In this episode we answer emails from Pete, Kevin and Dale. We discuss Pete's "Berry Pie" portfolio experiments on the testfolio site, the ongoing debate about the size and value factors and why it doesn't matter that much for constructing diversified portfolios due to Shannon's Demon, and some basics on the process for constructing portfolios moving from asset classes to specific ETFs.
We also roll out our "Top of the T-Shirt" Matching Campaign to benefit the Father McKenna Center. Please support the Father McKenna Center by visiting their website and mentioning "Risk Parity Radio" in the dedication box when donating. Your contribution will be matched dollar-for-dollar and help provide meals and services to homeless and hungry people in Washington DC.
And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Additional Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
Pete's Test Portfolios Analysis: https://testfol.io/?s=cTkuwqvwzMS
Shannon's Demon Article: Unexpected Returns: Shannon's Demon & the Rebalancing Bonus – Portfolio Charts
Meb Faber Interview of Professor Ken French: Famed Finance Expert Kenneth French Reveals: Most Dangerous Investor Fallacies
Breathless Unedited AI-Bot Summary:
Ever walked into a dive bar and found unexpected wisdom? That's Risk Parity Radio—a refreshingly honest approach to investing where movie quotes mix with mathematical principles, and portfolio theory comes without the corporate jargon.
In this episode, Frank Vasquez launches the "Top of the T-Shirt Campaign," where an anonymous donor will match up to $15,000 in listener contributions to the Father McKenna Center. This small but mighty charity serves thousands of meals to homeless and hungry people in Washington DC with remarkable efficiency, using a $1.5 million budget, donated space, and an army of volunteers to maximize impact.
The heart of the episode tackles a fundamental investing misconception—that we include value stocks or small cap funds because they'll outperform. Frank explains that diversification isn't about prediction but about mathematical certainty: "That's Shannon's Demon. If you have two assets with similar long-term performance but they aren't fully correlated, you're better off holding both than either one alone." By splitting stock holdings between growth and value, investors create systematic rebalancing opportunities when these segments diverge—as they dramatically did in 2022, when growth cratered while value remained relatively stable.
Listeners get practical portfolio construction wisdom too: start with your goals, select appropriate asset classes, then choose specific funds—not the other way around. Frank emphasizes that ETFs have made mutual funds largely obsolete for new investments, offering better tax efficiency and portability.
Weekly portfolio reviews reveal gold's continued dominance (up 28% YTD) while diversified portfolios showed modest gains despite volatile markets. Risk parity approaches demonstrated their resilience, with the Golden Butterfly portfolio up 3.13% year-to-date and 38.12% since inception in 2020.
Ready to build a portfolio that doesn't require predicting winners? Want to support a worthy cause while learning? This episode combines financial wisdom with practical generosity—a perfect introduction to the Risk Parity Radio approach.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Mary and Voices (00:01):
A foolish consistency is the hobgoblin of
little minds, adored by littlestatesmen and philosophers and
divines.
Mostly Uncle Frank (00:10):
If a man does not keep pace with his
companions, perhaps it isbecause he hears a different
drummer.
Mary and Voices (00:17):
A different drummer and now, coming to you
from dead center on your dial,welcome to Risk Parity Radio,
where we explore alternativesand asset allocations for the
do-it-yourself investor,Broadcasting to you now from the
comfort of his easy chair.
Here is your host, FrankVasquez.
Mostly Uncle Frank (00:38):
Thank you, mary, and welcome to Risk Parity
Radio.
If you have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Expect the unexpected.
It's a relatively small place.
It's just me and Mary in hereand we only have a few
(01:02):
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
I don't think I'd like anotherjob.
Mary and Voices (01:23):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Mostly Uncle Frank (01:29):
Now who's up for a trip to the library
tomorrow?
So please enjoy our mostly coldbeer served in cans and our
coffee served in old chipped andcracked mugs, along with what
our little free library has tooffer.
But now onward, episode 426.
(01:55):
Today on Risk Parity Radio,it's time for our weekly
portfolio reviews.
Of the eight sample portfoliosyou can find at
wwwriskparityradiocom on theportfolios page, and we also
have some emails.
Mary and Voices (02:08):
Groovy baby.
Mostly Uncle Frank (02:10):
But before we get to those, I have a little
announcement to make A campaign, if you will.
Surely you can't be serious.
I am serious and don't call meShirley, as most of you know,
because I say it all the time,we do not have any sponsors on
this podcast because it's aretirement hobby, but we do
support a charity called theFather McKenna Center that
(02:31):
supports hungry and homelesspeople in Washington DC.
Now, the Father McKenna Centeris a relatively small operation
as far as charities is concerned.
Our budget is only about $1.5million a year.
We only have about six actualemployees, but we do have
tremendous leverage in that ourspace is provided by the school,
(02:55):
gonzaga High School, which ownsthe church and the basement
where our center is located, andso we do not have to pay any
overhead for that.
And we also have about athousand volunteers that work at
the center every year, and theyare mostly high school students
and college students.
We are also now getting someinterns from people who are
(03:17):
studying social work and relatedfields to supplement our people
power.
