In this episode we answer emails from Chris, Will and Neelix. We discuss the basics of transitioning from accumulation to decumulation, choosing funds for accumulation from a limited selection, more transitioning questions from an alien, my lawyerly approach to personal finance and why the public personal finance landscape is often not very helpful and leaves much to be desired.
Frank addresses listener questions about transitioning from accumulation to retirement portfolios, focusing on timing and asset allocation decisions for different life stages. The episode explores foundational concepts about when to shift to a less aggressive portfolio and how to work around investment account limitations.
Links:
All Podcasts On One Web Page: Risk Parity Radio RSS Feed
Merriman ETF Recommendations: Best-in-Class ETF Recommendations | Merriman Financial Education Foundationj
Breathless Unedited AI-Bot Summary:
Ready to make the leap from aggressive growth investing to a more balanced retirement portfolio? Join Frank Vasquez as he breaks down one of investing's most critical transitions through thoughtful analysis of listener questions spanning different life stages and portfolio challenges.
We dive deep into the essential question of timing: when should you transition from accumulation to decumulation? Unlike conventional wisdom that focuses on market conditions, Frank reveals why your personal financial readiness should be the primary consideration. Learn why calculating your Financial Independence number is crucial and why your current spending patterns offer surprisingly reliable guidance for retirement planning.
For younger investors struggling with 401(k) limitations, Frank offers practical strategies to achieve optimal asset allocation across multiple account types. His clear breakdown of why certain asset classes (looking at you, small-cap growth) deserve caution while others merit emphasis provides actionable guidance regardless of your investment timeline.
What sets this episode apart is Frank's candid assessment of the personal finance media landscape. Drawing from his background cross-examining financial experts, he categorizes financial content into entertainment, sales, and education - explaining why most advice falls short for those who actually plan to spend money in retirement. His Bruce Lee-inspired approach to financial wisdom - "take what is useful, discard what is useless, and add something uniquely your own" - offers a refreshing framework for cutting through the noise.
Whether you're decades from retirement or counting down the years, you'll gain valuable perspective on building a portfolio strategy that serves your actual spending goals rather than following the crowd. Share your own portfolio questions at frank@riskparityradio.com!
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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 pace withhis 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 to episode 419.
Today, on Risk Parody Radio,we're just going to get back to
doing what we do best here,which is answer your emails.
Voices (01:48):
Yes.
Mostly Uncle Frank (01:49):
And so without further ado.
Voices (01:52):
Here I go once again with the email.
Mostly Uncle Frank (01:55):
And First off, first off, an email from
Chris.
What?
And Chris writes?
Mostly Mary (02:04):
Hey Frank, I recently discovered your podcast
.
I am a do-it-yourselfer, butwithout much experience.
I've been searching foralternative portfolios to smooth
out the ups and downs inretirement.
Now, seven years away, attack,speed, attack speed.
Glad I found your work.
It has helped tremendously.
I'm so excited.
(02:26):
I like the golden butterfly.
Would you suggest a gradualshift toward it over a few years
leading up to retirement, or gocold turkey and switch?
If so, at what point in time?
Right now, my wife and I holdapproximately 85% total stock
(02:46):
market and 15% internationalstock.
I appreciate all you do.
Thank you, chris.
Voices (02:53):
And then he followed it up with yet another.
What?
Well, welcome to the pleasuredome On our way home, going home
where love is warm, long wayfrom home.
Welcome to the pleasure dome.
Mostly Uncle Frank (03:20):
What you were talking about is generally
what we call transitioning.
Voices (03:25):
And that's the way.
Uh-huh, uh-huh, I like it.
Mostly Uncle Frank (03:28):
And we do talk about this very frequently
on this podcast.
But since you're new here, youwouldn't know that.
Voices (03:34):
But you know something, you're all right.
Mostly Uncle Frank (03:39):
So in the past year, let me give you these
podcasts where we've talkedabout this and then I will
answer your question directly.
We've talked abouttransitioning in episodes 329,
346, 360, 361, 362, 380, 389,and 417.
So you may want to go back andlisten to those, and that's just
(04:03):
in the past year.
If you'd like to search thepodcast, you can do that from
the podcast website atwwwriskparametercom.
But probably the easier way todo that is to actually look at
the RSS feed, where you'll seeall of the podcasts and all of
the show notes on one big page.
Don't try to open that on yourphone.
(04:24):
Open it up in a browser in yourcomputer and you can search
that whole one page for whateverwords you're interested in,
including transitioning, and youwill find a plethora of
material about this topic.
So let's talk abouttransitioning from an
accumulation portfolio to adecumulation portfolio, at least
(04:45):
in some broad strokes here.
The issue here has not to dowith what is going on in the
markets per se, but what's moreimportant is what is going on in
your personal life in terms ofyour finances, and what I mean
by that is how close are you tohaving enough money to retire?
Because that's the firstconsideration.
(05:06):
A transition is not going to beappropriate until you've either
reached that number.
You have enough money to retiregiven the rest of your
resources, or you will, witheven some moderate growth, be
able to reach that in the nextfew years.
So if you're like 85% there andyou have five years to go,
(05:26):
you're essentially there interms of a FI number.
The biggest problem most peoplehave here is they haven't
actually calculated how muchthey need and oftentimes they
make up reasons in their headwhy they don't think they can
calculate this number.
That goes something like Idon't know what I'm going to be
doing in five years or 10 years.
Voices (05:45):
Real wrath of God type stuff.
Mostly Uncle Frank (05:47):
I don't know what inflation is going to be.
I might break three of my legs.
Voices (05:51):
Fire and brimstone coming down from the skies,
rivers and seas boiling 40 yearsof darkness, earthquakes,
volcanoes, the dead rising fromthe grave.
Mostly Uncle Frank (06:00):
I might decide I want to open a zoo like
the Tiger King or somethinglike that.
Voices (06:04):
I might decide I want to open a zoo like the Tiger King
or something like that.
Human sacrifice dogs and catsliving together, mass hysteria.
Mostly Uncle Frank (06:13):
The truth is , what you're spending right now
is probably a good estimate ofwhat you're likely to spend in
retirement, with a fewadjustments, and your spending
is likely to go down inretirement, either nominally or
certainly less inflationary thanthe CPI.
And if your children areleaving the house, that's also a
sign that your expenses areabout to drop.
But that's the first thing youneed to do is add up your
(06:35):
expenses, your annual expensesright now and over the past few
years, and then use that as abasis for projecting what you're
going to spend in the future,and chances are it's not going
to be that much different.
Voices (06:51):
You can't handle the dogs and cats living together.
Mostly Uncle Frank (06:52):
I can tell you that our expenses have gone
down on a nominal basis over thepast five years of retirement.
But that is the first questionthat you need to answer have you
reached your financialindependence number in terms of
having enough money to retire,or will you reach it with
moderate growth in the next fewyears?
(07:13):
Then the second question youwant to ask yourself is is your
current portfolio situation ator near an all-time high?
Then this is just the idea thatyou want to sell high and buy
low, because you're going from amore aggressive portfolio to a
less aggressive portfolio, andso, ideally, when you've hit
(07:33):
your fine number and you're atan all-time high or near an
all-time high, that's a goodtime to transition.
Voices (07:40):
That is the straight stuff.
Oh funk master.
Mostly Uncle Frank (07:43):
Now.
We did ours about five yearsbefore we pulled the plug on
employment, and I see you'reseven years away.
So you're getting into the areawhere you should be considering
this and doing thesecalculations and the advantages.
The closer that you get to it,the more your expenses are going
to converge on what you expectthem to be.
Now, assuming those two thingsare true, you've reached a FI
(08:07):
number and you're at or near anall-time high.
You could make the transition inone fell swoop if you wanted to
, and that would be the easiestway to go about this, usually,
because oftentimes there are taxreasons or other reasons,
depending on what your accountset up, where these assets are
and those factors that play intohow this transition actually
(08:29):
happens in practical terms.
But the general rule is onceyou have won the game, you can
stop playing with all of yourchips.
That's from William Bernstein,because even in a retirement
configuration, particularly ifyou're not taking money out of
the portfolio, it's still goingto grow.
