Most people may not have heard of risk parity, but are fairly familiar with the idea of diversified portfolios. What has been preached for decades in classrooms and among portfolio managers is the idea of a 60/40 portfolio. A 60/40 portfolio is one that contains 60% of equity and 40% bonds. The 60/40 method minimizes an emphasis on risk. Typically, in a 60/40 portfolio the 60% equity accounts for around 90% of the risk of the portfolio. This strategy is not advantageous for risk-averse investors. However, the risk parity strategy offers a solution for investors to stay diversified while taking into account risk factors.