what is the risk parity strategy?

most of the first batch of FOF funds used the risk parity strategy, so the question is what is risk parity? Let's start with a few questions.

1. Why don't many investors make money by investing in the stock market?

in the past 1 years, the average annual return rate of our open-end stock funds has reached 16%. Yes, why don't most investors make money or even lose money?

Because the A-share market fluctuates too much, it is easy for investors to buy high and sell low-and then lose money. If there is an investment variety that can "smooth out" all the fluctuations and have the same long-term investment income as A shares, then investors can easily make money from such an investment variety.

2. What is the investment risk of securities?

The price fluctuation of securities is the risk. In finance, we will use the standard deviation as an indicator to measure the risk.

3. How to reduce the risk (volatility) of securities investment?

At the same time, investing in multiple types of assets with low correlation can effectively smooth the huge fluctuations in the single market. For example, a combination of 5% stocks (funds) and 5% bonds (funds) can reduce the risk of the combination, but the disadvantage of this combination is that the risk exposure is large.

4. How to further reduce the risk of portfolio investment?

In order to further reduce the risk of portfolio, investment can be started from two aspects:

A, the variety categories in the portfolio can be increased to include investments such as stocks, bonds, commodities and other investment targets;

B, low proportion is allocated for high-risk varieties, and high proportion is allocated for low-risk varieties.

5. What is risk parity?

official explanation: RiskParity is an asset allocation concept that assigns the same risk weight to different assets in a portfolio.

In fact, the risk parity strategy starts from the perspective of "risk" and ensures that the risks between stocks and bonds are equal through calculation. Take a chestnut as an example:

Suppose the risk of stocks in the portfolio is 4, the risk of commodities is 3, the risk of REITS is 2, and the risk of bonds is 1;

then the proportion of stocks, commodities, bonds, REITS and bonds in the portfolio can be 12%, 16%, 24% and 48% respectively.

in this way, the risks of the four types of assets in the portfolio, namely, stocks (4*12%), bonds (3*16%), REITS(2*24%) and commodities (1*48%), are all equal.

the core idea of the risk parity model is to realize the basic balance of RiskContribution of various assets in the portfolio by adjusting the weights of various assets.

The "I want a stable happiness" fund portfolio is to balance risks and returns by adopting the risk parity strategy, so our management team dares to lower the stock position in advance when the market is hot, because the happiness portfolio pays more attention to controlling risks than pursuing returns. We believe that a sustained and stable return of 6%-8% will enable all investors to find the most comfortable state in their investment.

after reading this, I believe you already know what a risk parity strategy is.