It's just going to grow moremoderately and with less
volatility than it would have ifyou were to leave it in 100%
(08:53):
stocks Now.
You could also do it moregradually, but it's probably
going to be more work actuallyto do it that way, but neither
choice is wrong.
What you really want to be in aposition, though, is everything
is all lined up where you wantit to be in a retirement
configuration before you stopworking.
(09:13):
That's the goal, and if you cando that three years before
retirement, great.
If you can do it five yearsbefore retirement, great.
If you can do it five yearsbefore retirement, great.
If you could do it now, thatwould be great too, because the
other thing you can consider is,if you have a pot of money that
covers your retirement expenses, you can convert that to your
(09:37):
retirement portfolio, and then,the rest of the new money coming
in, you can invest it any wayyou want to, or you can just
spend it.
You can do whatever you wantwith it.
So some people still want tohave some kind of aggressive
portfolio, and so you could usethe new money to create this new
aggressive portfolio if youreally wanted it.
(09:58):
That would be appropriate forsomebody who wanted to die with
the most money possible.
Voices (10:04):
What's with?
Mostly Uncle Frank (10:05):
you anyway.
Voices (10:06):
I can't help it.
I'm a greedy slob.
It's my hobby.
Mostly Uncle Frank (10:10):
Because if you continue to accumulate in
retirement with a highpercentage of equities in your
portfolio, the goal of that kindof portfolio is to accumulate
the most possible at death.
Voices (10:21):
Death stalks you at every turn.
Mostly Uncle Frank (10:24):
And if you don't want to do that, well, you
can put it into your retirementportfolio or you can put it in
cash.
Some people like to do that.
You have a lot of options onceyou've determined what that
(10:45):
retirement number is and thenallocated the necessary assets
to cover that to your retirementportfolio.
So that is just an overview.
As I mentioned, things willvary depending on how your
assets are organized, what taxbrackets you're in, so on and so
forth.
But if you want to hear aboutdifferent people's situations
(11:09):
and what I've said about thembefore, go back and listen to
those episodes I mentioned, andthen you can even search
transitions in the prior ones,because I only went back one
year on this for you.
Hopefully that helps, and thankyou for your email.
Voices (11:25):
Here's a horoscope for everyone Aquarius you're going
to die.
Capricorn you're going to die.
Gemini you're going to dietwice.
Mostly Uncle Frank (11:41):
Second off.
Second off we have an emailfrom Will Danger, will.
Voices (11:47):
Robinson Danger, danger.
Mostly Uncle Frank (11:51):
And Will writes.
Mostly Mary (11:53):
Hi Frank, Thanks for all the great content on
your podcast.
Voices (11:57):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Mary (12:02):
My wife and I are in our late 20s and have $90,000
invested between my 401k andRoth IRA.
Our current portfolio is$50,000 in the 401k split 75%
VIIIX and 25% VIEIX and $40,000in the Roth split, half and half
(12:27):
between VTSAX and VSIAX.
My wife is a stay-at-home momand we're at the upper limits of
what we can save, so a Roth forher or a 401k aren't an option
right now.
I'd like to move towards anaccumulation portfolio that's
50% large cap, 50% small capvalue.
What makes this tricky is ourcontributions to the 401k will
(12:51):
be about three times higher thanthe Roth each year due to
employer match and Roth limits,and the only index funds
available are VIIX and VIEIX.
There is a small cap value fundASVDX available, but it has a
high expense ratio and hasunderperformed historically.
(13:13):
The options I can see availableare the following One, invest
all of the 401k in VIIIX and allof the Roth and small cap,
knowing that our portfolio willincreasingly be weighted towards
large cap as time goes on.
Within 20 years it will becloser to 75% large cap, 25%
small cap value.
(13:33):
Two, invest 50% of our overallportfolio in VIIIX, the rest of
the 401k in VIEIX or ASVDX andall of the Roth and small cap
value.
Vieix gives me more mid-capexposure than preferred and I am
not a fan of ASVDX.
(13:55):
Do you have any suggestions onwhich approach you would take if
you were in our shoes?
Any other ideas to consider?
Also, would you invest the Rothin AV, uv or VIOV?
Please consult your crystalball if you are unsure.
Thanks for everything, will.
Your crystal ball can help you.
(14:15):
It can guide you.
Mostly Uncle Frank (14:19):
Well, the good news, will, is, regardless
of whatever you do here, you'regoing to be fine because you're
investing in 100% equities andlow-cost index funds, and so the
exact combination is really notas critical as the fact you are
doing that and not investing intarget date funds or doing
(14:39):
something screwy with individualstocks or managed mutual funds,
et cetera.
Voices (14:45):
Never go in against a Sicilian when death is on the
line.
Mostly Uncle Frank (14:55):
So this is going to work either way you go.
So this is going to work eitherway you go.
I guess if I were you, I wouldprobably go with option one that
you mentioned invest all of the401k in VIIX, which is the same
thing as VTI or VTSAX, really,and then put all the Roth in a
small cap value fund.
Because two things youmentioned that within 20 years
(15:22):
it'd be closer to 75% large capand 25% small cap value.
That actually may not be true,and the reason it's not likely
to be true is you guys are goingto be making more money through
time and so you are going tohave more room to invest outside
of the 401k.
So you're not only going tohave your 401k and your Roth
IRAs and you can have one inyour wife's name even though
(15:46):
she's not working, becauseyou're working and you're
married.
So don't forego thatopportunity.
Make sure you're also puttingmoney in her name in an IRA, and
once you fill those two thingsup, then you can fill up
ordinary brokerage accounts andyou can put all kinds of small
cap value or else you want inthose accounts, because they're
not restricted by the options inthe 401k.
(16:08):
So I'd be thinking about it interms of that going forward in
the future and looking at 20years out.
I did not look up ASVDX, butI'll take your word that it's a
high fee fund that hasunderperformed historically, in
which case I'd say, yeah, don'tbother with that, forget about
it.
Vieix is that extended marketfund from Vanguard.
(16:33):
It's okay, but what I reallydon't like about it is it seems
to tilt towards small cap growth, and small cap growth is
definitely not where you want tobe.
That's the one sector in thestyle boxes.
If you go over to Morningstar,you can see the style boxes and
you should take a look at that.
The one sector you probablywant to stay out of is the small
(16:54):
cap growth sector because it isthe most speculative and has
the worst risk reward kind ofratio to it.
When you're looking at thatstyle box tic-tac-toe board is
what it looks like you want tokind of stay out of the lower
right-hand quadrant.
Keep most of your investmentssort of to the left of a line
(17:15):
that goes from the bottom leftto the top right a diagonal line
that goes from the bottom leftto the top right a diagonal line
and then don't put too much inlarge cap value during
accumulation, because that isreally the thing you want to
have in retirement if you'regoing to have it at all.
It's just lower risk and lowerreward overall, so you will
reach your goals either way, butI would go with option one of
(17:35):
the two you presented.
You also asked about AVUV orVIOV in the Roth.
I'd probably go with AVUV.
These days I think thebest-in-class ETF
recommendations that PaulMerriman makes in his site are
pretty good and they do use anice process for coming up with
(17:55):
those.
That's very analytical.
But again, any of the fundsthat are listed there in their
best-in-class recommendationsare going to work pretty well.
I think they go with AVUV asthe US small-cap value fund that
they give their highestrecommendation to.
Voices (18:13):
I gotta have more cowbell.
I gotta have more cowbell.
Mostly Uncle Frank (18:16):
So I'd probably pick that one, but you
can't go wrong either way withany of these.
Hopefully that helps, and thankyou for your email.
Voices (18:36):
Last off.
Mostly Uncle Frank (18:38):
Last off an email from Neelix I'm not a
fighter, I'm just a cook.
Voices (18:47):
Who sometimes imagines himself to be a diplomat.
On the contrary, mr Neelix, youare much more than that.
You are perhaps the mostresourceful individual I have
ever known.
I always thought you justtolerated me.
You do have some annoying habits.
Mostly Uncle Frank (19:10):
And Neelix writes.
Mostly Mary (19:13):
Hey, frank, love the show.
It's the perfect soundtrack tomy daily commute, especially
when you're duking it out withother bloggers like Karsten.