All this is to say we areextremely efficient at the
services we provide with themoney that we do get in, and we
serve thousands and thousands ofmeals and have a food pantry
that serves many families andhave other ancillary functions,
(03:37):
including medical clinicvolunteers, legal clinic
volunteers, and we even have afinancial literacy class going
on there.
Right now, we rely mostly ondonations from individuals
because we do not receive anygovernment support.
We're not really big enough forthat to make sense and many of
you have been extremely generousand I really wanted to thank
(04:00):
you first, because I neveractually expected this podcast
to be able to raise the kind ofmoney it has raised for the
center.
Surprise, surprise surprise, butI have one listener who
contacted me recently with aproposal and he wishes to remain
anonymous.
I have no name, so I'm going togive him a name anyway.
(04:24):
We're going to call him Matthew63.
And that's code for something.
We'll see how many of you canfigure that out.
It's not too hard.
But Matthew 63 proposes to give$15,000 to the center as
matching funds, matching theother donations that we receive
now from our listeners at RiskParity Radio, and so we are
(04:47):
starting a matching campaign tomatch that $15,000.
We decided to call it the Top ofthe T-Shirt Campaign.
Why are we calling it that?
Okay, so our major fundraiserfor the year is a walk for
McKenna that we hold inSeptember of each year, but we
collect the major donations forthe walk in the summertime and
(05:11):
the major donors get to havetheir names and logos put on the
t-shirt that we give toeverybody who's walking, and the
more you give, the higher onthe t-shirt your logo and name
is going to be.
Now, usually that top spot isoccupied by a local Irish pub
near the McKenna Center who'sbeen a great sponsor, and that
(05:31):
is called the Dubliner.
If you're ever in DC on CapitolHill, you should definitely go
to the Dubliner.
It is an institution on CapitolHill but we want to get Risk
Parity Radio up to the level ofthe Dubliner and if we get all
the matches for the $15,000, wewill certainly be at that level,
because $15,000 is a lot ofmoney for us.
(05:52):
It is 1% of our annual budgetand $30,000 would be 2% of our
annual budget, which would behuge, a really big one here,
which is huge.
So I am inviting you toparticipate in the top of the
t-shirt campaign and you willhave to hear about it
periodically from now until weraise the money.
(06:15):
So maybe that's incentive togive it right away.
We can get it over with, Idon't care about the children I
just care about their parents'money.
So if you would like toparticipate in it I hope you do
the easiest way would be to goto the Father McKenna website
and go to the donation page andwhen you fill out your donation
and you can donate by creditcard or check or donate shares,
(06:37):
many other ways, but there's alittle box there for like a
dedication or something, and ifyou just put in Risk Parity
Radio or Risk Parity Radio Matchor just something in there to
flag it, we'll be able to countthe donations that way and I'll
go ahead and make sure you getanother copy of that memo, okay,
(06:58):
and then we will ask Matthew 63to double it, as he has pledged
.
Mary and Voices (07:03):
Show me the money, jerry, you better yell.
Show me the money, show me themoney, show me the money.
Mostly Uncle Frank (07:12):
Do you love this black man?
I love the black man.
Mary and Voices (07:16):
Show me the money.
I love black people.
I love black people.
Mostly Uncle Frank (07:22):
And so thank you very much for your past and
future support.
Mary and Voices (07:26):
Top drawer, really top drawer.
Mostly Uncle Frank (07:30):
But now let's get to some of those
emails, and so, without furtherado, here I go once again with
the email.
And First off.
First off, we have an emailfrom Pete.
Mary and Voices (07:45):
I got a little rabbit in this hole and I'm
going to catch the little rabbitand eat him up.
And Pete writes Frank and Mary,I thought I'd share the results
of my efficient frontierexploration with you and your
audience.
I used Testfolio to try andmaximize the compound annual
(08:07):
growth rate and minimize themaximum drawdowns in volatility
of various equity allocations,ranging from 45 to 85 percent.
To smooth out the volatility ofequities, I explored differing
percentages and combinations ofgold, managed futures and strips
.
A couple of observations.
One I used QQQ to represent USlarge-cap growth and replicated
(08:29):
TQQQ to make room foralternative assets in the
portfolio.
I also used US small-cap valueand international small-cap
value equities.
Two at higher 75% and aboveequity allocation, gold ceased
to provide meaningful ballastversus managed futures and
strips.
Technically, gold didn'tprovide special diversification
(08:51):
at lower equity levels either,but I preferred having an
additional asset with a muchlower expense ratio than managed
futures.
Three at 85% equity, Istruggled to minimize drawdown
and volatility to better levelsthan a typical 60-40 portfolio
with a total market equity fund.
Four I struggled to minimizedrawdown and volatility to
better levels than a typical60-40 portfolio with a total
market equity fund.
Four I was surprised by twothings the impressive
(09:12):
performance of only 45% equitiesand how, smoothing out the ride
through the 01 tech bubble and08 great recession, greatly
improved long-term returns inall portfolio iterations Five.
My wife wasn't nearly as excitedabout my portfolio tinkering
results as I expected.
I could have told you that.
I mean, I didn't even get asingle come-hither look.
(09:34):
Apparently sharp ratios havethe same sex appeal as
renaissance festivals.
As an aside, I asked Tyler atPortfolio Charts about possibly
(09:58):
using the SockGen CTA index toreplicate managed futures on his
site.
