How to Implement the Do-It-Yourself Risk Parity Principles

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The simplicity principle means that you are better off not overdoing it with the number of funds and the number of asset classes in your portfolio. The Holy Grail principle says we need to look for maximum diversification. We need to find asset classes that have zero or negative correlations as our primary building blocks. And finally, the simplicity principle says we shouldn't use more funds than we have to in order to meet our goals.

In this episode we discuss how professionals construct risk-parity style portfolios, what are the basic principles for the do-it-yourself investor, and how to implement them. The three basic principles are (1) the Holy Grail Principle; (2) the Macro-Allocation Principle; and (3) the Simplicity Principle.

Here are the links mentioned in the episode:

March draw-downs for professional risk-parity style portfolios: https://www.markovprocesses.com/blog/risk-parity-funds-in-the-coronavirus-market-rout/

Ray Dalio explains the Holy Grail principle of risk-parity style investing: https://www.youtube.com/watch?v=Nu4lHaSh7D4

Ray Dalio reveals the most basic components of most risk-parity style portfolios:
https://www.youtube.com/watch?v=KA7U8xT_2Dk

Portfolio Visualizer Asset Correlation Calculator: https://www.portfoliovisualizer.com/asset-correlations

Portfolio Charts Master Portfolio Analyzer: https://portfoliocharts.com/portfolios/

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