Risk Parity

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Tjb
Posts: 84
Joined: Mon Jul 20, 2015 4:17 pm

Risk Parity

Post by Tjb »

I’ve been listening to Frank Vasquez risk parity podcast. It’s interesting and entertaining. However, as I listen to the various portfolios, I got to thinking about simplification and the way I see it, the Vanguard Balanced Index fund alone would qualify as a single risk parity fund, and perhaps ideally using the 60/40 Balanced index fund coupled with a 40/60 life strategy fund, would result in a 50/50 AA with a little international that balances on its own. No worry about holding or selling gold, or what reits are up or down, to me, an ultimate boggle head set up, that balances risk pretty well. Add a 2-3 year expense account to minimize a forced selling in a dip, and call it a day

I’m sure we could split hairs, but am I missing something ?
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JoMoney
Posts: 16260
Joined: Tue Jul 23, 2013 5:31 am

Re: Risk Parity

Post by JoMoney »

There are lots of potential portfolios one could hold.
Different people will have different "risk preferences" and different objectives for what they want their portfolio to do.
Develop a plan you can stick with, diversify, keep your costs low, "stay the course"
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Wiggums
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Joined: Thu Jan 31, 2019 7:02 am

Re: Risk Parity

Post by Wiggums »

Tjb wrote: Sun May 23, 2021 11:32 am I’ve been listening to Frank Vasquez risk parity podcast. It’s interesting and entertaining. However, as I listen to the various portfolios, I got to thinking about simplification and the way I see it, the Vanguard Balanced Index fund alone would qualify as a single risk parity fund, and perhaps ideally using the 60/40 Balanced index fund coupled with a 40/60 life strategy fund, would result in a 50/50 AA with a little international that balances on its own. No worry about holding or selling gold, or what reits are up or down, to me, an ultimate boggle head set up, that balances risk pretty well. Add a 2-3 year expense account to minimize a forced selling in a dip, and call it a day

I’m sure we could split hairs, but am I missing something ?
The Vanguard balanced index fund is good. The downsides of a single fund in taxable are no TLH and turnover generates short term capital gains. There is also a tax managed fund at 50/50. There are also all in one funds like TDF or Lifestrategy funds that are worth a look.
"I started with nothing and I still have most of it left."
mr_mac3
Posts: 30
Joined: Fri Apr 03, 2020 8:09 pm

Re: Risk Parity

Post by mr_mac3 »

Wiggums wrote: Sun May 23, 2021 11:51 am
Tjb wrote: Sun May 23, 2021 11:32 am I’ve been listening to Frank Vasquez risk parity podcast. It’s interesting and entertaining. However, as I listen to the various portfolios, I got to thinking about simplification and the way I see it, the Vanguard Balanced Index fund alone would qualify as a single risk parity fund, and perhaps ideally using the 60/40 Balanced index fund coupled with a 40/60 life strategy fund, would result in a 50/50 AA with a little international that balances on its own. No worry about holding or selling gold, or what reits are up or down, to me, an ultimate boggle head set up, that balances risk pretty well. Add a 2-3 year expense account to minimize a forced selling in a dip, and call it a day

I’m sure we could split hairs, but am I missing something ?
The Vanguard balanced index fund is good. The downsides of a single fund in taxable are no TLH and turnover generates short term capital gains. There is also a tax managed fund at 50/50. There are also all in one funds like TDF or Lifestrategy funds that are worth a look.
Probably best to find a balanced ETF so that they can use all their tax trickery to avoid capital gains distributions. For example, AOR or AOA only gave off capital gains once in their history.
John Laurens
Posts: 438
Joined: Mon Nov 14, 2016 6:31 pm

Re: Risk Parity

Post by John Laurens »

I’ve listened to the podcast. You will find better and more knowledgeable content elsewhere.

Best Regards
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Risk Parity

Post by ivgrivchuck »

Tjb wrote: Sun May 23, 2021 11:32 am I’m sure we could split hairs, but am I missing something ?
Usually term "risk parity" is used to describe a strategy which for example holds 25% stocks and 75% bonds and which is 2x-3x levered using borrowed money usually to match certain volatility targets.

It is a very complex strategy to execute.

I haven't listened the podcast, so this term might mean different things to different people...
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
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