15 uncorrelated bets
1 min read

15 uncorrelated bets

15-20 uncorrelated investments (at any risk level) offer significantly better risk/return characteristics than a single investment. Also called the "Holy Grail of Investing".

I asked Brian Gold, a recently graduated math major from Dartmouth who’d joined Bridgewater in 1990, to do a chart showing how the volatility of a portfolio would decline and its quality (measured by the amount of return relative to risk) would improve if I incrementally added investments with different correlations.

..

I saw that with fifteen to twenty good, uncorrelated return streams, I could dramatically reduce my risks without reducing my expected returns.
— Ray Dalio

References

Principles by Ray Dalio (page 56-57)

For a model portfolio of a Risk Parity strategy, refer to Reverse Engineering AQRs Risk Parity strategy

Related

Risk parity

☝️ Watch this rare video (starting at 6:00) where Ray Dalio explains why he invests in at least 15 uncorrelated bets at each time.