Risk Parity: A Better Way to Diversify?
May 26, 2011
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By Christopher A. Levell, ASA, CFA, CAIA
Instead of relying on 50-year-old guidelines, a more modern diversification technique is to allocate so that each asset class contributes an equal amount of risk. Build your portfolio with low-risk assets and a little leverage, and your clients can diversify away from equities without sacrificing expected return.