Fingers crossed, de opresso,lieber Pete.
Mostly Uncle Frank (10:07):
How many lumps do you want?
Mary and Voices (10:09):
Oh, three or four.
Mostly Uncle Frank (10:17):
Well, I took a look at what you've done here
and I will link to it in theshow notes you have a gambling
problem.
I always enjoy watching mylisteners play around with
leverage.
I command that you shoot me now.
Mary and Voices (10:33):
No.
Mostly Uncle Frank (10:36):
And I like the names you gave of the
portfolios.
Pete named them Apple Pie,berry Pie, cherry Pie and Double
Razzleberry Pie and thencompared them with a 60-40
portfolio, and they all trouncedthe 60-40 portfolio.
But I thought what was mostinteresting is that the max
drawdown for all of theseportfolios was less than 30%,
(10:57):
whereas the max drawdown for the60-40 portfolio was about 59%.
For this data set and the bigwinner, of course, was the one
with the most leverage, thedouble Razzleberry Pie portfolio
, which had a compounded annualgrowth rate of in excess of 17%.
So all of you leverage jockeysout there will want to check
(11:20):
this out.
Mary and Voices (11:22):
Oh, there it is , Winner, winner chicken dinner.
Mostly Uncle Frank (11:29):
But do not expect it to impress your
significant other.
Do you think anybody thinks I'ma failure because I go home to
Starla at night?
Forget about it, because riskparity style portfolios do not
make good aphrodisiacs, evenwith leverage in them, and
(12:15):
probably are more akin torenaissance festivals.
And I guess, finally, youmentioned asking Tyler to use
the SockGen CTA index toreplicate managed futures on his
site.
I feel bad for Tyler.
I think he gets an awful lot ofthese requests that he's done
so much work for free.
(12:37):
If I were him, I'd probably saysomething like this I don't
think I'd like another job andI'm not sure where he would get
that data Maybe from AQR,somewhere like that.
I know that Testfolio does havesimulated data for KMLM, at
least going back to the early1990s, but I don't know of
anything that goes all the wayback to the 1970s.
(12:59):
At least that's easilyaccessible.
But then again, I haven'treally looked because I don't
want that job either.
It's not that I'm lazy, it'sthat I just don't care.
But thank you always for yourparticipation, pete, you are one
of our loyal regulars at thebar here.
Mary and Voices (13:17):
Morning everybody.
Hey what's going onie.
Mostly Uncle Frank (13:22):
And thank you for your email.
Second off.
Second off, we have an emailfrom Kevin.
(13:42):
Feeling seven up, I'm feelingseven up.
Feeling seven up, I'm feelingseven up.
Mary and Voices (13:51):
It's a crisp, refreshing feeling Crystal,
clear and light.
Mostly Uncle Frank (13:55):
America's drinking seven up and it sure
feels right, Feeling lucky seven.
Mary and Voices (14:01):
Kevin, stop singing man.
Huh, I was a singing guy.
Mostly Uncle Frank (14:06):
And Kevin writes.
Mary and Voices (14:09):
Mr Frank, fama and French's research uncovered
several factors, like value andsize, that historically
generated excess returns.
Yet, over time, the alpha fromthese factors appears to have
diminished.
Factors appears to havediminished, given that markets
evolve and inefficiencies tendto shrink.
Once widely recognized, why doso many investors still believe
(14:29):
in factor investing as along-term strategy?
If these factors were truesources of outperformance,
shouldn't they persistregardless of discovery?
Or is it simply a case ofarbitrage, eroding the edge?
Thank you, kevin.
I do my best.
Thinking on the bus.
That's how come I don't drive?
See, you don't even know how todrive.
(14:50):
I don't want to know how.
I don't want to learn.
See, the more you drive, theless intelligent you are.
Mostly Uncle Frank (15:03):
Well, Kevin, I'm not sure what you're saying
is true.
At least if you ask people likeLarry Suedro and Ken French
himself, they would say whatyou're saying is true.
At least if you ask people likeLarry Suedro and Ken French
himself, he would say whatyou're saying is not true.
And the reason they would saythat is there has not been
enough data to make anypronouncements about the edge
going away.
Ken French would say that 10years of data is just noise and
(15:24):
you need something like 25 to 30years of data just to have
anything that is within therealm of statistical
significance.
But he'd even say that in orderto actually determine, say,
whether a manager can outperformthe market, you would need
something like 64 years of data.
I'll link to an interview ofhim recently by Memfavor in the
(15:48):
show notes.
But if you research this, youwill find endless articles
taking both sides of this andsome also distinguishing whether
they think the value factor isless useful these days or the
size factor is less useful thesedays.
I think the size factor getspicked on more often than the
value factor these days.
But from my perspective andwhat we are trying to do here,
(16:12):
this whole discussion completelymisses the point and I've
spoken about this in episode 401recently and another recent
episode the reason we want tosplit our stock holdings into
growth and value and probablyinclude some small cap value on
that side, is not because wethink it's going to outperform
(16:32):
the market.
And let's be clear, we do nothave small cap value funds in
these portfolios because wethink they're going to
outperform the market.
Mary and Voices (16:41):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (16:45):
The reason we have them in our portfolio is
for diversification purposes.
That is the straight stuff, ohfunk master.
