Imagine having a soccer team where every player is a striker -- too risky, right? ⚽️

Instead, having a well-rounded team of strikers, midfielders, defenders and a goalie is the key to success 🏆

Your investment portfolio is no different! 💼

Ideally, you'll invest in many stocks of different risk levels that work together to meet your risk tolerance.

But how do you determine how much to invest in each stock?

One method is Risk Parity Strategy! 👋

💡 Risk Parity Strategy = a strategy that states each stock you own should contribute the SAME amount of risk to your portfolio 🚀

The main idea is that instead of dividing your money equally amongst your stocks, you divide your risk equally 💰

The first step is to look at how risky each investment in your portfolio is 🔍

For example, if you want to invest in Tesla and Apple...

You might find that Tesla is 2X riskier than Apple 😲

Next, Risk Parity Strategy says to invest more into the lower risk stocks, and less into the higher risk stocks, to balance your overall risk.

This way, no single investment has too much influence on your returns 📊

With Risk Parity Strategy, you would invest 2X as much in Apple as you do in Tesla ⚖️

So for example, if you invest $10 in Tesla, you'd invest $20 in Apple so they'd each contribute an equal amount of risk to your portfolio ✅

Remember, investing is all about balancing risk, not avoiding it! 🤹‍♀️

Even if you don't use Risk Parity Strategy, its core idea of using position sizing to balance your risk is an important tool for building your portfolio.