HCXY - Building A Risk-Parity Portfolio: An Example

The idea behind risk parity is simple: build a portfolio of uncorrelated assets, weighted according to their volatilities, and use modest leverage to boost returns while keeping volatility tolerable. Let’s try our hand at building such a construction.

We’ll use four asset classes, and for the purposes of being able to simulate the past 29 years of financial market history using portfoliovisualizer.com, we’ll only use mutual funds available since 1991.

• US Stocks – S&P 500 (VFINX)
• Long-Term Treasuries (VUSTX)
• Gold Miners (INIVX)
• High Yield Bonds (FHAIX)

Important

Read more ...