Gyroscopic Investing

Looks and sounds a lot like the PP: http://finance.yahoo.com/blogs/breakout ... 32060.html

HA - I just came on here to post the same thing.  The best thing is one of the last quotes of the article:

"In fact, Partridge says, individuals can capture most of the benefits of risk parity investing by simple putting 25% of their funds into four different ETFs that match its key asset classes, such as the S&P 500 SPDR (SPY), the iShares Corporate Bond ETF (LQD), a Treasury ETF (TLT) and a Commodity ETF (DCB)."

So.... I can pay crazy active management fees or I can just implement the PP on my own and get substantially similar results?  Hmmmm....

The problem with risk parity is that it's backward-looking. How do you know those parities will continue into the future? You don't. The PP is more robust because you're not measuring historical data whose trend may change, you're logically understanding which asset classes intrinsically perform well in different economic situations.

Pointedstick wrote: The problem with risk parity is that it's backward-looking. How do you know those parities will continue into the future? You don't. The PP is more robust because you're not measuring historical data whose trend may change, you're logically understanding which asset classes intrinsically perform well in different economic situations.

From the article:

"Equities generally do well during times of positive growth and benign inflation," he explains, while "commodities do well in periods of rising inflation." Since the same type of variance also holds true for bonds and interest rates, he says you always have something in your portfolio that does well in a variety of growth, inflation and even sentiment scenarios.

It's a description of the PP!  The PP holds offsetting asset classes because of the backward-looking historical relationships, right? It's the best data we've got.

Risk parity asset allocation looks like a fancy calculation to prove you need a 15/25/35/25 allocation this month, then a 25/10/40/25 allocation the next month, etc., rather than a simple 25/25/25/25 allocation.  And we'll charge you substantial fees for our trouble!

Read this thread: http://gyroscopicinvesting.com/forum/ht ... ic.php?t=3