September 2014 Investment Insight, "Disparity? Risk Parity vs. the 60/40 Portfolio"

Abstract

This issue of Investment Insight reviews the evolution and purpose of risk-parity portfolios. It examines their shortcomings and potential value to investors, applying both data analysis and financial theory to assess risk parity's viability as an investment strategy. The issue also questions whether it is appropriate for risk-parity managers to compare their approach to the traditional portfolio of 60 percent stocks and 40 percent bonds, as they often do.