASX investors?

Well, I agree with him that bonds with ultra-low yields now look very poor opportunities. Interest rates are unlikely to go any lower and the actual yield is horrible.

Shares are now much cheaper so I think they would be better buys for the long-term because of coronavirus fears.

I’ve previously written about bond exchange-traded funds (ETFs) like Vanguard Australian Government Bond Index ETF (ASX: VGB) and Vanguard Australian Fixed Interest Index ETF (ASX: VAF). Comparing today’s price to the price at 21 February 2020, these ETFs have held up well.

But I don’t think government ETFs are worth holding any more with such low yields. I agree with Ray Dalio. I’d much rather invest in shares now over bonds.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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