During market turmoil, traditional portfolios often decline more than investors expect, due to different, seemingly unrelated, asset classes moving in unison. As Ben Levisohn and Joe Light of the Wall Street Journal write, traditional asset allocation fails to achieve stable and robust diversification. As the authors explain, making risk considerations a primary input to portfolio construction, turns 50 years of portfolio theory on its head and may deliver a smoother ride for investors:
For Rain Capital’s specific approach to risk allocation, be sure to revisit our December 2011 piece The Asset Allocation Merry-Go-Round: why most investors are over allocated but under-diversified, or just give us a call.