In this episode we answer emails from Corn Pop, Dustin and Jim. We discuss annuities for elderly parents, TIPS ladders in retirement, REITs in small cap value funds, currency speculation, the GDE fund (again) and an aggressive portfolio construction.
Link:
Interview of Michael Kitces Re Problems With TIPS Ladders: Michael Kitces: How Higher Yields Affect Asset Allocation and Retirement Planning | Morningstar
Breathless and Promotional AI-Bot Summary:
Dive into the mailbag as Frank tackles complex investment questions with his signature blend of expertise and pop culture references. This episode unpacks several critical financial planning dilemmas that challenge conventional wisdom.
First, Frank examines when annuities make sense for elderly parents, explaining how health prospects and longevity expectations should guide this decision. For those likely to outlive actuarial tables, annuities can provide financial value and simplify management—but they're far from universally beneficial. Frank introduces Qualified Longevity Annuity Contracts (QLACs) as a strategic option for those concerned about funding long-term care in their later years.
The conversation shifts to a provocative take on TIPS ladders, with Frank describing long-term ladders as "a flex for hoarders" rather than necessary financial tools. He argues these complicated structures work best for defined periods with specific purposes—like bridging to Social Security—not as decades-long income vehicles that will inevitably be either too long or too short for your actual lifespan.
Currency speculation, Bitcoin, and aggressive portfolio construction round out the episode's explorations. Frank explains how currency exposure already exists implicitly in international stocks and gold without dedicated speculation, evaluates an aggressive portfolio with substantial Bitcoin allocation, and questions whether dividend stocks belong in accumulation strategies.
Throughout, Frank balances technical analysis with practical wisdom, reminding listeners that personalized investment approaches must account for individual circumstances rather than following generic advice. Whether you're managing a retirement portfolio or building wealth, you'll gain valuable perspective on how the finest investment strategies align with your actual needs rather than theoretical ideals.
Want your questions answered on a future episode? Email frank@riskparityradar.com and don't forget to subscribe and leave a review!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Voices (00:01):
A foolish consistency, is the hobgoblin of little minds
, adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer, a different drummer.
Mostly Mary (00:19):
And now, coming to you from dead center on your
dial, welcome to Risk ParityRadio, where we explore
alternatives and assetallocations for the
do-it-yourself investorBroadcasting to you now from the
comfort of his easy chair.
Here is your host, frankVasquez.
Mostly Uncle Frank (00:37):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
Voices (00:50):
Yeah, baby, yeah.
Mostly Uncle Frank (00:52):
And the basic foundational episodes are
episodes 1, 3, 5, 7, and 9.
Some of our listeners,including Karen and Chris, have
identified additional episodesthat you may consider
foundational, and those areepisodes 12, 14, 16, 19, 21, 56,
(01:13):
82, and 184.
Whoa, and you probably shouldcheck those out too, because we
have the finest podcast audienceavailable.
Mostly Mary (01:26):
Top drawer, really top drawer.
Mostly Uncle Frank (01:31):
Along with a host named after a hot dog.
Voices (01:34):
Lighten up Francis.
Mostly Uncle Frank (01:37):
But now onward, episode 415.
Today, on Risk Parity Radio,we're just going to try to do
what we do best here, which isanswer your emails, and so,
without further ado, here I goonce again with the email.
And First off.
First off, we have an emailfrom Corn Pop.
Voices (02:01):
Ain't nothing wrong with that.
Mostly Mary (02:04):
And Corn Pop writes Howdy Frank and Mary ain't
nothing wrong with that and cornpop rights.
Howdy, frank and mary.
I have listened to everyepisode, currently through 399
and can unequivocally state Ihave learned more about
investing while listening toyour podcast in the last six
months than I have from anyother source in the last 20
years combined you are talkingabout the nonsensical ravings of
(02:24):
a lunatic mind.
Risk.
Parity Radio is an invaluableresource to the DIY investing
community.
Kudos for a job well done.
My only complaint now is I haveto wait for new episodes to be
posted.
Sigh.
Voices (02:38):
I don't understand.
I made a reservation.
Do you have my reservation?
Yes, we do.
Unfortunately, we ran out ofcars.
But the reservation keeps thecar here.
That's why you have thereservation.
I know why we have reservations.
I don't think you do.
Mostly Mary (02:53):
In the meantime, a few unrelated and related risk
parity questions to throw yourway First off.
In past podcasts it wasmentioned that it might be
advantageous to consider anannuity later in life.
I'm managing my healthy78-year-old mother's retirement
portfolio.
Her RMDs and Social Securityeasily pay for her expenses.
(03:13):
Is there some sort ofStein-esque methodology I could
use to determine if an annuitywould be beneficial for her?
If not, maybe a Vasquez-esqueone could be discussed.
Second off, users in thepopular online personal
investment forum Hogelbads oftenand by often I mean always will
eventually recommend using tipsletters at some point during
(03:35):
retirement.
Voices (03:36):
Forget about it.
Mostly Mary (03:37):
For the life of me, I can't figure out when.
I understand letters can beused to bridge income gaps, but
isn't that the purpose of savingfor and using a retirement
portfolio?
You are correct, sir.
Yes.
Wouldn't the money from theportfolio be used to fund the
latter Sounds like robbing Peterto pay Paul.
At 59 and a half, I plan tostart withdrawing 4% from our
(04:00):
golden ratio portfolio.
At that time my spouse mayclaim early Social Security,
while I plan to wait till 70 toclaim For the FOMO.
Do I need a tips ladder?
Forget about it.
Second to last, last off, whileassessing portfolio sector
concentrations, I noticed VIOVholds 8 to 9 percent in REITs.
(04:23):
Should I be adjusting theamount of my other REIT holdings
to account for the REITs inVIOV?
