Wonderful analogy of stores selling skis in the winter and bikes in the summer to explain the basics of diversification as the bedrock principle of effective portfolio construction. A must-understand concept for Risk Parity, cleverly and effectively presented.
Buy low, sell high. This mantra is the easiest, most straight-forward, non-controversial advice you can follow in investing, Risk Parity influenced or not. But what makes it so hard? Why do so many investors not only fail to do it, but actually do the exact opposite of selling low and buying high?
Common problem: I want to sell Asset A but it’s in a retirement account; I don’t want to sell Asset B, but it is what’s accessible in my brokerage account. How do I handle the conundrum? Answer: An Asset Swap, but be careful of the Wash Sale rule! Two embedded videos here to help you out.
Comprehensive look at the issue of rebalancing by a leading Financial Planning. Covers what rebalancing is, its benefits, different methods (including time-based and threshold-based), and other aspects for consideration. Key finding for RP investors: 20% (relative) threshold rebalancing looks best.
Older paper (2012) but valuable for two reasons: 1) is realistic about correlation, and 2) pays special attention to correlation in times of market decline, such as the one that just preceded the paper and the one we’re going through now.
