Articles on investing and capital management, with a quantitative focus.

#prp - Permanent Risk Parity (how I invest)

Buying Bonds in PRP


When adding new money to my portfolio, I look at my current asset weights to find out where I am underweight. Here's how my portfolio looked at the start of this week:

Asset class Current weight Target
Stocks 32.8% 30%
Bonds 47.9% 50%
Gold 19.3% 20%

I was already overweight stocks due to their recent strong performance. I am slightly underweight gold, but more significantly underweight bonds.

To bring my current weights closer to the targets, I bought bonds this week. These are new purchases, and don't involve selling any existing assets.

What if interest rates rise?

It should be noted that I must adhere to my portfolio target weights whether I think interest rates are going up or down. By adopting a passive investing strategy, I have already accepted that I don't know what the market will do.

If I was capable of predicting which way all these assets will move, then I would not use a passive asset allocation strategy.

Jem Berkes