That's why we want a portfoliowhere the stocks are half growth
and half value.
And so you can just look at thebad years and what happens to
growth and value in bad stockyears Most recent one, 2022,.
(17:07):
Growth stocks down, over 30%.
Value stocks some of them, wereup.
They were from minus 10% toplus 10%.
If you have those two thingstogether and you rebalance them,
you will get a rebalancingbonus.
It's better than holding eitherone or the other, and this is a
bedrock principle ofdiversification and rebalancing.
(17:28):
That's called Shannon's Demon.
I will link to it in the shownotes again.
It's named after Claude Shannon, the father of information
science, so it's about asironclad as anything, and what
it says is that if you have twoassets that have the same basic
long-term performance but theyare uncorrelated, or at least
(17:49):
not fully correlated, you arebetter off holding some of each
of those assets 50-50 if theirlong-term performance is the
same than you would holdingeither one of them, simply
because, as time goes on, youcan rebalance them, and so you
are always going to be sellingone high and buying the other
one low Buy, low sell, high Fear.
(18:11):
That's the other guy's problem.
And that combination portfoliowill outperform either one of
them individually.
Mary and Voices (18:20):
That's the fact , Jack.
That's the fact, Jack.
Mostly Uncle Frank (18:24):
So it is not a requirement for our
portfolios to work for small capvalue to outperform the rest of
the market, because we're onlyholding part of our portfolio in
that and we are holding therest of the market in the other
side of it or the other side ofthe market, which means that
we're going to win either way,but we're going to win even more
(18:45):
because we have a diversifiedportfolio.
When you're talking aboutdiversifying stocks, the
question is how do you slice upthe market?
That's the real question how doyou slice up the market to get
the best diversification?
And while you can do it bysectors or all kinds of other
metrics, growth versus valueworks really well.
(19:07):
When you're talking abouttrying to get a higher safe
withdrawal rate and you'll seethis when Bill Bengen's new book
comes out in August that thenew portfolio he suggests has a
lot of value in it, which is whyit has a higher safe withdrawal
rate than the old 4%.
The one he's suggesting is 4.7%, but it's actually more
(19:27):
complicated than something likethe golden butterfly or golden
ratio.
But the other problem you havehere, kevin, is it just a
logical one, in that it is notsufficient for you to say that
it seems like the premium hasgone away.
You need to actually say what isthe best holding for you to
have for whatever you're tryingto do.
(19:48):
I assume it's have the highestperformance over time, and if
you're just looking at the past10 or 15 years, that would be
large cap growth stocks and techstocks.
But I don't know of anybodythat's running around saying
that the last 10 or 15 years hasproved that large cap growth
stocks and tech stocks are goingto outperform the rest of the
market forever, and that's beenestablished now.
(20:10):
But that is basically what youare trying to argue, and so if
you really want to do somethingproductive, you're going to have
to prove that up, because thequestion is not in your mind
whether these factors work aswell as they did in the past,
but what in fact, are yousupposed to hold?
That was the equation, becausedisproving one thing does not
(20:32):
prove something different.
So that's just a logicalfallacy you're dealing with
there.
Mary and Voices (20:38):
You come in here with a skull full of mush
and you leave thinking like alawyer.
Mostly Uncle Frank (20:45):
So the short answer to your question why do
many investors still believe infactor investing as a long-term
strategy?
It's because there's still alot of data that supports that,
and you can listen to Ken Frenchor Larry Swetter or any other
number of very well-qualifiedacademics and investors who will
tell you that.
That's why people continue tobelieve that you can't handle
(21:07):
the truth.
But I don't need to know theoutcome of that debate to make a
good and useful decision abouthow to use these factors in a
risk parity style portfolio fordiversification purposes.
Hopefully that helps and thankyou for your email.
Mary and Voices (21:24):
Night Watchman Pomona.
Mostly Uncle Frank (21:25):
Yep.
Mary and Voices (21:27):
Asbestos worker .
City of industry.
Yep, french fry maker city ofindustry, yep.
French fry maker Agora.
That's absurd.
Yeah well, you think it's funny, huh?
Mostly Uncle Frank (21:35):
There's room to move.
As a fry cook man, you know, Icould be manager in two years,
king.
Mary and Voices (21:43):
God.
You know, Kevin, I had thiswild dream the other night.
What it was with you and me andwe were working in this sleazy
motel down in Miami Florida andwe were bellhops and we were 65
(22:04):
years old.
It was so real.
It was real, it was realistic,yeah.
Mostly Uncle Frank (22:09):
And then what you woke up in a puddle
Last off.
Last off we have an email fromDale.
I'm Chip, I'm Dave, we're justa couple of crazy rascals out to
have some fun.
Mary and Voices (22:29):
And Dale writes Is there a downloadable
spreadsheet for these portfolios?
I stumbled across your podcasttoday and thought it was great.
I love the movie quotes.
My wife rolls her eyes when Iquote movies all the time.
Love it, dale.
Mostly Uncle Frank (22:47):
I know what you're thinking.
Did he fire six shots or onlyfive?
Well, to tell you the truth, inall this excitement I've kind
of lost track myself.
But, ian, this is a .44 Magnum,the most powerful handgun in
the world, and would blow yourhead clean off.
