I have nothing to add on to the wonderfully in-depth look Tadas does on the Risk Parity “perfect storm” we’ve seen occur this past month.
Once again, we humans have latched on an investing trend because it seemed to carry the Holy Grail – gains without pain. “This is how Dalio does it, of course we can do it too!”
But like every other approach to investing, you don’t get the good without having to endure the bad and nothing is ever truly “all weather”. Just when you’ve data-mined yourself the perfect strategy that seemingly can’t miss, the markets will invent some new type of volatility to bring the fuckery right to your doorstep.
It never fails.
Rather than waste any time summarizing how risk parity works or why it’s become so hot in recent years, I send you instead directly to the source: