Risk parity

Portfolio construction approach that allocates capital so each asset contributes equally to total portfolio risk (instead of equal capital weights). Typically results in higher allocations to bonds (low vol) and lower to stocks.

Pioneered by Bridgewater's All Weather. Magnifies returns through leverage on the low-vol sleeve. Performed brilliantly 2002-2021; punished hard in 2022 when stocks AND bonds fell together.