No. of Recommendations: 0
The formulas they use can trigger big selloff when there is a dip in the market, selling at the new lower price, and all those funds (bazillions worth) are in the same positions.
As they sell, they trigger each other's rules to sell more and more.

The amount of money tracking risk parity these days certainly dwarfs, say, the amount of money using "portfolio protection" strategies in 1987.
When a whole lot of money follows the same formula, and that formula is based on recent prices, sometimes things get interesting.


To wit: Q4 2018! Now not just a herd, a robotic herd following a single central mind. (Borg?)

FC
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.