3 must-read books for better understanding Risk Parity Investing and the All Seasons Portfolio Strategy
- Recommendations for the 3 best books to start with for better understanding risk parity investing
- The Permanent Portfolio by Craig Rowland and J.M. Lawson
- Balanced Asset Allocation by Alex Shahidi
- Risk Parity Fundamentals by Edward Qian
- Reviews of each book below and suggested reading order
- Which to pick if you are only going to read one
The isolation and restrictions of movement during the Covid-19 pandemic and the lockdowns and curfews have been challenging to say the least. How can you spend your time, in an effort trying to stay sane, when you no longer can travel, barely go to the office, and perhaps not even physically meet friends and family.
Now in March, it becomes one full year of the exceptional circumstances and measures to limit spreading of the virus. It has been a difficult year for all, but even worse for some directly affected by the worst thinkable consequences of the pandemic.
Risk parity investing is an established discipline among institutional investors and family offices. Of these, the most famous are Bridgewater Associates' All Weather fund was a pioneer of the field, and is only accessible to pension funds and high net worth individuals.
But the benefits of risk parity investing reach also retail investors - people who do not get access to Bridgewater's products - as most investors are easily swayed by the most recent developments on the stock markets not to be sufficiently protected against the effects of what changes in expectations of economic growth and inflation can do to a portfolio.
Reading is a pastime of successful investors, not only in quarantine, and if you are keen on setting up your own risk parity portfolio (it is very easy to do with widely available ETFs), you should begin by seeking information on this investment discipline in the form of literature.
To make the getting started phase a bit easier for you, in this article, I highlight three great books about setting up a balanced portfolio. They all describe asset classes included (mainly stocks, bonds, gold, and commodities), and, more importantly, the reason behind why each asset class is needed in a portfolio to protect against the changing seasons of the economy.