Last off, in a few episodes youargue the benefit, or lack
thereof, of using internationalfunds for diversification and
point to currency speculation asthe reason for the difference.
Is there a way to integratecurrency speculation into a
(04:43):
portfolio?
Thanks for all you do, corn Pop.
Mostly Uncle Frank (04:55):
Well, you've got several good and
interesting questions here.
Voices (04:59):
No more flying solo.
You need somebody watching yourback at all times.
Mostly Uncle Frank (05:04):
Let's just take them in turn.
First talking about your78-year-old mother and whether
she might benefit from anannuity.
Voices (05:14):
Times have changed and times are strange.
Here I come, but I ain't thesame Mama, I'm coming home.
Mostly Uncle Fran (05:29):
Unfortunately , or maybe fortunately, there is
no one kind of analysis thatyou would use to determine
whether somebody would need anannuity or not, because it's
very dependent on theirindividual circumstances and
goals.
But it's one of those thingsthat it has to be fulfilling a
(05:51):
specific goal and can't bechosen just as nice to have
because they're not nice to have.
You either have a specific goalfor them or you don't.
Voices (06:00):
You know, I got friends of mine who live and die by the
actuarial tables and I say, hey,it's all one big crapshoot.
Anyhoo, tell me, have you everheard of single premium life?
Because I think that reallycould be the ticket for you.
Mostly Uncle Frank (06:12):
So when you're talking about somebody in
their 70s, the first questionhas to do with their individual
situation in terms of what istheir health?
Of what is their health?
Because, financially, anannuity is a good deal if you
are likely to outlive youractuarial death date.
That's how they are priced.
So if she is healthy and islikely to live well into her 90s
(06:37):
, an annuity might be a gooddeal financially and it also
reduces the burden of havingfinances to manage at an age
like that.
I was communicating with anotherlistener who was thinking about
this and had a family historyof family members living well
into their 90s and needing someform of long-term care at that
(06:59):
point in time, and she was alittle younger.
But something that might makesense for somebody in that
circumstance might be a QLAC,which is a deferred annuity that
you can buy out of your IRAmoney, and typically the way
that it's done is it's boughtearly in your 70s and it is
designed to be turned onsometime between, say, ages 80
(07:22):
and 85, at which point it willspew out a large stream of cash
that would be available for anykind of long-term care expenses
at that point.
Voices (07:34):
Death stalks you at every turn.
Mostly Uncle Frank (07:37):
So the purpose of that would be to
ameliorate long-term care costsfor somebody who thought they
were going to live a really longtime.
On the opposite side of things,if your mother's in poor health,
then an annuity certainly doesnot make much sense at all.
Now there is another sort ofjust convenience factor that if
you could, for instance,evaluate what her total expenses
(08:02):
are you said it's SocialSecurity and her RMDs cover her
expenses Could you substitute,say, an annuity for the part of
expenses not covered by SocialSecurity, which again simply
just gives you an easy way ofmatching up a payment stream
with a set of expected expenses.
But that again is really onlymore of a convenience, having
(08:26):
not to manage that portion ofthe portfolio much anymore.
And then perhaps she can dosomething else with the rest of
the portfolio, depending on howmuch there is and what other
things she might like to do.
But again, I would thinkthey'll be highly dependent on
(08:57):
her prospects of living a verylong time if you don't start
making more sense, we're gonnahave to put you in a home.
Voices (09:04):
You already put me in a home.
You already put me in a home.
Then we'll put you in thecrooked home.
It's on 60 minutes.
Mostly Uncle Frank (09:17):
I'll be good If you go back to episode 184,
I talked about this at lengthabout what we are thinking about
doing in terms of a processwould be to wait until we were
in our early 70s and thenconsider our health and other
factors to determine whether wewould want one or more simple
annuities or deferred annuitiesat that point in time, such as
the QLAC, because it is truethat once you get into your 70s,
the payout rates for thesethings get very large, and we're
(09:39):
talking about 7, 8, 9 percent.
So those are my thoughts.
Sorry they weren't moreorganized.
Voices (09:46):
Hey, Grandpa, we need to know your first name.
You're making my tombstone.
No, we're just curious.
All right, let's see First name.
First name.
Well, whenever I'm confused, Ijust check my underwear it holds
the answer to all the importantquestions.
Call me Abraham Simpson Grandpahow'd you take off your
(10:08):
underwear without taking offyour pants?
I don't know.
Mostly Uncle Frank (10:13):
But let's move on to your next question.
It's funny you mentioned you'donly gotten up to episode 399 in
this email, which is from earlyFebruary.
If you listen to episode 401, Italk about this issue that it
seems that a lot of over-savedpeople get fixated on
complicated things likelong-term tip slatters, science.
(10:46):
It's like they heard thatWilliam Bernstein and Alan Roth
were doing things like that, sothey thought that they needed to
get on the bandwagon.
Voices (11:00):
To me it's kind of a flex for hoarders, instead of
buying fancy cars or boats orthings they go off and buy
complicated financial structuresthat they don't need, because
it's my birthday and I want it.
Mostly Uncle Frank (11:16):
I think bond ladders, whether they be tips
ladders or not, are best usedfor a defined finite period,
such as a gap between retiringand Social Security or something
of that nature, where you arefilling a specific void, where
an income is required to fulfillthat specific void and you know
(11:38):
that's going to end at aparticular point, so that you
can make your ladder exactly aslong as it needs to be, because
having ladders that are way tooshort or way too long is
extremely inefficient anddoesn't make much sense are you
stupid or something stupid, as astupid does?
Voices (11:55):
sir?
Mostly Uncle Frank (11:56):
and I cited an interview for michael kitsis
by morningstar about this verytopic and I'll link to that
interview again and his point isthe same one that I'm just
making that if you can reallyafford to create a long-term
tips ladder I'm talking aboutsome 30-year thing you probably
are just grossly over savedwhat's with you anyway?
