Resolve Riffs Investment Podcast ReSolve Riffs with the ReSolve Crew on Optimizing Risk Parity and Stacking Alphas
Jun 17, 2022
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Importance of Diversification Across Regimes
- The global market dynamics differ greatly across inflation and growth regimes, making diversification central for stable returns.
- Different asset classes rarely lose at the same time, proving diversification is structurally sound and beneficial.
Rebalancing Stocks and Bonds
- A 50/50 stock-bond portfolio is not truly balanced due to stock volatility dominating.
- To equalize personality expression in portfolio, bonds often must outweigh stocks to mitigate growth and inflation risks.
Market Rewards Non-Diversifiable Risks
- Markets reward only non-diversifiable risks, like policy shocks and changing risk premiums, not diversifiable growth or inflation risks.
- A global risk parity portfolio aims to diversify away diversifiable risks while capturing rewards from unavoidable market uncertainties.