Risk Parity

Risk parity flips the usual way of building a portfolio. Instead of putting, say, 60% of your money in stocks and 40% in bonds, you size each part so it contributes an equal share of the portfolio's ups and downs. Because bonds are usually calmer than stocks, that typically means holding more bonds, often using leverage to boost them.

It works well when stocks and bonds move in opposite directions. It can struggle badly when they fall together, as in 2022, when rising inflation hit both at once.