Voices (12:19):
I can't help it.
I'm a greedy slob, it's myhobby.
Mostly Uncle Frank (12:22):
Save me and you don't really need such a
thing, because they are grosslyinefficient.
And the reason they are grosslyinefficient is because they are
the exact opposite of anannuity, in that an annuity is
guaranteed to last for your life, but a 30-year tips ladder is
either likely to be way too longor way too short, unless you
(12:43):
know exactly when you're goingto die or have plans for that in
some way, and it's certainlynot something you would want to
leave around for your heirs tohave to unravel.
Voices (12:54):
That's not an improvement.
Mostly Uncle Frank (12:56):
So when I hear people start talking about
these things, I always ask themwell, how are you going to
balance that with the rest ofyour portfolio, or how is that
going to all work out?
And what you usually find fromsuch a conversation is that
they're just grossly oversaved.
Voices (13:11):
Oh boy, I'm rich, I'm wealthy, I'm independent, I'm
socially secure.
I'm rich, I'm rich, I'm rich,I'm socially secure.
I'm rich, I'm rich, I'm rich.
Mostly Uncle Frank (13:20):
And that they're planning on not spending
the rest of their portfolio orsomething like that.
So it really is something forpeople who want to hoard their
money, to waste their time withand make themselves feel
financially superior to the hoipolloi, I guess.
Voices (13:36):
Flare I think that's the last of it.
Just a quick check to see if Imissed anything.
Hey, what's this?
Mostly Mary (13:44):
Hmm, well, polished up, it might bring another
quick four bits on the openmarket.
Mostly Uncle Frank (13:50):
So, interestingly enough, you hit
upon this just a week before Imade a podcast about it, or at
least talked about it in apodcast.
A strange coincidence.
Hey, you want to see somethingreally scary.
Voices (14:04):
You bet.
Mostly Uncle Frank (14:07):
But go back and check that out and check out
this article I'm going to linkto in the show notes.
All right.
Your second to last offquestion was whether you should
adjust your holdings in a smallcap value fund like viov to
account for the reits that arein it.
I don't think so.
Voices (14:23):
I think that's trying to be too clever by half that and
a nickel, get your hot cup ajack squat but if you have some
reit holdings, that is obviouslygoing to take up some space in
your overall stock allocation.
Mostly Uncle Frank (14:38):
That's why I suppose I would account for it
in looking at the overallportfolio allocations.
But I would not be tooconcerned about the individual
relationship between REITholdings and a small cap value
holding.
And last off, you have aquestion here about using
currency speculation as part ofa portfolio.
Voices (15:00):
You have a gambling problem.
Mostly Uncle Frank (15:08):
And the answer is yeah.
This is kind of implicit in anumber of holdings.
It's implicit if you're holdinginternational stocks because
they are likely to performbetter than US stocks when the
dollar is weak, as we see rightnow in this year so far, and not
as well when the dollar isstrong.
If you are holding gold, thatis partially a currency
speculation because goldessentially functions like an
alternative currency.
(15:29):
It's held by central banks.
Like, central banks hold allkinds of different currencies,
usually mostly reservecurrencies like the dollar, but
they also hold gold and theyhold it essentially like another
currency.
So when the dollar is weak,that also strengthens the hand
for gold performance.
Voices (15:47):
This is gold, Mr Barton.
Mostly Uncle Frank (15:50):
Currency speculation is also part of what
goes on in a managed futuresfund, because typically they
have allocations that are shortor long, various currencies
usually the dollar, the yen andthe euro and they will pick up
on trends with respect to thosethings.
Now some of our listeners havealso used currency-related ETFs,
(16:12):
because you can also speculatein currencies just using ETFs.
Voices (16:17):
Well, you have a gambling problem.
Mostly Uncle Frank (16:21):
And if you go back to episode 222, you will
hear a discussion of the dude'svolatility-related portfolio,
which includes a fund called EUOand another one called YCS,
which are essentially short theyen and short the euro against
the dollar.
Voices (16:39):
Yeah, well, the do the binds.
Mostly Uncle Frank (16:43):
Now that would have worked pretty well in
the past, the past few years,given that in years like 2022,
the dollar was strong and thathurt the performance of stocks
and other things, and so thosefunds did well.
It would not perform well in anera like we're in now, where
the dollar is weaker and sothose currencies are stronger.
So I guess my final answer isthat, yeah, you could integrate
(17:07):
currency speculation into aportfolio, but I think it's
going to be a little bitdifficult to do outside of what
kind of naturally occurs inconnection with some of these
other asset classes which haveimplicit currency speculations
built into them.
But I think that's a veryinteresting thing to think about
, or at least to recognize, withrespect to any particular asset
(17:31):
that you might buy, as towhether there is an embedded
currency speculation involved inbuying that asset, and
sometimes there is and sometimesthere isn't Gosh.
So thank you for all theseinteresting questions.
Hopefully this is a little bithelpful, and thank you for your
email.
Voices (17:51):
Second off.
Mostly Uncle Frank (18:09):
Second off, we have an email from Dustin.
Voices (18:12):
Mrs Robinson, you're trying to seduce me, aren't you?
Mostly Uncle Frank (18:20):
Actually, this is a follow-up email to the
one that Dustin asked and weanswered in episode 407.
Mostly Mary (18:27):
And Dustin writes I listened to episode 167 and 168
, where you covered the GDE fund.
Voices (18:34):
Yes.
Mostly Mary (18:35):
Well done and thank you.
Would GDE make sense to givesome gold exposure in an
accumulation portfolio so thatit does not reduce the desired
high stock exposure?
Thanks, dustin.
Voices (18:48):
Would you like me to seduce you?
