Risk Parity vs Traditional Asset Allocation: Rethinking Portfolio Risk
Risk Parity vs Traditional Asset Allocation: Rethinking Portfolio Risk Most investors call a portfolio with 60% in stocks and 40% in bonds “balanced.” By rupees invested, it is. By risk, it is not even close. In a typical 60/40 portfolio, stocks produce roughly 85% to 90% of the ups and downs, and bonds add very […]
Portfolio Concentration Risk: When High Conviction Becomes Excessive Exposure
Portfolio Concentration Risk: When High Conviction Becomes Excessive Exposure Every investor has a favourite. It might be a stock that doubled in two years, a sector you understand better than anyone you know, or a mutual fund your friends keep praising. Backing it with real money feels smart, and sometimes it is. The trouble starts […]
Correlation Breakdown: Why Diversification Can Fail During Market Stress
Correlation Breakdown: Why Diversification Can Fail During Market Stress Every investor has heard it a hundred times: don’t put all your eggs in one basket. Spread your money across stocks, bonds, gold and property, and when one falls, another will hold up. That advice is sound most of the time. The trouble is that “most […]
The Mathematics of Financial Independence: Savings Rate, Withdrawal Rate and Portfolio Risk
The Mathematics of Financial Independence: Savings Rate, Withdrawal Rate and Portfolio Risk Financial independence means your investments can pay for your living expenses for the rest of your life, so working becomes a choice. Three numbers decide how soon you get there: your savings rate, your withdrawal rate and the risk in your portfolio. The […]