It's hilarious how you call himbiased while simultaneously
showering him with praise forarticles about oh I don't know
gold and small cap value, which,coincidentally, you also happen
to love.
If I didn't know you were alawyer, I would definitely think
(19:35):
you were a lawyer.
Just kidding, Mostly we use theSocratic method here, but
seriously, you do a great jobpointing us towards better
portfolio construction At times,you may feel that you have
found the correct answer.
Voices (19:52):
I assure you that this is a total delusion on your part
.
Mostly Mary (19:56):
I'm about 10 years away from early retirement at 55
, I hope, currently rocking an85% stock portfolio.
Because clearly I like to liveon the edge and you won't be
angry, I will not be angry.
So I've gone and done somethingslightly less insane for the
future.
I opened a Fidelity account andstarted a risk parity fire
(20:19):
portfolio for my golden dayswhere I will live off the safe
withdrawal rate.
It's only got five grand as seedmoney, but the allocation I've
set is 33% large cap value, 33%small cap growth, because don't
we love a cowbell?
Voices (20:36):
I'm telling you, fellas, you're gonna want that cowbell
25% 10-year treasury, for a bitof safety.
Mostly Mary (20:43):
5% gold, because soundbite, I love gold.
Voices (20:48):
I love gold.
Mostly Mary (20:51):
And 4% cash equivalent, because, guess what?
I will have to pay other billsNow for the million dollar or
hopefully much more question doI keep feeding my existing
aggressive growth portfolio ordo I throw all my future funds
at this new, slightly lessbonkers fire portfolio?
(21:11):
I'm torn.
Help me, frank Neelix, hailthem.
Voices (21:27):
Whoever you are, I found this waste zone first.
We're not interested in thisdebris.
Mr Neelix, prepare to firephasers.
Our target, mr Neelix, fire.
Mostly Uncle Frank (21:47):
Well, let's talk about your personal
portfolio questions first, andthen we'll start talking about
personal finance, media andgurus, etc.
So, looking at what you've gothere, I think you've got things
a little bit mixed up, or maybeyou just wrote them the wrong
way.
In your email you said you have33% large cap value and 33%
small cap growth.
(22:08):
I think you've got those mixedup.
Voices (22:11):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (22:15):
You want those in large cap growth and
small cap value Because, as Ijust mentioned to Will, the last
emailer, you probably want tostay away from the small cap
growth category unless you'reactually doing some stock
picking, and this is not theshow for that.
Voices (22:33):
Not going to do it Wouldn't be prudent at this
juncture.
Mostly Uncle Frank (22:36):
Large cap value is something you can
include as part of your valueallocation in a retirement
portfolio, but I'd consider itmore as an add-on than some kind
of necessity, as I've mentionedin many other podcasts.
In terms of the portfolio youwant to get to for a good
retirement portfolio with a high, safe withdrawal rate, you want
(22:58):
to split your equities intogrowth and value as the first
denominator, or firstdifferentiator, I should say,
and then you can consider thingslike size factors, sectors,
what country they're from, allthose other things, but the
first thing is to split betweengrowth and value, although stay
away from small cap growth ingeneral, gosh, okay, then your
(23:22):
overall question was do you keepfeeding your existing
aggressive growth portfolio withall your future funds into your
new, slightly less bonkers fireportfolio, as you described it?
Voices (23:33):
Dogs and cats living together mass hysteria.
Mostly Uncle Frank (23:36):
And I think this goes back to the answer to
the first question we had iswhere are you in the process of
accumulating enough money toretire, is the big question.
Have you accumulated enoughalready or do you still need to
accumulate considerably more?
And so all of my answers to thefirst email or apply here that
you should add up your annualexpenses, use those to help you
(24:01):
determine what you're likely tobe spending in the future and
for most people it's not likelyto change that much and more
likely to go down than up,especially after you take into
account taxes.
And so here you do run intothis kind of preference kind of
thing that, if you think you canjust kind of glide in and
you're getting close to thatnumber, yeah, you could build up
(24:22):
the new portfolio and leave theold one alone for a while and
then transition more of it later.
Or you could make the shiftearlier.
10 years out is pretty early, soprobably wait at least another
three years before reallylooking at it, because things
could change in terms of whenyou really want to retire.
So either one is fine, just aslong as you do get your
(24:46):
portfolio set up so that youhave that retirement money in
your retirement portfolioseveral years before you
actually pull the plug, becauseyour biggest risk is having some
kind of big drawdown rightbefore you retire.
And that is also why you wantto do this when your current
portfolio is at or near anall-time high, because then you
(25:07):
know you are selling high.
Buy low sell high Fear.
That's the other guy's problem.
Now getting to the funquestions about my presentation
style and what I'm doing here.
Voices (25:22):
You mean, let me understand this, because maybe
it's me.
I'm funny how I mean funny likeI'm a clown.
I amuse you, I make you laugh.
Mostly Uncle Frank (25:31):
So my background is as a lawyer and I
spent most of my career workingwith and cross-examining
financial and technical expertsand these are everybody from
people that appraise real estateto people who have won Nobel
Prizes in economics.
So my approach to personalfinance is as a lawyer,
(25:52):
cross-examining experts.
Voices (25:56):
You can't handle the truth.
Mostly Uncle Frank (25:58):
Which means the first thing I do is separate
the ideas of somebody from theperson, which is actually not
the way personal finance isgenerally presented.
Voices (26:09):
You need somebody watching your back at all times.
Mostly Uncle Frank (26:12):
So I generally like lots of people in
personal finance land.
I like most of them, except forthe ones that are actually
selling things.
Voices (26:21):
Always be closing, always be closing, always be
closing.
Mostly Uncle Frank (26:27):
The Ned Ryerson's of the world.
Voices (26:30):
You know, whenever I see an opportunity now, I charge it
like a bull, ned the Bull,that's me.
Now, you know, I got friends ofmine who live and die by the
actuarial tables and I say, hey,it's all one big crapshoot.
Anywho, tell me, have you everheard of single premium life?
Because I think that reallycould be the ticket for you.
Mostly Uncle Frank (26:48):
But I'm going to apply the Bruce Lee
principles to whatever somefinance guru is saying, which
means take what is useful,discard what is useless and add
something that is uniquely yourown.
What the hell that is uniquelyyour own, what the?
But let's step back and talkabout how the personal finance
(27:09):
media landscape is presented.
Generally, most of personalfinance is personality-based,
which leads to two fallaciousreasons for doing something.
One is the appeal to authorityoh, this person is famous, they
must know things, they'vewritten some books.
Therefore, let's just do whatthey say.
(27:31):
Or the appeal to popularity,which also goes with this fame,
culture kind of thing.
Everybody else is doing it thisway.
That's what we do in ourpersonal finance club, or
whatever we want to call it.
It's the popular thing to do.
(28:01):
Therefore, that's what weshould do.
Both of these are well-knownfallacious arguments, fallacious
reasons for doing somethingbased either on mere authority
or popularity, and they do alsorepresent a form of intellectual
laziness that you're notwilling to really grapple with
the raw arguments of what isbeing presented, aside from the
personality or the group that isbeing presented in.
(28:21):
I'm not a smart man.
If you're going to be a goodlawyer, you need to quickly get
beyond appeals to authority andappeals to popularity, and I
believe the same is true withjust about any kind of decision
making you can make, at least ifit's important to you.
Yet you only want to use appealto authority or appeal to
popularity where you reallydon't care about the decision
(28:44):
that much, as in what to eat atthis restaurant.
Voices (28:50):
Who wants an orange whip ?
Orange whip, orange whip, threeorange whips.
Mostly Uncle Frank (28:57):
And then when I look at sort of the
personal finance media landscape, it falls into three kind of
categories.
One is the purely exploitative,for entertainment purposes.
These things sound a lot likeJerry Springer, and people that
fall into this category includeSusie Orman and Dave Ramsey and
(29:20):
this hammer guy that's popularon YouTube these days, and a
little bit Ramit Sethi, althoughhe's nice about it.
But the idea for those kind ofshows is let's actually go out
and find somebody who's doingkind of stupid stuff.
Voices (29:35):
Are you stupid or something?
