Risk-only investment strategies have been growing in popularity as traditional investment strategies have fallen short of return targets over the last decade. However, risk-based investors should be aware of four things. First, theoretical considerations and empirical studies show that apparently distinct risk-based investment strategies are manifestations of a single eect. Second, turnover and associated transaction costs can be a substantial drag on return. Third, capital diversication benefits may
be reduced. Fourth, there is an apparent connection between performance and risk
diversication. To analyze risk diversification benets in a consistent way, we introduce the Risk Diversification index (RDI) which measures risk concentrations and complements the Herndahl-Hirschman index (HHI) for capital concentrations.