On today's show, Stig and Trey talk with Alex Shahidi and Damien Bisserier from Evoke Advisors, to discuss why each holding in your portfolio should be as uncorrelated as possible.


Trey Lockerbie
Very cool. And Damien, I have to talk a little bit with you about your experience at Bridgewater Associates. So for those who don’t know, Bridgewater is one of the largest hedge funds with over 160 billion in assets under management. And Ray Dalio, who you spoke about is himself a billionaire of worth somewhere around 16 billion, I think. Ray has also pioneered this concept that the Holy Grail of investing is made up of about 15 uncorrelated investments, and uncorrelated being the key word. So this is obviously possible for someone maybe as big as Bridgewater, but how is that realistic for a retail investor to find 15 uncorrelated bets?

Damien Bisserier
It’s probably not possible for a retail investor to find 15 uncorrelated bets, but there is the possibility to incorporate four or five uncorrelated return streams. You just accessing liquid public markets in an inexpensive efficient way. And that’s essentially what risk parity is. So if you think about the traditional approach, 60/40 or some derivation of that, that is primarily invested in equity and equity-like risk. And so you have to check one number to figure out how you did day-to-day in your portfolio. Just look at what the stock market did. That’s why when you turn on the CNBC, they talk about stocks, primarily. That’s all that anybody cares about because their portfolios are concentrated to that one thing. And the idea of the Holy Grail is finding a few things that are unrelated to each other and taking a much greater advantage of diversification. And it’s a simple concept, but in practice, very few people do it.


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