(23:09):
Well, dale, thank you forappreciating the gratuitous
entertainment that we provide,in addition to the financial
knowledge, to the financialknowledge.
Mary and Voices (23:18):
You are talking about the nonsensical ravings
of a lunatic mind.
Mostly Uncle Frank (23:24):
Now you ask if there was a downloadable
spreadsheet for these portfolios.
The answer is no, there is not.
Not going to do it Wouldn't beprudent at this juncture.
I'm afraid you get what you gethere.
That's all you get, becausethis podcast is a retirement
(23:46):
hobby for me and I do not wishto expand it in any way that
would require more time oreffort than it requires right
now.
And you won't be angry.
I will not be angry, but Ithink it's simple enough to take
the tickers down and put themin a spreadsheet.
My eldest son also tells methat there is a function in
Google Spreadsheets that willactually bring the prices of the
(24:07):
assets into the spreadsheetautomatically.
I don't know how to use that.
Either Are you stupid orsomething, but I think you can
simply take the tickers off ofthe website and do your own
thing with them, and I wouldsuggest you do those things at
Portfolio Visualizer, portfolioCharts and Testfolio.
(24:29):
Check out what Pete has done.
There's a lot of nice new toolsover there for do-it-yourself
investors and a lot of reallylong data sets as well for many
of the tickers.
But the ticker itself is thelast thing you should be
concerning yourself with whenyou are doing portfolio
construction.
When you're doing portfolioconstruction, first you have to
think about what the goal of theportfolio is, and then you
(24:52):
should be looking at broad assetclasses or subclasses as the
things you are manipulating ortrying to decide how much of
this or that I want to have.
I'm talking about things likelarge cap growth or small cap
value or international value orgold or intermediate treasury
bonds, and you need to make sureyou're doing it at that level,
(25:15):
because a lot of the oldercalculators I'm talking about
things like Seafire or FIRECalconly had very limited broad
asset classes like stocks orbonds or cash.
That kind of calculator is notuseful for this.
It doesn't have enough features.
So you do need to be usingsomething that distinguishes
(25:36):
asset classes, like a portfoliovisualizer or a portfolio charts
for any of this work.
So you construct your portfoliousing the asset class
descriptions or sub-asset classdescriptions, and only after you
figure those out do you then golooking around for well, which
ticker am I going to use for mylarge cap growth or my small cap
(26:00):
value, and how does it fittogether with the other ones I
have chosen?
And so when you do look at theportfolios on the website, those
tickers are not magical.
Those are just representativesof one ticker in an asset class
that is either widely used andor is cheap.
Usually the criteria thatyou're looking for.
(26:21):
You're looking for somethingthat is indexed in some way and
is relatively inexpensivecompared to the other choices in
the asset class, but there isnothing magical about any of
those tickers per se and, giventhe era we live in, where we
have multiple ETFs foreverything, there are many good
choices out there.
When it comes to the specifictickers you are using, I would
(26:45):
use ETFs whenever possible andnot mutual funds, because they
are more efficient and they areportable, and there's no reason
not to be using them in the erawe live in, which we have no fee
trading and fractional shares,which we didn't have prior to
2020.
So the mutual fund is prettymuch obsolete at this point and
should only be used if you haveto.
(27:07):
That doesn't mean I would sellthe old ones if it's going to
cause you tax headaches.
I'm just talking about goingforward.
Anyway, that was probably morethan you wanted to hear about
that.
I will continue to pepper youwith movie quotes and other
quotes for your entertainment.
Mary and Voices (27:23):
Who wants an orange whip?
Whip, orange whip, three orangewhips and thank you for your
email.
Mostly Uncle Frank (27:31):
You're a dinosaur, callahan.
Your ideas don't fit today.
You know who you're talking to.
You know my record.
Yeah, you're a legend in yourown mind.
Mary and Voices (27:45):
And now for something completely different.
What is that?
What is that?
What is it?
Oh no, not the bees, not thebees.
Ah, I don't love my eyes.
My eyes, ah, ah, I love my eyes, my eyes, ah, ah.
Mostly Uncle Frank (28:04):
And the something completely different
is our weekly portfolio reviewsof the eight sample portfolios
you can find atwwwriskprioritycom on the
portfolios page.
Actually, it wasn't that badthis past week, it just wasn't
very good.
Looking at the markets so farthis year, the S&P 500,
represented by VOO, is down0.85% for the year.
(28:25):
The NASDAQ 100, represented byQQQ, is down 0.24% for the year.
Small cap value, represented bythe fund VIOV, is the big loser
still this year.
It's down 12.83% for the year.
But gold continues to be thebig winner I love gold
(28:45):
representative fund gldm is up28.04 for the year.
I think it went up like six orseven percent last week, nearing
all-time highs again and that'sthe way.
Mary and Voices (28:57):
Uh-huh, uh, uh-huh.
Mostly Uncle Frank (28:58):
I like it.
Okay, see you on the SunshineBond.
Long-term treasury bondsrepresented by the fund VGLT are
down 1.16% for the year.
Wreaths, represented by thefund REET, are up 1.44% for the
year.
Commodities, represented by thefund PDBC are down 1% for the
year.
Preferred shares, representedby the fund PFFV are down 0.66%
(29:21):
for the year.
