The Plutus Community Directory

Risk Parity Chronicles has three goals: 1) Research into Risk Parity: an approach to asset allocation in investing that emphasizes balancing risks between asset classes. Its goal is to create diversified portfolios that can achieve steady returns in a variety of economic environments. I gather, read, and summarize relevant academic articles, industry white papers, websites, books, podcast episodes and news, hoping to make the knowledge of the professional investing world accessible for DIY investors. 2) I test sample Risk Parity portfolios. I have three original portfolios, two adapted portfolios, and five comparison portfolios which I track. Each is described, backtested, and analyzed, with withdrawal policies that test whether the portfolios can survive 4% withdrawals. Portfolio Reviews are published each month. 3) I share what I have learned from the resources and the testing, adding my perspectives, in the hopes of educating individual investors about ways to construct better portfolios. 1) I want to research the world of Risk Parity. I’ve been fascinated in my pursuit of understanding RP, and have achieved some measure of confidence with the topic, though there is still much out there to pursue. I find the subject matter interesting in its own terms, so I don’t look at it as work, but I did want to create a project that would cause me to not just look at things in dribs and drabs, but instead in a focused, purposeful way. Sometimes the concepts of Risk Parity are challenging for me (plain English: my upper level math skills ain't so good!), but I did want to try to understand that aspect of RP. 2) I want to test what I’ve learned. Since I’m years away from my earliest possible retirement date at which time I might need to live off my investments, I wanted to put these insights into practice in a systematic way. True, there isn’t as much skin in the game since I’m not actually doing the tests with my retirement nest egg (though I do own the assets I am testing in various amounts), but I do look at it as preparation for the real thing. I am thus applying a realistic and consistent set of rules governing withdrawals from each portfolio, so that I can get a sense of how they’ll perform. Think of this part like a flight simulator before you fly the plane itself - definitely not the same as being in the air, but still valuable training. 3) I want to share what I have learned both from the research and the simulation. I’m a teacher by trade, and by nature, so this project is my way of helping others, if they are interested in the topic, as well. I am inspired by Frank Vasquez who calls his Risk Parity Radio project a “labor of love.” I, too, see this as a contribution, and if not, well, I guess you get what you pay for! I know that this is a niche topic, but I truly believe it’s an interesting and important one, and so part of the project is making that niche a little bit bigger and more accessible.