Mama says stupid is as stupidas it is.
Mostly Uncle Frank (29:41):
And then tell them how stupid they are
and the whole audience willobviously be able to see how
stupid they are and the wholeaudience will obviously be able
to see how stupid they are andwhat the answer is, and and it's
easy and we all agree, butfundamentally it's a kind of
exploitative entertainment whatdo you want to buy?
Voices (29:58):
hey, everybody, suzy o here.
Now can I afford?
It has been gamified, whichmeans you're going to get to
listen to the caller.
You're going to say, show methe money to yourself anyway,
and then you're going to get toapprove or deny it.
You think you're going to beright or wrong.
Let's go and try it right now.
Mostly Uncle Frank (30:24):
Yeah, and usually the things at issue are
just things like you know know,people being in ridiculous debt
because they're keeping 100canaries in their barn or
something silly like that.
The next category and these dooverlap a lot is the sales
category.
People are fundamentallyselling you something.
Voices (30:40):
A, b, C, a, always B, b, c.
Closing, always be closing.
Mostly Uncle Frank (30:47):
Either in terms of products that they are
promoting or referrals thatthey're coming up with.
Oftentimes, it is actually thesponsors on the program that
they are funneling theiraudience to, because only one
thing counts in this life Getthem to sign on the line which
is dotted and generally the goalthere is just to attract clicks
(31:10):
and eyeballs.
Present something that isinteresting enough that you'll
attract a big audience and thenyou can sell things to them
sitting out there waiting togive you their money.
Voices (31:21):
Are you gonna take it?
Mostly Uncle Frank (31:23):
that's what most of financial media is
actually about.
It's presented more like sportsor something like that, or the
style pages and then finally, atleast in popular personal
finance, and that's really whatI'm talking about here.
I'm not talking aboutprofessionals talking to each
other.
The final category is peoplethat present themselves as
(31:43):
educators.
The educator, media personalityand most of your personal
finance gurus present themselvesthis way, and they write books
and they make appearances andthey have media outlets which
range from TikTok to books thesedays, and most of these people
are very well-meaning and theymay be promoting their book or
(32:04):
their course or their club orsomething like that, but their
idea is to try to present goodinformation to each other.
But this group is kind of liketheir own kind of club.
Nobody in the educator side offinancial media really wants to
(32:27):
criticize anybody else in thesame field, because they all
appear at the same conferencesand so differences are always
minimized.
People want to be on eachother's programs,
cross-promoting, so on and soforth, and so if you want to
belong to that club, you have toplay nice in the sandbox with
everybody else in the club.
Voices (32:47):
I want you to be nice.
Mostly Uncle Frank (32:51):
There's kind of an unwritten rule that true
conflicts are not really allowed, so they end up always we'll
agree to disagree and thedisagreements are minimized or
papered over or people will saywell, you know, it's kind of
personal and you can just dowhat you want.
And that is typically howpodcasts are run these days in
(33:13):
personal finance land.
People get their guests on andthere are not critiques that are
thrown or comparisons that aremade, so you never get down to
deciding which arguments arebetter and why.
On the level of a kind ofcross-examination that I would
do, all conflicts are leftunresolved, so everybody can go
on their merry way and promotetheir merry things.
Voices (33:35):
Whoa, that's the thing you should see, but don't worry
you can sometimes.
Mostly Uncle Fran (33:44):
Unfortunately , what that tends to play into
is this appeal to authority andappeal to popularity that these
folks rely on to attract andmaintain their audiences.
And all that's probably fine ifyou want to take a superficial
approach to this.
But if you are a real DIYer whowants to do the best thing for
(34:06):
their own finances and reallymanage your money particularly
when you're talking aboutgetting to retirement and
drawdowns and things like thatyou need to go beyond this kind
of popularity thing where peoplereally are never questioning
each other's ideas and decidingone way or the other whether
this idea is the best one inthis particular situation,
(34:28):
Because typically you're talkingabout a certain idea that's
applicable in one situation butnot applicable in another
situation.
And then the other thing thatyou run into, particularly with
the educator media types, isthat fundamentally they're all
hoarders in the end and theirpersonal approach to finances
has everything to do withaccumulation and almost nothing
(34:50):
to do with decumulation, becausetheir real plan is just to not
spend much money in retirement.
And if your plan is to not spendmuch money in retirement, then
you can do whatever you wantwith your assets.
You can have 20% in stocks likea William Bernstein, or you can
have 80% in stocks like a JLCollins, or you can have a core
(35:13):
four portfolio like Rick Ferry,or you can have a Merriman
Ultimate portfolio like PaulMerriman and then have another
portfolio on the side that'smanaged by somebody.
Or you could be like Karsten,who's essentially living off
dividends and some tradingprofits and spending well under
3% of his accumulated assets,and you can have tips, ladders
(35:35):
and piles of cash and bucketstrategies and all manner of
stuff there's $250,000 liningthe walls of the banana stand.
Voices (35:45):
Why didn't you tell me that?
How much clearer can I saythere's always money in the
banana stand.
No touching, no touching.
Mostly Uncle Frank (35:55):
Because none of that really matters.
If you're not spending yourmoney, that's your strategy
Don't spend money.
Voices (36:01):
Oh boy, I'm rich, I'm wealthy, I'm independent, I'm
socially secure, I'm rich, I'mrich, I me.
Mostly Uncle Frank (36:10):
So for people like me that came into
this looking at all these peopleand saying, well, how do I
spend more money in retirement?
And if all the people you'relooking at aren't spending their
money in retirement and don'tplan to, you kind of have to
look harder and elsewhere tofind the people that are
actually planning on spendingyour money and stop looking at
(36:30):
things just because they'repopular or there's an appeal to
authority going on, that youactually need to look at the
data and the arguments and theportfolios and the methodologies
, not on the basis of what anyparticular person says about
them, but on good data analysisand Monte Carlo simulations and
(36:51):
other mathematically-basedtechniques.
But while you're doing that, alot of those good techniques
data mathematics are found inthe works of many of these
people and that's why you getback to applying the adages of
(37:17):
Bruce Lee, which, whenever youare confronted with experts and
expert material, the bestapproach is to take what is
useful, discard what is uselessand add something that is
uniquely your own.
The best, jerry, the best.
(37:40):
It is partially confrontational, but it's not directed at any
particular person, but on whichideas are good and applicable to
people who want to spend theirmoney in retirement, and which
ones are really only for peoplewho don't want to spend their
money in retirement.
Voices (37:59):
I wonder how that crazy duck ever made out with that
genie.
Hey, what do you know, poil,it's mine.
Understand mine, mine, all mine, go, go, go mine.
Do you hear me?
Oh brother, blow sesame.
Mostly Uncle Frank (38:15):
I'm rich, I'm a happy miniser and since
this is just a retirement hobbyfor me and I don't have any
aspirations to become a mediapersonality, doing the circuit,
if you will, and writing booksand so on and so forth At least
not at this stage of my life Askme in 15 or 20 years, I'm not
(38:35):
concerned with scratchinganybody's back and worried about
whether mine gets scratched orwhether I get excluded from the
conference or the club orwhatever it is so.
Voices (38:46):
after the third week I sent him a telegram and says
please accept my resignation.
I don't want to belong to anyclub that will accept me as a
member.
Mostly Uncle Frank (38:57):
Which has the wonderful side effect of
attracting a very intelligentand discerning audience.
Mostly Mary (39:05):
Top drawer, really top drawer.
Mostly Uncle Frank (39:09):
Who really cares about this stuff and has
similar goals to mine and sendsme all kinds of excellent topics
to talk about.
That goes without saying.
Voices (39:21):
Oof.
Mostly Uncle Frank (39:23):
So never be surprised when I both criticize
and praise somebody at the sametime, because I wouldn't feel
like I was doing my job as agood cross-examiner if I did not
take that approach, which is tomake this about ideas and not
about personalities.
So hopefully I was able toanswer your questions.
That gives you a little betterunderstanding of what's going on
(39:45):
around here, at least when I'mnot just goofing off.
Voices (39:49):
You want to be a public nuisance?
Sure how much does the job pay?
I've got a good mind to join aclub and beat you over the head
with it.
Ha ha.