Mostly Uncle Frank (18:51):
Well, we're talking about GDE again, which
is a fund that has an exposureto both gold and large cap
equities.
So it's got leverage built in,and I think my answer is if
you're trying to build somethinglike a return-stacked portfolio
a la Corey Hofstein or ResolveAsset Management, yeah, you
(19:12):
could use something like GDE toget a gold exposure on top of
your stock exposures.
My preference is still as Imentioned in episode 407, to
keep stocks and non-stock assetsseparate in a portfolio,
because it's easier to rebalancethem then.
But if you wanted to build anaccumulation portfolio that
(19:35):
essentially has some leveragebuilt into it but is designed to
have the same volatilitycharacteristics as, say, a 100%
stock portfolio, which is whatmost of these things are trying
to do, then yeah, you could usesomething like this to do that.
I'm not sure most people needto be doing things like that in
their accumulation portfolio,but I know that some of you have
(19:57):
a gambling problem.
Voices (19:59):
Remember when I got caught stealing all those
watches from Sears but I knowthat some of you have a gambling
problem.
Remember when I got caughtstealing all those watches from
Sears Well, that's nothingbecause you have a gambling
problem.
And remember when I let thatescaped lunatic in the house
because he was dressed likeSanta Claus.
Well, you have a gamblingproblem, Homer.
When you forgive someone, youcan't throw a back at them like
that.
Oh, what a jip.
Mostly Uncle Frank (20:20):
And there are now a lot of new funds that
allow you to do things like thisat relatively low costs.
But I'm going to be moreinterested to see how this plays
out over the next decade or so,because it is kind of a
newfangled way of approachingthese things.
I can smell the chemicalsScience, the concepts are old,
(20:53):
but the applications are newGrabbing speed, grabbing speed.
So hopefully that helps, andthank you for your email.
I'm going home now.
I apologize for what I said.
Voices (21:07):
I hope you can forget it , but I'm going home right now.
Mostly Uncle Frank (21:12):
Last off.
Voices (21:16):
Last off, an email from Jim.
Well, I'm waiting for you,Jimmy boy and Jim writes.
Mostly Mary (21:22):
Hi Frank, what are your thoughts on my current
portfolio?
I'm 49 and will not have apension.
I'm four years into building aninsurance agency and take a
salary of $42,000 currently and$5,000 to $10,000 in
distributions each year.
The past few years I've onlymanaged to max out Roth due to
lower income Fidelity.
(21:43):
I have an HSA Roth andtraditional with $100,000 in
total 40% VUG, 35% VOO, 10% SCHDand 15% BTC.
So I need to grow my nest eggThoughts.
Thanks, love your podcast.
Mostly Uncle Frank (22:02):
Well, jim, you've got a very aggressive
portfolio there, so I hope youhave at least a decade for this
thing to grow.
Just some notes on it.
Vug and VOO have a largeoverlap to them.
Vug is more aggressive than VOO, but if you wanted to pair VUG
(22:23):
with something that was moredifferent than VOO, I would
probably go with something likea small cap value fund, which
could be also an internationalvalue fund, or you could go with
a international large capgrowth fund, which we've talked
about in some recent episodes.
Go back to episode 394, whichwas in January, and then some of
(22:45):
the ones from December.
We had some questions aboutInternational Large Cap Growth
Funds that might be of interestto you looking for a very
aggressive portfolio.
Now you have 10% in SCHD inhere also.
I'm not sure that belongs inthis kind of portfolio if you're
seeking to be the mostaggressive, because that is
(23:06):
essentially a large-cap valuefund and so it's likely to have
lower volatility but also lowerreturns than either something
like a large-cap growth fund ora small-cap value fund.
That's just the nature of thosebeasts.
So something like that issomething you would usually hold
in your retirement portfolioand not in an accumulation
(23:27):
portfolio.
And then there's the Bitcoin.
What can I tell you about theBitcoin?
Voices (23:33):
Well, you have a gambling problem.
Mostly Uncle Frank (23:37):
In the past couple years, bitcoin has
behaved like a levered large-captechnology fund, something like
the Nasdaq levered up two orthree times, and that's really
been kind of the case since it'sbeen adopted more widely by the
financial services industry andany of these ETFs and things
like that.
Whether that's going to changeor not, I don't know.
(23:59):
I don't know what the future ofBitcoin is likely to be.
Voices (24:03):
What do we know?
You don't know, I don't know,nobody knows.
Mostly Uncle Frank (24:11):
I would say it's likely to be volatile, but
it actually may be less volatilenow and going forward than it
was, say, five years ago orbefore 2020.
Its overall volatility has beendecreasing over time as it's
achieved more wide adoption.
I would honestly be a bithesitant to put so much of my
money into such a thing, becauseremember, the idea of having
(24:31):
these things is you're going tobuy more of it when it goes down
.
And because you don't knowwhether it's going to stay down
or how long it's going to staydown, because it's a speculative
asset, it does kind of put youin a kind of a pickle.
It's great if you know it'sgoing to go up, then you just
leave it alone and you're buyingmore of the other things.
But if it collapses and dropsyou know, 80 percent, like it
(24:55):
has historically then are yougoing to go in there and buy
more, because that is whatyou're supposed to do when you
have a portfolio like this.
Voices (25:03):
Then we'll reinvest the earnings into foreign currency
accounts with compoundinginterest, and it's gone.
What it's gone?
It's all gone.
What's all gone?
The money in your account.
It didn't do too well, it'sgone.
Mostly Uncle Frank (25:18):
So I don't know if I'd feel comfortable
with that kind of exposure tothat kind of an asset, even in
an accumulation portfolio.
I'd probably reduce it to, say,5% or less, but that's because
I don't know what it's going todo.
Voices (25:31):
I don't know.