Preferred shares represented bythe fund PFFV are down 0.66%
for the year and managed futuresare still managing to be down,
although not as much.
Representative fund DBMF isdown at 2.49% for the year so
far.
Moving to these portfolios,they're all up marginally for
the year, except for the onethat's not very well diversified
.
But the first one is the AllSeasons.
This is a reference portfolio.
(29:43):
It's only 30% in stocks and atotal stock market fund VTI, 55%
in intermediate and long-termtreasury bonds, 15% in gold and
commodities and it's down 0.27%for the month of May.
It's up 1.83% year-to-date andup 10.54% since inception in
(30:03):
July 2020.
Moving to our bread and butterrisk parity style portfolios,
first one's Golden Butterfly.
This one is 40% in stocks in atotal stock market fund and a
small cap value fund, 40% intreasury bonds divided into long
and short, and 20% in gold.
It is down 0.87% month to date.
(30:23):
For the month of May, it's up3.13% year to date and up 38.12%
since inception in July 2020.
Next one's the golden ratio.
This one's 42% in stocks dividedinto a large cap growth fund
and a small cap value fund, 26%in long-term treasury bonds, 16%
in gold, 10% in managed futuresand 6% in cash in a money
(30:47):
market fund.
It's up 1.21% for the month ofMay and it's up 1.33%
year-to-date and up 31.69% sinceinception in July 2020.
Next one's the risk parityultimate our kitchen sink.
I won't go through all 15 ofthese funds, but the crypto is
doing really well again thesedays.
We'll probably be taking adistribution out of that for
(31:09):
June.
For the month of May, it is up0.79%.
It's up 1.21% year-to-date andup 21.14% since inception in
July 2020.
And now we're moving to theseexperimental portfolios that all
involve leveraged funds and areall over the map.
Don't try this at home.
Mary and Voices (31:29):
Look away, I'm hitting you.
Mostly Uncle Frank (31:32):
First one's the accelerated permanent
portfolio.
It is 27.5% in a leveraged bondfund TMF, 25% in a leveraged
stock fund Upro, 25% in PFFV, apreferred shares fund, and 22.5%
in gold.
It's down 1.96% month to date.
It's down 0.36% year to dateand up 0.66% since inception,
(31:56):
july 2020.
Next one's the aggressive 50-50.
This is the most levered andleast diversified of these
portfolios and it shows it'sone-third in a levered bond fund
TMF, one-third in a leveredstock fund UPRO and the
remaining third divided into apreferred shares fund and an
intermediate treasury bond fund.
It's down 2.41% month-to-datefor the month of May.
(32:18):
It's down 8.17% year-to-dateand down 19.12% since inception
in July 2020.
Next one's the levered goldenratio.
This one is 35% in a compositefund called NTSX that's, the S&P
500 and treasury bonds, 20% ingold GLDM, 15 percent in a
(32:40):
international small cap valuefund, avdv, 10 percent in KMLM,
which is a managed futures fund,10 percent in TMF, a levered
bond fund, and the remaining 10percent divided into UDOW and
UTSL, which are levered fundsthat follow the Dow and
Utilities indexes.
It's up 1.43% for the month ofMay.
(33:01):
It's up 3.93% year-to-date anddown 0.67% since inception in
July 2021.
And the last one and newest oneis the Optra portfolio.
It's a return-stacked kind ofportfolio.
Mary and Voices (33:15):
It is 16% in a levered stock fund.
Mostly Uncle Frank (33:17):
It is 16% in a levered stock fund, Upro, 24%
in a worldwide value fundcalled AVGV, 24% in GOVZ, a
government treasury strips fund,and the remaining 36% divided
into gold and managed futures.
It's up 1.59% for the month ofMay.
(33:46):
It's up 1.38% year-to-date andup 4.33% since inception in July
2024.
And that concludes ourportfolio reviews for the week.
I guess we'll be talking aboutdistributions for June when we
get to this next weekend, butnow 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.
Or you can go to the websitewwwriskparityradarcom.
(34:07):
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike subscribe.
Give me some stars.
Follow review.
That would be great, Okay,Thank you once again for tuning
in.
This is Frank Vasquez, withRisk Party Radio signing off.
Mary and Voices (34:52):
Tell me where is Gandalf, for I much desire to
speak with him About RokofMorkoth.
What do you say Now, taking thehobbits to Isengard, Struggle
for gold.
Mostly Uncle Frank (35:02):
I'm taking the hobbits to Isengard Struggle
for gold.
I'm taking the hobbits toIsengard.
I'm taking the hobbits toIsengard.
I'm taking the hobbits toIsengard Struggle for gold.
They know and never come back,back, back, back, back, back,
back, back, back, back, back,back, back, back, back, back,
back back.
Come back, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks.
Mary and Voices (35:20):
Sparks, sparks, sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks
purposes only and does notconstitute financial investment,
tax or legal advice.
(35:40):
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
A foolish consistency is the hobgoblin of
little minds, adored by littlestatesmen and philosophers and
divines.
Mostly Uncle Frank (00:10):
If a man does not keep pace with his
companions, perhaps it isbecause he hears a different
drummer.
