Regardless of the investing environment, diversification can help lower total portfolio volatility and stabilize, or even increase, returns. This wonderful illustration demonstrates just how important diversification is and what impact combining multiple asset classes can have in your portfolio.
Investors who try to maintain any given asset allocation in a portfolio will soon find that asset price ups and downs have taken that portfolio "out of whack." Here’s a quick explanation of rebalancing - getting that portfolio back in line - with a helpful tool to make the process easier.
Downturns can happen in two directions: depth and length. Both types matter, and the Ulcer Index (UI) is a fantastic metric to intuitively explain the extent of a portfolio downturn. Unsurprisingly, RP portfolios are less stressful than their traditional counterparts, as measured by UI.
As you delve into the world of Risk Parity, you’ll find the topic of asset allocation come up again and again, and with good reason. But what of “asset LOcation” - figuring out in which accounts one should keep various assets, so as to manage the taxation of those assets? Here is a quick guide...
If RP has a secret ingredient, it is correlation: the degree to which two assets move in relation to each other. It comes up everywhere in this blog and elsewhere in the Risk Parity literature, so perhaps a step back to officially define and explain it is important.