Mostly Uncle Frank (25:33):
So sorry I can't be more helpful on that
one.
Hopefully what I had to sayabout the other ones was helpful
and thank you for your email.
Voices (25:42):
Bow to your sensei.
Bow to your sensei.
Mostly Uncle Frank (25:46):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to frank atriskparityradarcom.
That email is frank atriskparityradarcom.
We are a couple months behindin the email, so it may take a
while before we get to yours.
And if you haven't had a chanceto do it, please go to your
favorite podcast provider andlike, subscribe, give me some
(26:08):
stars or follow or review.
That would be great.
Mostly Mary (26:12):
Okay.
Mostly Uncle Frank (26:14):
Thank you once again for tuning in.
This is Frank Baskett with RiskPriority Radio signing off.
Thank you.
(26:37):
The Risk Parody Radio Show ishosted by Frank Vasquez.
Mostly Mary (27:35):
The content provided is for entertainment
and informational purposes onlyand does not constitute
financial investment tax orlegal advice.
Thank you.
A foolish consistency, is the hobgoblin of little minds
, adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer, a different drummer.
Mostly Mary (00:19):
And now, coming to you from dead center on your
dial, welcome to Risk ParityRadio, where we explore
alternatives and assetallocations for the
do-it-yourself investorBroadcasting to you now from the
comfort of his easy chair.
Here is your host, frankVasquez.
Mostly Uncle Frank (00:37):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
Voices (00:50):
Yeah, baby, yeah.
Mostly Uncle Frank (00:52):
And the basic foundational episodes are
episodes 1, 3, 5, 7, and 9.
Some of our listeners,including Karen and Chris, have
identified additional episodesthat you may consider
foundational, and those areepisodes 12, 14, 16, 19, 21, 56,
(01:13):
82, and 184.
Whoa, and you probably shouldcheck those out too, because we
have the finest podcast audienceavailable.
Mostly Mary (01:26):
Top drawer, really top drawer.
Mostly Uncle Frank (01:31):
Along with a host named after a hot dog.
Voices (01:34):
Lighten up Francis.
Mostly Uncle Frank (01:37):
But now onward, episode 415.
Today, on Risk Parity Radio,we're just going to try to do
what we do best here, which isanswer your emails, and so,
without further ado, here I goonce again with the email.
And First off.
First off, we have an emailfrom Corn Pop.
Voices (02:01):
Ain't nothing wrong with that.
Mostly Mary (02:04):
And Corn Pop writes Howdy Frank and Mary ain't
nothing wrong with that and cornpop rights.
Howdy, frank and mary.
I have listened to everyepisode, currently through 399
and can unequivocally state Ihave learned more about
investing while listening toyour podcast in the last six
months than I have from anyother source in the last 20
years combined you are talkingabout the nonsensical ravings of
(02:24):
a lunatic mind.
Risk.
Parity Radio is an invaluableresource to the DIY investing
community.
Kudos for a job well done.
My only complaint now is I haveto wait for new episodes to be
posted.
Sigh.
Voices (02:38):
I don't understand.
I made a reservation.
Do you have my reservation?
Yes, we do.
Unfortunately, we ran out ofcars.
But the reservation keeps thecar here.
That's why you have thereservation.
I know why we have reservations.
I don't think you do.
Mostly Mary (02:53):
In the meantime, a few unrelated and related risk
parity questions to throw yourway First off.
In past podcasts it wasmentioned that it might be
advantageous to consider anannuity later in life.
I'm managing my healthy78-year-old mother's retirement
portfolio.
Her RMDs and Social Securityeasily pay for her expenses.
(03:13):
Is there some sort ofStein-esque methodology I could
use to determine if an annuitywould be beneficial for her?
If not, maybe a Vasquez-esqueone could be discussed.
Second off, users in thepopular online personal
investment forum Hogelbads oftenand by often I mean always will
eventually recommend using tipsletters at some point during
(03:35):
retirement.
Voices (03:36):
Forget about it.
Mostly Mary (03:37):
For the life of me, I can't figure out when.
I understand letters can beused to bridge income gaps, but
isn't that the purpose of savingfor and using a retirement
portfolio?
You are correct, sir.
Yes.
Wouldn't the money from theportfolio be used to fund the
latter Sounds like robbing Peterto pay Paul.
At 59 and a half, I plan tostart withdrawing 4% from our
(04:00):
golden ratio portfolio.
At that time my spouse mayclaim early Social Security,
while I plan to wait till 70 toclaim For the FOMO.
Do I need a tips ladder?
Forget about it.
Second to last, last off, whileassessing portfolio sector
concentrations, I noticed VIOVholds 8 to 9 percent in REITs.
(04:23):
Should I be adjusting theamount of my other REIT holdings
to account for the REITs inVIOV?
Last off, in a few episodes youargue the benefit, or lack
thereof, of using internationalfunds for diversification and
point to currency speculation asthe reason for the difference.
Is there a way to integratecurrency speculation into a
(04:43):
portfolio?
Thanks for all you do, corn Pop.
Mostly Uncle Frank (04:55):
Well, you've got several good and
interesting questions here.
Voices (04:59):
No more flying solo.
You need somebody watching yourback at all times.
Mostly Uncle Frank (05:04):
Let's just take them in turn.
First talking about your78-year-old mother and whether
she might benefit from anannuity.
Voices (05:14):
Times have changed and times are strange.
Here I come, but I ain't thesame Mama, I'm coming home.
Mostly Uncle Fran (05:29):
Unfortunately , or maybe fortunately, there is
no one kind of analysis thatyou would use to determine
whether somebody would need anannuity or not, because it's
very dependent on theirindividual circumstances and
goals.
But it's one of those thingsthat it has to be fulfilling a
(05:51):
specific goal and can't bechosen just as nice to have
because they're not nice to have.