Mary and Voices (00:17):
A different drummer and now, coming to you
from dead center on your dial,welcome to Risk Parity Radio,
where we explore alternativesand asset allocations for the
do-it-yourself investor,Broadcasting to you now from the
comfort of his easy chair.
Here is your host, FrankVasquez.
Mostly Uncle Frank (00:38):
Thank you, mary, and welcome to Risk Parity
Radio.
If you have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Expect the unexpected.
It's a relatively small place.
It's just me and Mary in hereand we only have a few
(01:02):
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
I don't think I'd like anotherjob.
Mary and Voices (01:23):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Mostly Uncle Frank (01:29):
Now who's up for a trip to the library
tomorrow?
So please enjoy our mostly coldbeer served in cans and our
coffee served in old chipped andcracked mugs, along with what
our little free library has tooffer.
But now onward, episode 426.
(01:55):
Today on Risk Parity Radio,it's time for our weekly
portfolio reviews.
Of the eight sample portfoliosyou can find at
wwwriskparityradiocom on theportfolios page, and we also
have some emails.
Mary and Voices (02:08):
Groovy baby.
Mostly Uncle Frank (02:10):
But before we get to those, I have a little
announcement to make A campaign, if you will.
Surely you can't be serious.
I am serious and don't call meShirley, as most of you know,
because I say it all the time,we do not have any sponsors on
this podcast because it's aretirement hobby, but we do
support a charity called theFather McKenna Center that
(02:31):
supports hungry and homelesspeople in Washington DC.
Now, the Father McKenna Centeris a relatively small operation
as far as charities is concerned.
Our budget is only about $1.5million a year.
We only have about six actualemployees, but we do have
tremendous leverage in that ourspace is provided by the school,
(02:55):
gonzaga High School, which ownsthe church and the basement
where our center is located, andso we do not have to pay any
overhead for that.
And we also have about athousand volunteers that work at
the center every year, and theyare mostly high school students
and college students.
We are also now getting someinterns from people who are
(03:17):
studying social work and relatedfields to supplement our people
power.
All this is to say we areextremely efficient at the
services we provide with themoney that we do get in, and we
serve thousands and thousands ofmeals and have a food pantry
that serves many families andhave other ancillary functions,
(03:37):
including medical clinicvolunteers, legal clinic
volunteers, and we even have afinancial literacy class going
on there.
Right now, we rely mostly ondonations from individuals
because we do not receive anygovernment support.
We're not really big enough forthat to make sense and many of
you have been extremely generousand I really wanted to thank
(04:00):
you first, because I neveractually expected this podcast
to be able to raise the kind ofmoney it has raised for the
center.
Surprise, surprise surprise, butI have one listener who
contacted me recently with aproposal and he wishes to remain
anonymous.
I have no name, so I'm going togive him a name anyway.
(04:24):
We're going to call him Matthew63.
And that's code for something.
We'll see how many of you canfigure that out.
It's not too hard.
But Matthew 63 proposes to give$15,000 to the center as
matching funds, matching theother donations that we receive
now from our listeners at RiskParity Radio, and so we are
(04:47):
starting a matching campaign tomatch that $15,000.
We decided to call it the Top ofthe T-Shirt Campaign.
Why are we calling it that?
Okay, so our major fundraiserfor the year is a walk for
McKenna that we hold inSeptember of each year, but we
collect the major donations forthe walk in the summertime and
(05:11):
the major donors get to havetheir names and logos put on the
t-shirt that we give toeverybody who's walking, and the
more you give, the higher onthe t-shirt your logo and name
is going to be.
Now, usually that top spot isoccupied by a local Irish pub
near the McKenna Center who'sbeen a great sponsor, and that
(05:31):
is called the Dubliner.
If you're ever in DC on CapitolHill, you should definitely go
to the Dubliner.
It is an institution on CapitolHill but we want to get Risk
Parity Radio up to the level ofthe Dubliner and if we get all
the matches for the $15,000, wewill certainly be at that level,
because $15,000 is a lot ofmoney for us.
(05:52):
It is 1% of our annual budgetand $30,000 would be 2% of our
annual budget, which would behuge, a really big one here,
which is huge.
So I am inviting you toparticipate in the top of the
t-shirt campaign and you willhave to hear about it
periodically from now until weraise the money.
(06:15):
So maybe that's incentive togive it right away.
We can get it over with, Idon't care about the children I
just care about their parents'money.
So if you would like toparticipate in it I hope you do
the easiest way would be to goto the Father McKenna website
and go to the donation page andwhen you fill out your donation
and you can donate by creditcard or check or donate shares,
(06:37):
many other ways, but there's alittle box there for like a
dedication or something, and ifyou just put in Risk Parity
Radio or Risk Parity Radio Matchor just something in there to
flag it, we'll be able to countthe donations that way and I'll
go ahead and make sure you getanother copy of that memo, okay,
(06:58):
and then we will ask Matthew 63to double it, as he has pledged
.
Mary and Voices (07:03):
Show me the money, jerry, you better yell.
Show me the money, show me themoney, show me the money.
Mostly Uncle Frank (07:12):
Do you love this black man?
I love the black man.
Mary and Voices (07:16):
Show me the money.
I love black people.
I love black people.
Mostly Uncle Frank (07:22):
And so thank you very much for your past and
future support.
Mary and Voices (07:26):
Top drawer, really top drawer.
