How to Build a Risk Parity Style Portfolio

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Most risk parity style portfolios start with the two ends. Stock funds and long-term treasury funds are your base because they have that nice negative correlation. To that base you add other macro asset classes such as gold, commodities or preferred shares. You want to go run it through the calculators over at another website called Portfolio Charts.

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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