You either have a specific goalfor them or you don't.
Voices (06:00):
You know, I got friends of mine who live and die by the
actuarial tables and I say, hey,it's all one big crapshoot.
Anyhoo, tell me, have you everheard of single premium life?
Because I think that reallycould be the ticket for you.
Mostly Uncle Frank (06:12):
So when you're talking about somebody in
their 70s, the first questionhas to do with their individual
situation in terms of what istheir health?
Of what is their health?
Because, financially, anannuity is a good deal if you
are likely to outlive youractuarial death date.
That's how they are priced.
So if she is healthy and islikely to live well into her 90s
(06:37):
, an annuity might be a gooddeal financially and it also
reduces the burden of havingfinances to manage at an age
like that.
I was communicating with anotherlistener who was thinking about
this and had a family historyof family members living well
into their 90s and needing someform of long-term care at that
(06:59):
point in time, and she was alittle younger.
But something that might makesense for somebody in that
circumstance might be a QLAC,which is a deferred annuity that
you can buy out of your IRAmoney, and typically the way
that it's done is it's boughtearly in your 70s and it is
designed to be turned onsometime between, say, ages 80
(07:22):
and 85, at which point it willspew out a large stream of cash
that would be available for anykind of long-term care expenses
at that point.
Voices (07:34):
Death stalks you at every turn.
Mostly Uncle Frank (07:37):
So the purpose of that would be to
ameliorate long-term care costsfor somebody who thought they
were going to live a really longtime.
On the opposite side of things,if your mother's in poor health,
then an annuity certainly doesnot make much sense at all.
Now there is another sort ofjust convenience factor that if
you could, for instance,evaluate what her total expenses
(08:02):
are you said it's SocialSecurity and her RMDs cover her
expenses Could you substitute,say, an annuity for the part of
expenses not covered by SocialSecurity, which again simply
just gives you an easy way ofmatching up a payment stream
with a set of expected expenses.
But that again is really onlymore of a convenience, having
(08:26):
not to manage that portion ofthe portfolio much anymore.
And then perhaps she can dosomething else with the rest of
the portfolio, depending on howmuch there is and what other
things she might like to do.
But again, I would thinkthey'll be highly dependent on
(08:57):
her prospects of living a verylong time if you don't start
making more sense, we're gonnahave to put you in a home.
Voices (09:04):
You already put me in a home.
You already put me in a home.
Then we'll put you in thecrooked home.
It's on 60 minutes.
Mostly Uncle Frank (09:17):
I'll be good If you go back to episode 184,
I talked about this at lengthabout what we are thinking about
doing in terms of a processwould be to wait until we were
in our early 70s and thenconsider our health and other
factors to determine whether wewould want one or more simple
annuities or deferred annuitiesat that point in time, such as
the QLAC, because it is truethat once you get into your 70s,
the payout rates for thesethings get very large, and we're
(09:39):
talking about 7, 8, 9 percent.
So those are my thoughts.
Sorry they weren't moreorganized.
Voices (09:46):
Hey, Grandpa, we need to know your first name.
You're making my tombstone.
No, we're just curious.
All right, let's see First name.
First name.
Well, whenever I'm confused, Ijust check my underwear it holds
the answer to all the importantquestions.
Call me Abraham Simpson Grandpahow'd you take off your
(10:08):
underwear without taking offyour pants?
I don't know.
Mostly Uncle Frank (10:13):
But let's move on to your next question.
It's funny you mentioned you'donly gotten up to episode 399 in
this email, which is from earlyFebruary.
If you listen to episode 401, Italk about this issue that it
seems that a lot of over-savedpeople get fixated on
complicated things likelong-term tip slatters, science.
(10:46):
It's like they heard thatWilliam Bernstein and Alan Roth
were doing things like that, sothey thought that they needed to
get on the bandwagon.
Voices (11:00):
To me it's kind of a flex for hoarders, instead of
buying fancy cars or boats orthings they go off and buy
complicated financial structuresthat they don't need, because
it's my birthday and I want it.
Mostly Uncle Frank (11:16):
I think bond ladders, whether they be tips
ladders or not, are best usedfor a defined finite period,
such as a gap between retiringand Social Security or something
of that nature, where you arefilling a specific void, where
an income is required to fulfillthat specific void and you know
(11:38):
that's going to end at aparticular point, so that you
can make your ladder exactly aslong as it needs to be, because
having ladders that are way tooshort or way too long is
extremely inefficient anddoesn't make much sense are you
stupid or something stupid, as astupid does?
Voices (11:55):
sir?
Mostly Uncle Frank (11:56):
and I cited an interview for michael kitsis
by morningstar about this verytopic and I'll link to that
interview again and his point isthe same one that I'm just
making that if you can reallyafford to create a long-term
tips ladder I'm talking aboutsome 30-year thing you probably
are just grossly over savedwhat's with you anyway?
Voices (12:19):
I can't help it.
I'm a greedy slob, it's myhobby.
Mostly Uncle Frank (12:22):
Save me and you don't really need such a
thing, because they are grosslyinefficient.
And the reason they are grosslyinefficient is because they are
the exact opposite of anannuity, in that an annuity is
guaranteed to last for your life, but a 30-year tips ladder is
either likely to be way too longor way too short, unless you
(12:43):
know exactly when you're goingto die or have plans for that in
some way, and it's certainlynot something you would want to
leave around for your heirs tohave to unravel.
Voices (12:54):
That's not an improvement.
Mostly Uncle Frank (12:56):
So when I hear people start talking about
these things, I always ask themwell, how are you going to
balance that with the rest ofyour portfolio, or how is that
going to all work out?
And what you usually find fromsuch a conversation is that
they're just grossly oversaved.
