“The Role of Risk in Asset Allocation”

Investors can often mistake the asset diversity in their portfolios for adequate risk diversification.  Author Jason Hsu, of Research Affiliates, argues many investors who are diversified around investment products may be poorly diversified by risks.  He suggests investors should look beyond asset class “menu” labels to avoid building unintended risks into their portoflios. An investment approach based on risk factors can also achieve more intuitive and perhaps more sensible portfolios.