His advice follows a recent flurry of warnings he’s issued over a coming US fiscal crisis.
Real estate has been a top investment choice through all kinds of economic cycles, prized for its resistance to inflation and its ability to generate steady cashflow — but you might want to think twice about diving into property investing in this climate, Ray Dalio says.
The founder of Bridgewater Associates, Dalio has been known most recently for his grim outlook for America’s fiscal situation.
In an August 11 X post, Dalio turned his eye to the real estate market and laid out why he believes people should avoid buying and holding real estate assets in the current economy.
He provided three reasons the asset class isn’t ideal for investors right now:
From Dalio’s perspective, the first reason seems to be the most important. “Real estate is more interest rate sensitive than it is inflation sensitive, so given our current circumstances it is likely to go down in real terms,” he said.
For the second, Dalio noted that because real estate is an asset that can be taxed easily, the holder’s ability to diversify can be limited, which can compromise them financially.
The third reason on Dalio’s short list may concern investors who believe worse times are coming.
“Real estate is nailed down, so investing in it makes it more difficult to move money from one place to another,” he said, highlighting a course of action that people often take when economic circumstances appear grim. Real estate, unlike stocks or other assets, is very illiquid, and it can be difficult for investors to get their money out of a property if they need cash quickly.
Dalio’s conservative advice on real estate investing related closely to other strategies he’s outlined for weathering a US debt spiral. Dalio said at an event in July that the most important things one can do are to hedge portfolios against inflation and diversify holdings.
He has also suggested that investors should consider allocating 15% of their portfolio for either gold or bitcoin to protect against economic risks, although he said he prefers gold over crypto.
In July, Dalio made it clear that he believes the US is running out of time to take action that could help it avert economic disaster. Reducing the deficit is possible but not likely, leading him to raise grave concerns about the direction of the US economy.
“If the US doesn’t cut the deficit to 3% of the GDP, and soon, we risk facing an economic heart attack in the next three years.” he said in July.