Voices (13:11):
Oh boy, I'm rich, I'm wealthy, I'm independent, I'm
socially secure.
I'm rich, I'm rich, I'm rich,I'm socially secure.
I'm rich, I'm rich, I'm rich.
Mostly Uncle Frank (13:20):
And that they're planning on not spending
the rest of their portfolio orsomething like that.
So it really is something forpeople who want to hoard their
money, to waste their time withand make themselves feel
financially superior to the hoipolloi, I guess.
Voices (13:36):
Flare I think that's the last of it.
Just a quick check to see if Imissed anything.
Hey, what's this?
Mostly Mary (13:44):
Hmm, well, polished up, it might bring another
quick four bits on the openmarket.
Mostly Uncle Frank (13:50):
So, interestingly enough, you hit
upon this just a week before Imade a podcast about it, or at
least talked about it in apodcast.
A strange coincidence.
Hey, you want to see somethingreally scary.
Voices (14:04):
You bet.
Mostly Uncle Frank (14:07):
But go back and check that out and check out
this article I'm going to linkto in the show notes.
All right.
Your second to last offquestion was whether you should
adjust your holdings in a smallcap value fund like viov to
account for the reits that arein it.
I don't think so.
Voices (14:23):
I think that's trying to be too clever by half that and
a nickel, get your hot cup ajack squat but if you have some
reit holdings, that is obviouslygoing to take up some space in
your overall stock allocation.
Mostly Uncle Frank (14:38):
That's why I suppose I would account for it
in looking at the overallportfolio allocations.
But I would not be tooconcerned about the individual
relationship between REITholdings and a small cap value
holding.
And last off, you have aquestion here about using
currency speculation as part ofa portfolio.
Voices (15:00):
You have a gambling problem.
Mostly Uncle Frank (15:08):
And the answer is yeah.
This is kind of implicit in anumber of holdings.
It's implicit if you're holdinginternational stocks because
they are likely to performbetter than US stocks when the
dollar is weak, as we see rightnow in this year so far, and not
as well when the dollar isstrong.
If you are holding gold, thatis partially a currency
speculation because goldessentially functions like an
alternative currency.
(15:29):
It's held by central banks.
Like, central banks hold allkinds of different currencies,
usually mostly reservecurrencies like the dollar, but
they also hold gold and theyhold it essentially like another
currency.
So when the dollar is weak,that also strengthens the hand
for gold performance.
Voices (15:47):
This is gold, Mr Barton.
Mostly Uncle Frank (15:50):
Currency speculation is also part of what
goes on in a managed futuresfund, because typically they
have allocations that are shortor long, various currencies
usually the dollar, the yen andthe euro and they will pick up
on trends with respect to thosethings.
Now some of our listeners havealso used currency-related ETFs,
(16:12):
because you can also speculatein currencies just using ETFs.
Voices (16:17):
Well, you have a gambling problem.
Mostly Uncle Frank (16:21):
And if you go back to episode 222, you will
hear a discussion of the dude'svolatility-related portfolio,
which includes a fund called EUOand another one called YCS,
which are essentially short theyen and short the euro against
the dollar.
Voices (16:39):
Yeah, well, the do the binds.
Mostly Uncle Frank (16:43):
Now that would have worked pretty well in
the past, the past few years,given that in years like 2022,
the dollar was strong and thathurt the performance of stocks
and other things, and so thosefunds did well.
It would not perform well in anera like we're in now, where
the dollar is weaker and sothose currencies are stronger.
So I guess my final answer isthat, yeah, you could integrate
(17:07):
currency speculation into aportfolio, but I think it's
going to be a little bitdifficult to do outside of what
kind of naturally occurs inconnection with some of these
other asset classes which haveimplicit currency speculations
built into them.
But I think that's a veryinteresting thing to think about
, or at least to recognize, withrespect to any particular asset
(17:31):
that you might buy, as towhether there is an embedded
currency speculation involved inbuying that asset, and
sometimes there is and sometimesthere isn't Gosh.
So thank you for all theseinteresting questions.
Hopefully this is a little bithelpful, and thank you for your
email.
Voices (17:51):
Second off.
Mostly Uncle Frank (18:09):
Second off, we have an email from Dustin.
Voices (18:12):
Mrs Robinson, you're trying to seduce me, aren't you?
Mostly Uncle Frank (18:20):
Actually, this is a follow-up email to the
one that Dustin asked and weanswered in episode 407.
Mostly Mary (18:27):
And Dustin writes I listened to episode 167 and 168
, where you covered the GDE fund.
Voices (18:34):
Yes.
Mostly Mary (18:35):
Well done and thank you.
Would GDE make sense to givesome gold exposure in an
accumulation portfolio so thatit does not reduce the desired
high stock exposure?
Thanks, dustin.
Voices (18:48):
Would you like me to seduce you?
Mostly Uncle Frank (18:51):
Well, we're talking about GDE again, which
is a fund that has an exposureto both gold and large cap
equities.
So it's got leverage built in,and I think my answer is if
you're trying to build somethinglike a return-stacked portfolio
a la Corey Hofstein or ResolveAsset Management, yeah, you
(19:12):
could use something like GDE toget a gold exposure on top of
your stock exposures.
My preference is still as Imentioned in episode 407, to
keep stocks and non-stock assetsseparate in a portfolio,
because it's easier to rebalancethem then.
But if you wanted to build anaccumulation portfolio that
(19:35):
essentially has some leveragebuilt into it but is designed to
have the same volatilitycharacteristics as, say, a 100%
stock portfolio, which is whatmost of these things are trying
to do, then yeah, you could usesomething like this to do that.
I'm not sure most people needto be doing things like that in
their accumulation portfolio,but I know that some of you have
(19:57):
a gambling problem.
