Ray Dalio raises red flag over real estate in America — warns it’s ‘not a good idea’ even if the US dollar scares you. Here’s what he likes instead

In a recent conversation with fellow billionaire David Rubenstein, Dalio was asked about the common strategy of owning real estate to protect against a weakening currency.

“If you're nervous about paper currency and the valuation of it, why not just buy real estate and hold on to it?” Rubenstein asked. (1)

Dalio didn’t hesitate: “It’s not a good idea,” he said. “It's not a good idea because, first of all, real estate is more interest-rate-sensitive than it is even inflation-sensitive.”

What Dalio is getting at here is that real estate prices respond more to interest rates than to inflation itself. When interest rates go up — which is often what happens when the Federal Reserve raises rates to curb inflation — mortgage rates also tend to rise. That can reduce affordability and demand, causing property prices to drop even as inflation continues to climb.

The second reason, Dalio argues, is that real estate is a fixed asset — which makes it an easy target for tax hikes.

“[Real estate] is also an asset that is a fixed asset, that is the easiest asset to tax,” he explained. “In other words, in any place — you're in a particular state — putting in real estate taxes means that they could always get the money.”

Property taxes have been steadily climbing in recent years. From 2021 to 2023, the average U.S. property tax bill rose by 10.4%, according to reports. (2) And property owners don’t have much choice when taxes go up — they simply have to pay.

Finally, Dalio points out that real estate “is nailed down” and can’t easily “move money from one place to another.” Unlike investments such as stocks, which can be bought or sold in seconds, property is literally “nailed down” to its location. Selling a home or building — especially in a weak market — can take weeks or even months from listing to closing and often comes with hefty transaction costs.

The good news? While real estate may not be Dalio’s preferred hedge against inflation, the legendary hedge fund manager has highlighted another asset that, in his view, can help guard your wealth: gold.

A safe haven for ‘bad times’

Dalio has repeatedly emphasized gold’s importance in a resilient portfolio. Earlier this year, he told CNBC that “people don't have, typically, an adequate amount of gold in their portfolio,” adding that “when bad times come, gold is a very effective diversifier.”

This time, he gave Rubenstein a more detailed explanation of what gold represents.

“Gold is a form of money,” he said. “Central banks are acquiring gold now as a diversifier, it also is negatively correlated with most of the things that you have. In a time of great stress, what you’ll find is that the gold will do well [when the other] assets don’t.”

Gold has long been viewed as the ultimate safe haven. Unlike fiat currency, it can’t be printed in unlimited quantities by central banks. It’s also not tied to any one country, currency or economy. When markets wobble or geopolitical tensions flare, investors often flock to gold, pushing prices higher.

So, how much gold should you own?

“It’s a prudent thing to have somewhere between 10% or 15% of your portfolio in gold,” Dalio said.

Over the past 12 months, gold prices have surged by more than 45%.

One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Thor Metals.

Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold, making it an attractive option for those looking to potentially hedge their retirement funds against economic uncertainties.

To learn more, you can get a free information guide that includes details on how to get up to $20,000 in free metals on qualifying purchases.

‘The best thing to do,’ according to Warren Buffett

Stocks have long been another powerful hedge against rising prices. But as investing legend Warren Buffett has often pointed out, not all stocks are created equal — and some companies are better equipped to thrive during inflationary periods than others.

In a 1981 letter to shareholders, Buffett highlighted two business traits that investors should look for when trying to fight inflation: 1) the power to increase prices easily and 2) the ability to take on more business without requiring heavy capital investment. (3)

You can apply those principles when analyzing individual companies. But if you’d rather not pick winners and losers, there’s a simpler option — investing in an S&P 500 index fund.

“In my view, for most people, the best thing to do is own the S&P 500 index fund,” Buffett has famously stated. (4)

This approach gives investors exposure to 500 of America’s largest companies across a wide range of industries, providing instant diversification without the need for constant monitoring or active management.

The beauty of this approach is its accessibility — anyone, regardless of wealth, can take advantage of it. Even small amounts can grow over time with tools like Acorns, a popular app that automatically invests your spare change.

Signing up for Acorns takes just minutes: link your cards and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio.