The Unsung Magic of Risk Parity Portfolios

Diversification is not an objective on its own, right? The objective is to make the most amount of money with the least amount of risk. For three independent markets or three independent bets in the portfolio, you can extract about 1% a year. This is a 1% ayear in excess tailwind purely from being diversified and rebalancing back and forth between these three different markets as they gyrate up and down. That is the real unsung magic of the type of risk parity portfolio that we advocate for.