The Best Investment Writing Volume 3: Larry Swedroe – Investment Strategy in an Uncertain World

Key Points

• Investors should focus on managing risks through diversification across many unique sources of risk and return, rather than attempting to manage returns through active management which often fails to outperform market benchmarks.
• A risk parity approach to portfolio construction seeks to allocate capital based on risk-weighted assets, aiming for a more efficient portfolio by diversifying across various systematic assets and factors with similar expected returns per unit of risk.
• To improve portfolio efficiency and reduce tail risks, investors should consider adding exposure to a variety of unique sources of risk, such as size, value, momentum, profitability, quality, carry, variance risk premium, reinsurance, and marketplace lending.