Mostly Uncle Frank (39:59):
Ha ha, and thank you for your email.
Voices (40:04):
You come in here with a skull full of mush and you leave
thinking like a lawyer.
Mostly Uncle Frank (40:11):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to frank atriskparityradiocom.
That email is frank atriskparityradiocom.
Or you can go to the websitewwwriskparityradiocom.
Put your go to the websitewwwriskparityradiocom, put your
message into the contact formand I'll get it that way.
If you haven't had a chance todo it, please go to your
(40:32):
favorite podcast provider andlike subscribe.
Give me some stars, a follow, areview.
That would be great, okay, thankyou once again for tuning in.
This is Frank Vasquez with RiskPrairie Radio Signing off to
see.
Voices (40:50):
But don't worry, you can start soon.
Music, music, music, music,music, music, music, music music
(41:24):
music, music, cool Go Go.
Mostly Mary (42:00):
Please consult with your own advisors before taking
any actions based on anyinformation you have heard here,
making sure to take intoaccount your own personal
circumstances.
A foolish consistency, is the hobgoblin of little minds
, adored by little statesmen andphilosophers and divines.
If a man does not keep pace withhis 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 to episode 419.
Today, on Risk Parody Radio,we're just going to get back to
doing what we do best here,which is answer your emails.
Voices (01:48):
Yes.
Mostly Uncle Frank (01:49):
And so without further ado.
Voices (01:52):
Here I go once again with the email.
Mostly Uncle Frank (01:55):
And First off, first off, an email from
Chris.
What?
And Chris writes?
Mostly Mary (02:04):
Hey Frank, I recently discovered your podcast
.
I am a do-it-yourselfer, butwithout much experience.
I've been searching foralternative portfolios to smooth
out the ups and downs inretirement.
Now, seven years away, attack,speed, attack speed.
Glad I found your work.
It has helped tremendously.
I'm so excited.
(02:26):
I like the golden butterfly.
Would you suggest a gradualshift toward it over a few years
leading up to retirement, or gocold turkey and switch?
If so, at what point in time?
Right now, my wife and I holdapproximately 85% total stock
(02:46):
market and 15% internationalstock.
I appreciate all you do.
Thank you, chris.
Voices (02:53):
And then he followed it up with yet another.
What?
Well, welcome to the pleasuredome On our way home, going home
where love is warm, long wayfrom home.
Welcome to the pleasure dome.
Mostly Uncle Frank (03:20):
What you were talking about is generally
what we call transitioning.
Voices (03:25):
And that's the way.
Uh-huh, uh-huh, I like it.
Mostly Uncle Frank (03:28):
And we do talk about this very frequently
on this podcast.
But since you're new here, youwouldn't know that.
Voices (03:34):
But you know something, you're all right.
Mostly Uncle Frank (03:39):
So in the past year, let me give you these
podcasts where we've talkedabout this and then I will
answer your question directly.
We've talked abouttransitioning in episodes 329,
346, 360, 361, 362, 380, 389,and 417.
So you may want to go back andlisten to those, and that's just
(04:03):
in the past year.
If you'd like to search thepodcast, you can do that from
the podcast website atwwwriskparametercom.
But probably the easier way todo that is to actually look at
the RSS feed, where you'll seeall of the podcasts and all of
the show notes on one big page.
Don't try to open that on yourphone.
(04:24):
Open it up in a browser in yourcomputer and you can search
that whole one page for whateverwords you're interested in,
including transitioning, and youwill find a plethora of
material about this topic.
So let's talk abouttransitioning from an
accumulation portfolio to adecumulation portfolio, at least
(04:45):
in some broad strokes here.
The issue here has not to dowith what is going on in the
markets per se, but what's moreimportant is what is going on in
your personal life in terms ofyour finances, and what I mean
by that is how close are you tohaving enough money to retire?
Because that's the firstconsideration.
(05:06):
A transition is not going to beappropriate until you've either
reached that number.
You have enough money to retiregiven the rest of your
resources, or you will, witheven some moderate growth, be
able to reach that in the nextfew years.
So if you're like 85% there andyou have five years to go,
(05:26):
you're essentially there interms of a FI number.
The biggest problem most peoplehave here is they haven't
actually calculated how muchthey need and oftentimes they
make up reasons in their headwhy they don't think they can
calculate this number.
That goes something like Idon't know what I'm going to be
doing in five years or 10 years.
Voices (05:45):
Real wrath of God type stuff.
Mostly Uncle Frank (05:47):
I don't know what inflation is going to be.
I might break three of my legs.
Voices (05:51):
Fire and brimstone coming down from the skies,
rivers and seas boiling 40 yearsof darkness, earthquakes,
volcanoes, the dead rising fromthe grave.
Mostly Uncle Frank (06:00):
I might decide I want to open a zoo like
the Tiger King or somethinglike that.
Voices (06:04):
I might decide I want to open a zoo like the Tiger King
or something like that.
Human sacrifice dogs and catsliving together, mass hysteria.
Mostly Uncle Frank (06:13):
The truth is , what you're spending right now
is probably a good estimate ofwhat you're likely to spend in
retirement, with a fewadjustments, and your spending
is likely to go down inretirement, either nominally or
certainly less inflationary thanthe CPI.
And if your children areleaving the house, that's also a
sign that your expenses areabout to drop.
But that's the first thing youneed to do is add up your
(06:35):
expenses, your annual expensesright now and over the past few
years, and then use that as abasis for projecting what you're
going to spend in the future,and chances are it's not going
to be that much different.
Voices (06:51):
You can't handle the dogs and cats living together.
Mostly Uncle Frank (06:52):
I can tell you that our expenses have gone
down on a nominal basis over thepast five years of retirement.
But that is the first questionthat you need to answer have you
reached your financialindependence number in terms of
having enough money to retire,or will you reach it with
moderate growth in the next fewyears?
(07:13):
Then the second question youwant to ask yourself is is your
current portfolio situation ator near an all-time high?
Then this is just the idea thatyou want to sell high and buy
low, because you're going from amore aggressive portfolio to a
less aggressive portfolio, andso, ideally, when you've hit
(07:33):
your fine number and you're atan all-time high or near an
all-time high, that's a goodtime to transition.
Voices (07:40):
That is the straight stuff.
Oh funk master.
Mostly Uncle Frank (07:43):
Now.
We did ours about five yearsbefore we pulled the plug on
employment, and I see you'reseven years away.
So you're getting into the areawhere you should be considering
this and doing thesecalculations and the advantages.
The closer that you get to it,the more your expenses are going
to converge on what you expectthem to be.
Now, assuming those two thingsare true, you've reached a FI
(08:07):
number and you're at or near anall-time high.
You could make the transition inone fell swoop if you wanted to
, and that would be the easiestway to go about this, usually,
because oftentimes there are taxreasons or other reasons,
depending on what your accountset up, where these assets are
and those factors that play intohow this transition actually
(08:29):
happens in practical terms.
But the general rule is onceyou have won the game, you can
stop playing with all of yourchips.
That's from William Bernstein,because even in a retirement
configuration, particularly ifyou're not taking money out of
the portfolio, it's still goingto grow.
It's just going to grow moremoderately and with less
volatility than it would have ifyou were to leave it in 100%
(08:53):
stocks Now.
You could also do it moregradually, but it's probably
going to be more work actuallyto do it that way, but neither
choice is wrong.
What you really want to be in aposition, though, is everything
is all lined up where you wantit to be in a retirement
configuration before you stopworking.
(09:13):
That's the goal, and if you cando that three years before
retirement, great.
If you can do it five yearsbefore retirement, great.
If you can do it five yearsbefore retirement, great.
If you could do it now, thatwould be great too, because the
other thing you can consider is,if you have a pot of money that
covers your retirement expenses, you can convert that to your
(09:37):
retirement portfolio, and then,the rest of the new money coming
in, you can invest it any wayyou want to, or you can just
spend it.
You can do whatever you wantwith it.
So some people still want tohave some kind of aggressive
portfolio, and so you could usethe new money to create this new
aggressive portfolio if youreally wanted it.
(09:58):
That would be appropriate forsomebody who wanted to die with
the most money possible.
