Insight
Lessons from the Boxing Ring
Wai Lee, co-head of Systematic Research at Allspring, explains how investors can learn from the boxing world to determine the combination of portfolio techniques that fits their needs and may help reduce portfolio risks.
Key takeaways
- In modern portfolio theory, the portfolio is greater than the sum of its parts. Investors can combine tools to diversify the diversifiers in optimizing their portfolio.
- Investors can use strategic allocations to aim for an optimal base-case portfolio allocation and make tactical adjustments over time as market events unfold.
- With risk allocations, investors gain flexibility to align their total portfolio capital allocations with macroeconomic risks, market risks, or other concerns.
- Viewing the portfolio from both asset and factor allocations may help investors aim for improved diversification.
- Investors can overlay dynamic risk hedging, aiming to add protection at the total portfolio level against certain market risks.