Voices (19:59):
Remember when I got caught stealing all those
watches from Sears but I knowthat some of you have a gambling
problem.
Remember when I got caughtstealing all those watches from
Sears Well, that's nothingbecause you have a gambling
problem.
And remember when I let thatescaped lunatic in the house
because he was dressed likeSanta Claus.
Well, you have a gamblingproblem, Homer.
When you forgive someone, youcan't throw a back at them like
that.
Oh, what a jip.
Mostly Uncle Frank (20:20):
And there are now a lot of new funds that
allow you to do things like thisat relatively low costs.
But I'm going to be moreinterested to see how this plays
out over the next decade or so,because it is kind of a
newfangled way of approachingthese things.
I can smell the chemicalsScience, the concepts are old,
(20:53):
but the applications are newGrabbing speed, grabbing speed.
So hopefully that helps, andthank you for your email.
I'm going home now.
I apologize for what I said.
Voices (21:07):
I hope you can forget it , but I'm going home right now.
Mostly Uncle Frank (21:12):
Last off.
Voices (21:16):
Last off, an email from Jim.
Well, I'm waiting for you,Jimmy boy and Jim writes.
Mostly Mary (21:22):
Hi Frank, what are your thoughts on my current
portfolio?
I'm 49 and will not have apension.
I'm four years into building aninsurance agency and take a
salary of $42,000 currently and$5,000 to $10,000 in
distributions each year.
The past few years I've onlymanaged to max out Roth due to
lower income Fidelity.
(21:43):
I have an HSA Roth andtraditional with $100,000 in
total 40% VUG, 35% VOO, 10% SCHDand 15% BTC.
So I need to grow my nest eggThoughts.
Thanks, love your podcast.
Mostly Uncle Frank (22:02):
Well, jim, you've got a very aggressive
portfolio there, so I hope youhave at least a decade for this
thing to grow.
Just some notes on it.
Vug and VOO have a largeoverlap to them.
Vug is more aggressive than VOO, but if you wanted to pair VUG
(22:23):
with something that was moredifferent than VOO, I would
probably go with something likea small cap value fund, which
could be also an internationalvalue fund, or you could go with
a international large capgrowth fund, which we've talked
about in some recent episodes.
Go back to episode 394, whichwas in January, and then some of
(22:45):
the ones from December.
We had some questions aboutInternational Large Cap Growth
Funds that might be of interestto you looking for a very
aggressive portfolio.
Now you have 10% in SCHD inhere also.
I'm not sure that belongs inthis kind of portfolio if you're
seeking to be the mostaggressive, because that is
(23:06):
essentially a large-cap valuefund and so it's likely to have
lower volatility but also lowerreturns than either something
like a large-cap growth fund ora small-cap value fund.
That's just the nature of thosebeasts.
So something like that issomething you would usually hold
in your retirement portfolioand not in an accumulation
(23:27):
portfolio.
And then there's the Bitcoin.
What can I tell you about theBitcoin?
Voices (23:33):
Well, you have a gambling problem.
Mostly Uncle Frank (23:37):
In the past couple years, bitcoin has
behaved like a levered large-captechnology fund, something like
the Nasdaq levered up two orthree times, and that's really
been kind of the case since it'sbeen adopted more widely by the
financial services industry andany of these ETFs and things
like that.
Whether that's going to changeor not, I don't know.
(23:59):
I don't know what the future ofBitcoin is likely to be.
Voices (24:03):
What do we know?
You don't know, I don't know,nobody knows.
Mostly Uncle Frank (24:11):
I would say it's likely to be volatile, but
it actually may be less volatilenow and going forward than it
was, say, five years ago orbefore 2020.
Its overall volatility has beendecreasing over time as it's
achieved more wide adoption.
I would honestly be a bithesitant to put so much of my
money into such a thing, becauseremember, the idea of having
(24:31):
these things is you're going tobuy more of it when it goes down
.
And because you don't knowwhether it's going to stay down
or how long it's going to staydown, because it's a speculative
asset, it does kind of put youin a kind of a pickle.
It's great if you know it'sgoing to go up, then you just
leave it alone and you're buyingmore of the other things.
But if it collapses and dropsyou know, 80 percent, like it
(24:55):
has historically then are yougoing to go in there and buy
more, because that is whatyou're supposed to do when you
have a portfolio like this.
Voices (25:03):
Then we'll reinvest the earnings into foreign currency
accounts with compoundinginterest, and it's gone.
What it's gone?
It's all gone.
What's all gone?
The money in your account.
It didn't do too well, it'sgone.
Mostly Uncle Frank (25:18):
So I don't know if I'd feel comfortable
with that kind of exposure tothat kind of an asset, even in
an accumulation portfolio.
I'd probably reduce it to, say,5% or less, but that's because
I don't know what it's going todo.
Voices (25:31):
I don't know.
Mostly Uncle Frank (25:33):
So sorry I can't be more helpful on that
one.
Hopefully what I had to sayabout the other ones was helpful
and thank you for your email.
Voices (25:42):
Bow to your sensei.
Bow to your sensei.
Mostly Uncle Frank (25:46):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to frank atriskparityradarcom.
That email is frank atriskparityradarcom.
We are a couple months behindin the email, so it may take a
while before we get to yours.
And if you haven't had a chanceto do it, please go to your
favorite podcast provider andlike, subscribe, give me some
(26:08):
stars or follow or review.
That would be great.
Mostly Mary (26:12):
Okay.
Mostly Uncle Frank (26:14):
Thank you once again for tuning in.
This is Frank Baskett with RiskPriority Radio signing off.
Thank you.
(26:37):
The Risk Parody Radio Show ishosted by Frank Vasquez.
Mostly Mary (27:35):
The content provided is for entertainment
and informational purposes onlyand does not constitute
financial investment tax orlegal advice.
Thank you.
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