Voices (10:04):
What's with?
Mostly Uncle Frank (10:05):
you anyway.
Voices (10:06):
I can't help it.
I'm a greedy slob.
It's my hobby.
Mostly Uncle Frank (10:10):
Because if you continue to accumulate in
retirement with a highpercentage of equities in your
portfolio, the goal of that kindof portfolio is to accumulate
the most possible at death.
Voices (10:21):
Death stalks you at every turn.
Mostly Uncle Frank (10:24):
And if you don't want to do that, well, you
can put it into your retirementportfolio or you can put it in
cash.
Some people like to do that.
You have a lot of options onceyou've determined what that
(10:45):
retirement number is and thenallocated the necessary assets
to cover that to your retirementportfolio.
So that is just an overview.
As I mentioned, things willvary depending on how your
assets are organized, what taxbrackets you're in, so on and so
forth.
But if you want to hear aboutdifferent people's situations
(11:09):
and what I've said about thembefore, go back and listen to
those episodes I mentioned, andthen you can even search
transitions in the prior ones,because I only went back one
year on this for you.
Hopefully that helps, and thankyou for your email.
Voices (11:25):
Here's a horoscope for everyone Aquarius you're going
to die.
Capricorn you're going to die.
Gemini you're going to dietwice.
Mostly Uncle Frank (11:41):
Second off.
Second off we have an emailfrom Will Danger, will.
Voices (11:47):
Robinson Danger, danger.
Mostly Uncle Frank (11:51):
And Will writes.
Mostly Mary (11:53):
Hi Frank, Thanks for all the great content on
your podcast.
Voices (11:57):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Mary (12:02):
My wife and I are in our late 20s and have $90,000
invested between my 401k andRoth IRA.
Our current portfolio is$50,000 in the 401k split 75%
VIIIX and 25% VIEIX and $40,000in the Roth split, half and half
(12:27):
between VTSAX and VSIAX.
My wife is a stay-at-home momand we're at the upper limits of
what we can save, so a Roth forher or a 401k aren't an option
right now.
I'd like to move towards anaccumulation portfolio that's
50% large cap, 50% small capvalue.
What makes this tricky is ourcontributions to the 401k will
(12:51):
be about three times higher thanthe Roth each year due to
employer match and Roth limits,and the only index funds
available are VIIX and VIEIX.
There is a small cap value fundASVDX available, but it has a
high expense ratio and hasunderperformed historically.
(13:13):
The options I can see availableare the following One, invest
all of the 401k in VIIIX and allof the Roth and small cap,
knowing that our portfolio willincreasingly be weighted towards
large cap as time goes on.
Within 20 years it will becloser to 75% large cap, 25%
small cap value.
(13:33):
Two, invest 50% of our overallportfolio in VIIIX, the rest of
the 401k in VIEIX or ASVDX andall of the Roth and small cap
value.
Vieix gives me more mid-capexposure than preferred and I am
not a fan of ASVDX.
(13:55):
Do you have any suggestions onwhich approach you would take if
you were in our shoes?
Any other ideas to consider?
Also, would you invest the Rothin AV, uv or VIOV?
Please consult your crystalball if you are unsure.
Thanks for everything, will.
Your crystal ball can help you.
(14:15):
It can guide you.
Mostly Uncle Frank (14:19):
Well, the good news, will, is, regardless
of whatever you do here, you'regoing to be fine because you're
investing in 100% equities andlow-cost index funds, and so the
exact combination is really notas critical as the fact you are
doing that and not investing intarget date funds or doing
(14:39):
something screwy with individualstocks or managed mutual funds,
et cetera.
Voices (14:45):
Never go in against a Sicilian when death is on the
line.
Mostly Uncle Frank (14:55):
So this is going to work either way you go.
So this is going to work eitherway you go.
I guess if I were you, I wouldprobably go with option one that
you mentioned invest all of the401k in VIIX, which is the same
thing as VTI or VTSAX, really,and then put all the Roth in a
small cap value fund.
Because two things youmentioned that within 20 years
(15:22):
it'd be closer to 75% large capand 25% small cap value.
That actually may not be true,and the reason it's not likely
to be true is you guys are goingto be making more money through
time and so you are going tohave more room to invest outside
of the 401k.
So you're not only going tohave your 401k and your Roth
IRAs and you can have one inyour wife's name even though
(15:46):
she's not working, becauseyou're working and you're
married.
So don't forego thatopportunity.
Make sure you're also puttingmoney in her name in an IRA, and
once you fill those two thingsup, then you can fill up
ordinary brokerage accounts andyou can put all kinds of small
cap value or else you want inthose accounts, because they're
not restricted by the options inthe 401k.
(16:08):
So I'd be thinking about it interms of that going forward in
the future and looking at 20years out.
I did not look up ASVDX, butI'll take your word that it's a
high fee fund that hasunderperformed historically, in
which case I'd say, yeah, don'tbother with that, forget about
it.
Vieix is that extended marketfund from Vanguard.
(16:33):
It's okay, but what I reallydon't like about it is it seems
to tilt towards small cap growth, and small cap growth is
definitely not where you want tobe.
That's the one sector in thestyle boxes.
If you go over to Morningstar,you can see the style boxes and
you should take a look at that.
The one sector you probablywant to stay out of is the small
(16:54):
cap growth sector because it isthe most speculative and has
the worst risk reward kind ofratio to it.
When you're looking at thatstyle box tic-tac-toe board is
what it looks like you want tokind of stay out of the lower
right-hand quadrant.
Keep most of your investmentssort of to the left of a line
(17:15):
that goes from the bottom leftto the top right a diagonal line
that goes from the bottom leftto the top right a diagonal line
and then don't put too much inlarge cap value during
accumulation, because that isreally the thing you want to
have in retirement if you'regoing to have it at all.
It's just lower risk and lowerreward overall, so you will
reach your goals either way, butI would go with option one of
(17:35):
the two you presented.
You also asked about AVUV orVIOV in the Roth.
I'd probably go with AVUV.
These days I think thebest-in-class ETF
recommendations that PaulMerriman makes in his site are
pretty good and they do use anice process for coming up with
(17:55):
those.
That's very analytical.
But again, any of the fundsthat are listed there in their
best-in-class recommendationsare going to work pretty well.
I think they go with AVUV asthe US small-cap value fund that
they give their highestrecommendation to.
Voices (18:13):
I gotta have more cowbell.
I gotta have more cowbell.
Mostly Uncle Frank (18:16):
So I'd probably pick that one, but you
can't go wrong either way withany of these.
Hopefully that helps, and thankyou for your email.
Voices (18:36):
Last off.
Mostly Uncle Frank (18:38):
Last off an email from Neelix I'm not a
fighter, I'm just a cook.
Voices (18:47):
Who sometimes imagines himself to be a diplomat.
On the contrary, mr Neelix, youare much more than that.
You are perhaps the mostresourceful individual I have
ever known.
I always thought you justtolerated me.
You do have some annoying habits.
Mostly Uncle Frank (19:10):
And Neelix writes.
Mostly Mary (19:13):
Hey, frank, love the show.
It's the perfect soundtrack tomy daily commute, especially
when you're duking it out withother bloggers like Karsten.
It's hilarious how you call himbiased while simultaneously
showering him with praise forarticles about oh I don't know
gold and small cap value, which,coincidentally, you also happen
to love.
If I didn't know you were alawyer, I would definitely think
(19:35):
you were a lawyer.
Just kidding, Mostly we use theSocratic method here, but
seriously, you do a great jobpointing us towards better
portfolio construction At times,you may feel that you have
found the correct answer.
Voices (19:52):
I assure you that this is a total delusion on your part
.
Mostly Mary (19:56):
I'm about 10 years away from early retirement at 55
, I hope, currently rocking an85% stock portfolio.
Because clearly I like to liveon the edge and you won't be
angry, I will not be angry.
So I've gone and done somethingslightly less insane for the
future.
I opened a Fidelity account andstarted a risk parity fire
(20:19):
portfolio for my golden dayswhere I will live off the safe
withdrawal rate.
It's only got five grand as seedmoney, but the allocation I've
set is 33% large cap value, 33%small cap growth, because don't
we love a cowbell?
