All Weather Portfolio: Risk Parity Allocation
Earlier this year I launched an “All-Weather” ETF Portfolio. The initial launch of the portfolio provided a static allocation to 8 ETFs and was inspired by Ray Dalio of Bridgewater Associates.
I have added two dynamic allocations to the All-Weather portfolio spreadsheet. The first is an unleveraged risk-parity asset allocation. The allocations for each ETF are updated daily based on the trailing 20-day volatility of each ETF as calculated using adjusted closing prices. The allocation to each ETF is calculated by taking the inverse of its trailing 20-day volatility and then calculating the percent each ETF contributes to the sum of all the inverse volatilities (for an example of the calculation please visit the spreadsheet). Bottom line: the lower trailing volatility an ETF has relative to the other ETFs in the portfolio, the higher its allocation.
The allocations as of last Friday’s close are below. The 20-day volatility is listed along with the static allocation I proposed in January. While the allocations update daily, I do not personally check the allocations daily nor do I endorse checking allocations daily. The spreadsheet and calculations were created to allow for maximum flexibility; hence, the daily updates:
| Name | Symbol | Original Static Allocation | Historic 20-Day Volatility of ETF | Risk Parity Weighting |
| Vanguard Total Stock Market | VTI | 18.75% | 12.85% | 5.11% |
| PowerShares DB Commodity Index Tracking Fund | DBC | 7.25% | 7.01% | 9.38% |
| SPDR Gold Trust | GLD | 7.25% | 14.23% | 4.62% |
| iShares iBoxx $ High Yield Corporate Bond Fund | HYG | 6.50% | 3.60% | 18.27% |
| iShares Emerging Markets USD Bond ETF | EMB | 14.50% | 4.44% | 14.80% |
| iShares Barclays TIPS Bond Fund | TIP | 20.75% | 4.51% | 14.57% |
| iShares Barclays 20+ Year Treasury Bond ETF | TLT | 12.50% | 12.42% | 5.29% |
| iShares Barclays Aggregate Bond Fund | AGG | 12.50% | 2.35% | 27.96% |
Stay tuned this week for details on the second dynamic allocation tool, the “minimum correlation” weightings!
If you enjoy these free tools, please consider making a donation on the home page of Scott’s Investments using the Paypal link in the upper-right corner!
Follow Scott’s Investments on Twitter: http://twitter.com/#!/scottsinvest
2013-03-04 02:46:51
Source: http://www.scottsinvestments.com/2013/03/04/all-weather-portfolio-risk-parity-allocation/
Source:
Anyone can join.
Anyone can contribute.
Anyone can become informed about their world.
"United We Stand" Click Here To Create Your Personal Citizen Journalist Account Today, Be Sure To Invite Your Friends.
Lion’s Mane Mushroom
Mushrooms are having a moment. One fabulous fungus in particular, lion’s mane, may help improve memory, depression and anxiety symptoms. They are also an excellent source of nutrients that show promise as a therapy for dementia, and other neurodegenerative diseases. If you’re living with anxiety or depression, you may be curious about all the therapy options out there — including the natural ones.Our Lion’s Mane WHOLE MIND Nootropic Blend has been formulated to utilize the potency of Lion’s mane but also include the benefits of four other Highly Beneficial Mushrooms. Synergistically, they work together to Build your health through improving cognitive function and immunity regardless of your age. Our Nootropic not only improves your Cognitive Function and Activates your Immune System, But it benefits growth of Essential Gut Flora, further enhancing your Vitality.
Our Formula includes:
Lion’s Mane Mushrooms which Increase Brain Power through nerve growth, lessen anxiety, reduce depression, and improve concentration. Its an excellent adaptogen, promotes sleep and improves immunity.
Shiitake Mushrooms which Fight cancer cells and infectious disease, boost the immune system, promotes brain function, and serves as a source of B vitamins.
Maitake Mushrooms which regulate blood sugar levels of diabetics, reduce hypertension and boosts the immune system.
Reishi Mushrooms which Fight inflammation, liver disease, fatigue, tumor growth and cancer. They Improve skin disorders and soothes digestive problems, stomach ulcers and leaky gut syndrome.
Chaga Mushrooms which have anti-aging effects, boost immune function, improve stamina and athletic performance, even act as a natural aphrodisiac, fighting diabetes and improving liver function.
Try Our Lion’s Mane WHOLE MIND Nootropic Blend 60 Capsules. Today Be 100% Satisfied Or Receive A Full Money Back Guarantee Order Yours Today By Following This Link.
| Online: | |
| Visits: | 1,609,334,018 |
| Stories: | 8,167,544 |
Whistler Blowers, Insiders
I had a look at your spreadsheet. Well you are not using a risk parity strategy at all. You are just weighting the ETFs inverse to their overall volatility! That has nothing to do with a risk parity approach or with the concept Ray Dalio of Bridgewater Associates is applying!