Content Library

Here I list useful content on several topics across different areas such as risk parity investing, the All Seasons Portfolio strategy, personal finance, and asset classes. This page will serve you as a good place to start your further education in risk balanced investing and my intent is to facilitate your journey by guiding you to relevant resources, both from this blog and from handpicked external sites.

Risk Parity Fundamentals

• Why The 60/40 Portfolio Is Not Balanced (The 60/40 Portfolio has been the go-to strategy for the last four decades. We dive into why this is not a balanced portfolio as most of the risk [volatility] is deriving from stocks. This means that the safe haven asset – bonds – hardly has any impact on the portfolio’s behavior other than being a drag on absolute return.)
• A study of risk parity portfolios against S&P 500 since 1927 (Comparing the excess returns over cash of a Risk Balanced Portfolio with that of S&P 500 to build a case or RP investing)
• Prediction vs. Preparation (A good outcome is not always a good decision, and it is near impossible to make accurate predictions about the future. Actually, what really moves asset prices is when things happens that were unpredicted and perhaps unpredictable, why it is better to prepare a portfolio for any possible outcome. The ASP is built on that premises, that it is better to prepare than predict.)
• Why Volatility Trend Tracking Matters And How To Optimize Your Portfolio Based On Inverse Volatility (An article about Inverse-Vol optimizing strategies, being one specific type of risk parity)
• 3 must-read books for better understanding Risk Parity Investing and the All Seasons Portfolio Strategy (A post about three books with various levels of difficulty for better grasping the concepts around risk parity. As I have explored more about risk parity since writing the post back in early 2021, many more books could be added to the list, and will be listed on this page separately.)

All Seasons Portfolio

• Getting started with the All Seasons Portfolio (Introduction to the strategy and brief summary on how to start)
• Strategic rebalancing (About rebalancing as a concept and how returns can be enhanced by adding strategic measures such as rebalancing spans and trend indicators)
• The value of currency hedging (Want to avoid currency risk when investing? FX rates could caused greater fluctuations in your portfolio than you wished for, and will sometimes add to your gains and sometimes lower your returns. At times you could take active bets on changes in FX rates, but if you want to neutralize this effect on your portfolio [e.g. to limit the tracking error with your neighbor] this post explores the effect of selecting currency hedged ETFs from an European investor’s perspective.)
• Considering “convex return profiles” when diversifying (How to make sure that the assets you add to a portfolio really help against drawdowns, by making sure that the return profiles of two compared assets is convex (a smiling face), so that the diversifying asset actually performs well when another asset experiences a greater drawdown.)
• 2020 Year in Review – Never Let A Good Crisis Go To Waste (Three key lessons summarized from the eventful pandemic year of 2020 and the value of investing using risk parity strategies such as the All Seasons Portfolio strategy. The ASP added stability through the year and had a much shallower drawdown than stocks in March, as shown in several charts included in the post.)

Asset Classes

• Which is the best Commodity index to invest in? (High Inflation / High Growth)
• Where does Real Estate fit in a risk balanced Portfolio (High Growth / Falling Inflation from high levels)
• How Commodities, Gold, and TIPS hedge against different kinds of inflation (High Inflation)
• The case for Gold in a diversified portfolio – what gold has to offer (high inflation / safe haven)
• Adding US Dollar Index (DXY) Exposure to an All Seasons Portfolio (Rising rates)

The Behavioural Side of Investing

• Where does the All Seasons Portfolio fit in your wealth structure? (Personal finance post about how to structure your wealth according to their functions and risk tolerance, and where the ASP fits in building that puzzle)
• Retail Investors’ Irrational Expectations of Risk Parity (Tracking error is difficult for all investors, but is perhaps most difficult for retail investors to master. Albeit the theories behind risk parity strategies make sense, it is not always easy to stick with these diversified strategies when single line items rally. This post explains this common imbalance in expectations.)
• The Two Most Important Risks For Retail Investors And How To Avoid Them (Behavioral post about two particular risks being 1. the risk of us not reaching our financial goals by not managing our investment risk properly, and 2. abandoning a safer strategy at the wrong time when we see others making more money with high-risk strategies.)
• Have you been taking too much risk when the market tanked in 2020? (Did you feel your stomach turn during 2020? This post serves as a great reminder of how investors were really feeling in the middle of a drawdown, and perhaps you should recall that sense of fear and desperation when shaping your portfolio and preparing it to withstand future crises.)

Macroeconomical Considerations for Investing

• The Impact of Interest Rate Risk on asset prices (How changes in the cash rate, a.k.a. the discount rate adversely affects valuations of risky assets such as stocks and bonds)
• How Roll Yield Influences Bond ETF Performance In Rising Yield Environments (In an environment of rising yields, bond ETF performance is positively skewed thanks to the held bonds travelling across the yield curve to a shorter remaining maturity before being rolled)
• Indicators of an Overvalued Stock Market and What You Can Do About It (Post from May 2021 about how the Shiller’s CAPE ratio (Cyclically Adjusted Price-to-Earnings) is at a historically high level [and has been for a decade] which implies that future expected returns for the stock market should be much lower over the next decade compared to what they have been. This article explores why diversification and risk parity may be a viable option.)
• Different Types of Inflation and What Assets Protect Against Each (Inflation comes in many forms, and gold is not a universal hedge. Instead, a portfolio should include a combination of Commodities, Gold, and Inflation-Linked Bonds that protect against inflation caused by increases in monetary supply, cost-push inflation, and demand-pull inflation.)
• What is Dynamic Risk Allocation? (Dynamic Risk Allocation is a temporary tactical shift in risk allocation where the investor can dynamically allocate more risk to certain assets at the expense of other assets. This is usually done in connection to expected shifts in environments. Therefore, when used right, DRA can improve the overall risk-adjusted return of the total portfolio.)