Risk parity strategy is the latest development of modern portfolio theory, which was first put forward by Dr. Edward Qian. Its characteristic is risk balance, that is, the portfolio is divided into several core components (such as stocks, bonds, commodities, etc. ), and the weights are dynamically and evenly distributed according to their respective risks in the portfolio, rather than simply balancing the investment amount of assets. This will enable those assets that perform well in different environments such as economic growth, economic contraction and inflation to make similar contributions to portfolio risk, thus making the portfolio return more stable and pursuing a better Sharp ratio for a long time. In contrast, the traditional investment strategy emphasizes the market value allocation ratio of assets, but does not pay attention to portfolio risk. Once a single class of assets falls sharply, there will be greater loss of income.

In other words, the risk parity strategy aims to build a portfolio that performs well in various economic situations, share the gains of market rise in the period of market rise, control the risk of portfolio in the period of market imbalance, and reduce the loss of portfolio decline. Therefore, this is a more reasonable way to diversify investment, which can achieve more stable investment performance in different macroeconomic cycles and business cycles, thus realizing asset appreciation.