Voices (20:36):
I'm telling you, fellas, you're gonna want that cowbell
25% 10-year treasury, for a bitof safety.
Mostly Mary (20:43):
5% gold, because soundbite, I love gold.
Voices (20:48):
I love gold.
Mostly Mary (20:51):
And 4% cash equivalent, because, guess what?
I will have to pay other billsNow for the million dollar or
hopefully much more question doI keep feeding my existing
aggressive growth portfolio ordo I throw all my future funds
at this new, slightly lessbonkers fire portfolio?
(21:11):
I'm torn.
Help me, frank Neelix, hailthem.
Voices (21:27):
Whoever you are, I found this waste zone first.
We're not interested in thisdebris.
Mr Neelix, prepare to firephasers.
Our target, mr Neelix, fire.
Mostly Uncle Frank (21:47):
Well, let's talk about your personal
portfolio questions first, andthen we'll start talking about
personal finance, media andgurus, etc.
So, looking at what you've gothere, I think you've got things
a little bit mixed up, or maybeyou just wrote them the wrong
way.
In your email you said you have33% large cap value and 33%
small cap growth.
(22:08):
I think you've got those mixedup.
Voices (22:11):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (22:15):
You want those in large cap growth and
small cap value Because, as Ijust mentioned to Will, the last
emailer, you probably want tostay away from the small cap
growth category unless you'reactually doing some stock
picking, and this is not theshow for that.
Voices (22:33):
Not going to do it Wouldn't be prudent at this
juncture.
Mostly Uncle Frank (22:36):
Large cap value is something you can
include as part of your valueallocation in a retirement
portfolio, but I'd consider itmore as an add-on than some kind
of necessity, as I've mentionedin many other podcasts.
In terms of the portfolio youwant to get to for a good
retirement portfolio with a high, safe withdrawal rate, you want
(22:58):
to split your equities intogrowth and value as the first
denominator, or firstdifferentiator, I should say,
and then you can consider thingslike size factors, sectors,
what country they're from, allthose other things, but the
first thing is to split betweengrowth and value, although stay
away from small cap growth ingeneral, gosh, okay, then your
(23:22):
overall question was do you keepfeeding your existing
aggressive growth portfolio withall your future funds into your
new, slightly less bonkers fireportfolio, as you described it?
Voices (23:33):
Dogs and cats living together mass hysteria.
Mostly Uncle Frank (23:36):
And I think this goes back to the answer to
the first question we had iswhere are you in the process of
accumulating enough money toretire, is the big question.
Have you accumulated enoughalready or do you still need to
accumulate considerably more?
And so all of my answers to thefirst email or apply here that
you should add up your annualexpenses, use those to help you
(24:01):
determine what you're likely tobe spending in the future and
for most people it's not likelyto change that much and more
likely to go down than up,especially after you take into
account taxes.
And so here you do run intothis kind of preference kind of
thing that, if you think you canjust kind of glide in and
you're getting close to thatnumber, yeah, you could build up
(24:22):
the new portfolio and leave theold one alone for a while and
then transition more of it later.
Or you could make the shiftearlier.
10 years out is pretty early, soprobably wait at least another
three years before reallylooking at it, because things
could change in terms of whenyou really want to retire.
So either one is fine, just aslong as you do get your
(24:46):
portfolio set up so that youhave that retirement money in
your retirement portfolioseveral years before you
actually pull the plug, becauseyour biggest risk is having some
kind of big drawdown rightbefore you retire.
And that is also why you wantto do this when your current
portfolio is at or near anall-time high, because then you
(25:07):
know you are selling high.
Buy low sell high Fear.
That's the other guy's problem.
Now getting to the funquestions about my presentation
style and what I'm doing here.
Voices (25:22):
You mean, let me understand this, because maybe
it's me.
I'm funny how I mean funny likeI'm a clown.
I amuse you, I make you laugh.
Mostly Uncle Frank (25:31):
So my background is as a lawyer and I
spent most of my career workingwith and cross-examining
financial and technical expertsand these are everybody from
people that appraise real estateto people who have won Nobel
Prizes in economics.
So my approach to personalfinance is as a lawyer,
(25:52):
cross-examining experts.
Voices (25:56):
You can't handle the truth.
Mostly Uncle Frank (25:58):
Which means the first thing I do is separate
the ideas of somebody from theperson, which is actually not
the way personal finance isgenerally presented.
Voices (26:09):
You need somebody watching your back at all times.
Mostly Uncle Frank (26:12):
So I generally like lots of people in
personal finance land.
I like most of them, except forthe ones that are actually
selling things.
Voices (26:21):
Always be closing, always be closing, always be
closing.
Mostly Uncle Frank (26:27):
The Ned Ryerson's of the world.
Voices (26:30):
You know, whenever I see an opportunity now, I charge it
like a bull, ned the Bull,that's me.
Now, you know, I got friends ofmine who live and die by the
actuarial tables and I say, hey,it's all one big crapshoot.
Anywho, tell me, have you everheard of single premium life?
Because I think that reallycould be the ticket for you.
Mostly Uncle Frank (26:48):
But I'm going to apply the Bruce Lee
principles to whatever somefinance guru is saying, which
means take what is useful,discard what is useless and add
something that is uniquely yourown.
What the hell that is uniquelyyour own, what the?
But let's step back and talkabout how the personal finance
(27:09):
media landscape is presented.
Generally, most of personalfinance is personality-based,
which leads to two fallaciousreasons for doing something.
One is the appeal to authorityoh, this person is famous, they
must know things, they'vewritten some books.
Therefore, let's just do whatthey say.
(27:31):
Or the appeal to popularity,which also goes with this fame,
culture kind of thing.
Everybody else is doing it thisway.
That's what we do in ourpersonal finance club, or
whatever we want to call it.
It's the popular thing to do.
(28:01):
Therefore, that's what weshould do.
Both of these are well-knownfallacious arguments, fallacious
reasons for doing somethingbased either on mere authority
or popularity, and they do alsorepresent a form of intellectual
laziness that you're notwilling to really grapple with
the raw arguments of what isbeing presented, aside from the
personality or the group that isbeing presented in.
(28:21):
I'm not a smart man.
If you're going to be a goodlawyer, you need to quickly get
beyond appeals to authority andappeals to popularity, and I
believe the same is true withjust about any kind of decision
making you can make, at least ifit's important to you.
Yet you only want to use appealto authority or appeal to
popularity where you reallydon't care about the decision
(28:44):
that much, as in what to eat atthis restaurant.
Voices (28:50):
Who wants an orange whip ?
Orange whip, orange whip, threeorange whips.
Mostly Uncle Frank (28:57):
And then when I look at sort of the
personal finance media landscape, it falls into three kind of
categories.
One is the purely exploitative,for entertainment purposes.
These things sound a lot likeJerry Springer, and people that
fall into this category includeSusie Orman and Dave Ramsey and
(29:20):
this hammer guy that's popularon YouTube these days, and a
little bit Ramit Sethi, althoughhe's nice about it.
But the idea for those kind ofshows is let's actually go out
and find somebody who's doingkind of stupid stuff.
Voices (29:35):
Are you stupid or something?
Mama says stupid is as stupidas it is.
Mostly Uncle Frank (29:41):
And then tell them how stupid they are
and the whole audience willobviously be able to see how
stupid they are and the wholeaudience will obviously be able
to see how stupid they are andwhat the answer is, and and it's
easy and we all agree, butfundamentally it's a kind of
exploitative entertainment whatdo you want to buy?
Voices (29:58):
hey, everybody, suzy o here.
Now can I afford?
It has been gamified, whichmeans you're going to get to
listen to the caller.
You're going to say, show methe money to yourself anyway,
and then you're going to get toapprove or deny it.
You think you're going to beright or wrong.
Let's go and try it right now.
Mostly Uncle Frank (30:24):
Yeah, and usually the things at issue are
just things like you know know,people being in ridiculous debt
because they're keeping 100canaries in their barn or
something silly like that.
The next category and these dooverlap a lot is the sales
category.
People are fundamentallyselling you something.
Voices (30:40):
A, b, C, a, always B, b, c.
Closing, always be closing.
