The stock market can be a casino to some, and a solid investment to others.

The rise and fall (?) of Risk Parity is a great case study of the frameworks I have been writing about so far. We start with the concept of “Chasing Diversifiers.”

Nothing sounds simpler than earning the return of a simple 60/40 strategy, right? Just buy two ETFs at Vanguard, Global Stock and Global Bonds, for a combined 14 basis points fee, re-balance quarterly and you are done, right? The reality for most investors could not be further from this.

1.       Crashes and Low Returns (link)

2.       Low Conviction (link)

3.       Mis-Definition of “Risk” (link)

There are two kinds of randomness, one that is harmless and one that can hurt. 

Knowing which one your investments contain is important. 

A black-box ‘go-anywhere’ hedge fund = Strategy Risk

Buy and hold S&P500 for the long-run = Asset Risk

A black-box hedge fund might be less volatile than S&P500, but is it less risky?

One thing has not made sense to me.

Why does the most important step of investing is in the hands of Financial Advisors and not Asset Managers?

The slope of the yield curve is one of the most talked about signals

There exist many flavors of market timing.

Why do so many investors fail to achieve the average returns that various asset allocation approaches provide over the long-run?