Mostly Uncle Frank (30:47):
Either in terms of products that they are
promoting or referrals thatthey're coming up with.
Oftentimes, it is actually thesponsors on the program that
they are funneling theiraudience to, because only one
thing counts in this life Getthem to sign on the line which
is dotted and generally the goalthere is just to attract clicks
(31:10):
and eyeballs.
Present something that isinteresting enough that you'll
attract a big audience and thenyou can sell things to them
sitting out there waiting togive you their money.
Voices (31:21):
Are you gonna take it?
Mostly Uncle Frank (31:23):
that's what most of financial media is
actually about.
It's presented more like sportsor something like that, or the
style pages and then finally, atleast in popular personal
finance, and that's really whatI'm talking about here.
I'm not talking aboutprofessionals talking to each
other.
The final category is peoplethat present themselves as
(31:43):
educators.
The educator, media personalityand most of your personal
finance gurus present themselvesthis way, and they write books
and they make appearances andthey have media outlets which
range from TikTok to books thesedays, and most of these people
are very well-meaning and theymay be promoting their book or
(32:04):
their course or their club orsomething like that, but their
idea is to try to present goodinformation to each other.
But this group is kind of liketheir own kind of club.
Nobody in the educator side offinancial media really wants to
(32:27):
criticize anybody else in thesame field, because they all
appear at the same conferencesand so differences are always
minimized.
People want to be on eachother's programs,
cross-promoting, so on and soforth, and so if you want to
belong to that club, you have toplay nice in the sandbox with
everybody else in the club.
Voices (32:47):
I want you to be nice.
Mostly Uncle Frank (32:51):
There's kind of an unwritten rule that true
conflicts are not really allowed, so they end up always we'll
agree to disagree and thedisagreements are minimized or
papered over or people will saywell, you know, it's kind of
personal and you can just dowhat you want.
And that is typically howpodcasts are run these days in
(33:13):
personal finance land.
People get their guests on andthere are not critiques that are
thrown or comparisons that aremade, so you never get down to
deciding which arguments arebetter and why.
On the level of a kind ofcross-examination that I would
do, all conflicts are leftunresolved, so everybody can go
on their merry way and promotetheir merry things.
Voices (33:35):
Whoa, that's the thing you should see, but don't worry
you can sometimes.
Mostly Uncle Fran (33:44):
Unfortunately , what that tends to play into
is this appeal to authority andappeal to popularity that these
folks rely on to attract andmaintain their audiences.
And all that's probably fine ifyou want to take a superficial
approach to this.
But if you are a real DIYer whowants to do the best thing for
(34:06):
their own finances and reallymanage your money particularly
when you're talking aboutgetting to retirement and
drawdowns and things like thatyou need to go beyond this kind
of popularity thing where peoplereally are never questioning
each other's ideas and decidingone way or the other whether
this idea is the best one inthis particular situation,
(34:28):
Because typically you're talkingabout a certain idea that's
applicable in one situation butnot applicable in another
situation.
And then the other thing thatyou run into, particularly with
the educator media types, isthat fundamentally they're all
hoarders in the end and theirpersonal approach to finances
has everything to do withaccumulation and almost nothing
(34:50):
to do with decumulation, becausetheir real plan is just to not
spend much money in retirement.
And if your plan is to not spendmuch money in retirement, then
you can do whatever you wantwith your assets.
You can have 20% in stocks likea William Bernstein, or you can
have 80% in stocks like a JLCollins, or you can have a core
(35:13):
four portfolio like Rick Ferry,or you can have a Merriman
Ultimate portfolio like PaulMerriman and then have another
portfolio on the side that'smanaged by somebody.
Or you could be like Karsten,who's essentially living off
dividends and some tradingprofits and spending well under
3% of his accumulated assets,and you can have tips, ladders
(35:35):
and piles of cash and bucketstrategies and all manner of
stuff there's $250,000 liningthe walls of the banana stand.
Voices (35:45):
Why didn't you tell me that?
How much clearer can I saythere's always money in the
banana stand.
No touching, no touching.
Mostly Uncle Frank (35:55):
Because none of that really matters.
If you're not spending yourmoney, that's your strategy
Don't spend money.
Voices (36:01):
Oh boy, I'm rich, I'm wealthy, I'm independent, I'm
socially secure, I'm rich, I'mrich, I me.
Mostly Uncle Frank (36:10):
So for people like me that came into
this looking at all these peopleand saying, well, how do I
spend more money in retirement?
And if all the people you'relooking at aren't spending their
money in retirement and don'tplan to, you kind of have to
look harder and elsewhere tofind the people that are
actually planning on spendingyour money and stop looking at
(36:30):
things just because they'repopular or there's an appeal to
authority going on, that youactually need to look at the
data and the arguments and theportfolios and the methodologies
, not on the basis of what anyparticular person says about
them, but on good data analysisand Monte Carlo simulations and
(36:51):
other mathematically-basedtechniques.
But while you're doing that, alot of those good techniques
data mathematics are found inthe works of many of these
people and that's why you getback to applying the adages of
(37:17):
Bruce Lee, which, whenever youare confronted with experts and
expert material, the bestapproach is to take what is
useful, discard what is uselessand add something that is
uniquely your own.
The best, jerry, the best.
(37:40):
It is partially confrontational, but it's not directed at any
particular person, but on whichideas are good and applicable to
people who want to spend theirmoney in retirement, and which
ones are really only for peoplewho don't want to spend their
money in retirement.
Voices (37:59):
I wonder how that crazy duck ever made out with that
genie.
Hey, what do you know, poil,it's mine.
Understand mine, mine, all mine, go, go, go mine.
Do you hear me?
Oh brother, blow sesame.
Mostly Uncle Frank (38:15):
I'm rich, I'm a happy miniser and since
this is just a retirement hobbyfor me and I don't have any
aspirations to become a mediapersonality, doing the circuit,
if you will, and writing booksand so on and so forth At least
not at this stage of my life Askme in 15 or 20 years, I'm not
(38:35):
concerned with scratchinganybody's back and worried about
whether mine gets scratched orwhether I get excluded from the
conference or the club orwhatever it is so.
Voices (38:46):
after the third week I sent him a telegram and says
please accept my resignation.
I don't want to belong to anyclub that will accept me as a
member.
Mostly Uncle Frank (38:57):
Which has the wonderful side effect of
attracting a very intelligentand discerning audience.
Mostly Mary (39:05):
Top drawer, really top drawer.
Mostly Uncle Frank (39:09):
Who really cares about this stuff and has
similar goals to mine and sendsme all kinds of excellent topics
to talk about.
That goes without saying.
Voices (39:21):
Oof.
Mostly Uncle Frank (39:23):
So never be surprised when I both criticize
and praise somebody at the sametime, because I wouldn't feel
like I was doing my job as agood cross-examiner if I did not
take that approach, which is tomake this about ideas and not
about personalities.
So hopefully I was able toanswer your questions.
That gives you a little betterunderstanding of what's going on
(39:45):
around here, at least when I'mnot just goofing off.
Voices (39:49):
You want to be a public nuisance?
Sure how much does the job pay?
I've got a good mind to join aclub and beat you over the head
with it.
Ha ha.
Mostly Uncle Frank (39:59):
Ha ha, and thank you for your email.
Voices (40:04):
You come in here with a skull full of mush and you leave
thinking like a lawyer.
Mostly Uncle Frank (40:11):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to frank atriskparityradiocom.
That email is frank atriskparityradiocom.
Or you can go to the websitewwwriskparityradiocom.
Put your go to the websitewwwriskparityradiocom, put your
message into the contact formand I'll get it that way.
If you haven't had a chance todo it, please go to your
(40:32):
favorite podcast provider andlike subscribe.
Give me some stars, a follow, areview.
That would be great, okay, thankyou once again for tuning in.
This is Frank Vasquez with RiskPrairie Radio Signing off to
see.
Voices (40:50):
But don't worry, you can start soon.
Music, music, music, music,music, music, music, music music
(41:24):
music, music, cool Go Go.
Mostly Mary (42:00):
Please consult with your own advisors before taking
any actions based on anyinformation you have heard here,
making sure to take intoaccount your own personal
circumstances.
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