Mostly Uncle Frank (07:30):
But now let's get to some of those
emails, and so, without furtherado, here I go once again with
the email.
And First off.
First off, we have an emailfrom Pete.
Mary and Voices (07:45):
I got a little rabbit in this hole and I'm
going to catch the little rabbitand eat him up.
And Pete writes Frank and Mary,I thought I'd share the results
of my efficient frontierexploration with you and your
audience.
I used Testfolio to try andmaximize the compound annual
(08:07):
growth rate and minimize themaximum drawdowns in volatility
of various equity allocations,ranging from 45 to 85 percent.
To smooth out the volatility ofequities, I explored differing
percentages and combinations ofgold, managed futures and strips
.
A couple of observations.
One I used QQQ to represent USlarge-cap growth and replicated
(08:29):
TQQQ to make room foralternative assets in the
portfolio.
I also used US small-cap valueand international small-cap
value equities.
Two at higher 75% and aboveequity allocation, gold ceased
to provide meaningful ballastversus managed futures and
strips.
Technically, gold didn'tprovide special diversification
(08:51):
at lower equity levels either,but I preferred having an
additional asset with a muchlower expense ratio than managed
futures.
Three at 85% equity, Istruggled to minimize drawdown
and volatility to better levelsthan a typical 60-40 portfolio
with a total market equity fund.
Four I struggled to minimizedrawdown and volatility to
better levels than a typical60-40 portfolio with a total
market equity fund.
Four I was surprised by twothings the impressive
(09:12):
performance of only 45% equitiesand how, smoothing out the ride
through the 01 tech bubble and08 great recession, greatly
improved long-term returns inall portfolio iterations Five.
My wife wasn't nearly as excitedabout my portfolio tinkering
results as I expected.
I could have told you that.
I mean, I didn't even get asingle come-hither look.
(09:34):
Apparently sharp ratios havethe same sex appeal as
renaissance festivals.
As an aside, I asked Tyler atPortfolio Charts about possibly
(09:58):
using the SockGen CTA index toreplicate managed futures on his
site.
Fingers crossed, de opresso,lieber Pete.
Mostly Uncle Frank (10:07):
How many lumps do you want?
Mary and Voices (10:09):
Oh, three or four.
Mostly Uncle Frank (10:17):
Well, I took a look at what you've done here
and I will link to it in theshow notes you have a gambling
problem.
I always enjoy watching mylisteners play around with
leverage.
I command that you shoot me now.
Mary and Voices (10:33):
No.
Mostly Uncle Frank (10:36):
And I like the names you gave of the
portfolios.
Pete named them Apple Pie,berry Pie, cherry Pie and Double
Razzleberry Pie and thencompared them with a 60-40
portfolio, and they all trouncedthe 60-40 portfolio.
But I thought what was mostinteresting is that the max
drawdown for all of theseportfolios was less than 30%,
(10:57):
whereas the max drawdown for the60-40 portfolio was about 59%.
For this data set and the bigwinner, of course, was the one
with the most leverage, thedouble Razzleberry Pie portfolio
, which had a compounded annualgrowth rate of in excess of 17%.
So all of you leverage jockeysout there will want to check
(11:20):
this out.
Mary and Voices (11:22):
Oh, there it is , Winner, winner chicken dinner.
Mostly Uncle Frank (11:29):
But do not expect it to impress your
significant other.
Do you think anybody thinks I'ma failure because I go home to
Starla at night?
Forget about it, because riskparity style portfolios do not
make good aphrodisiacs, evenwith leverage in them, and
(12:15):
probably are more akin torenaissance festivals.
And I guess, finally, youmentioned asking Tyler to use
the SockGen CTA index toreplicate managed futures on his
site.
I feel bad for Tyler.
I think he gets an awful lot ofthese requests that he's done
so much work for free.
(12:37):
If I were him, I'd probably saysomething like this I don't
think I'd like another job andI'm not sure where he would get
that data Maybe from AQR,somewhere like that.
I know that Testfolio does havesimulated data for KMLM, at
least going back to the early1990s, but I don't know of
anything that goes all the wayback to the 1970s.
(12:59):
At least that's easilyaccessible.
But then again, I haven'treally looked because I don't
want that job either.
It's not that I'm lazy, it'sthat I just don't care.
But thank you always for yourparticipation, pete, you are one
of our loyal regulars at thebar here.
Mary and Voices (13:17):
Morning everybody.
Hey what's going onie.
Mostly Uncle Frank (13:22):
And thank you for your email.
Second off.
Second off, we have an emailfrom Kevin.
(13:42):
Feeling seven up, I'm feelingseven up.
Feeling seven up, I'm feelingseven up.
Mary and Voices (13:51):
It's a crisp, refreshing feeling Crystal,
clear and light.
Mostly Uncle Frank (13:55):
America's drinking seven up and it sure
feels right, Feeling lucky seven.
Mary and Voices (14:01):
Kevin, stop singing man.
Huh, I was a singing guy.
Mostly Uncle Frank (14:06):
And Kevin writes.
Mary and Voices (14:09):
Mr Frank, fama and French's research uncovered
several factors, like value andsize, that historically
generated excess returns.
Yet, over time, the alpha fromthese factors appears to have
diminished.
Factors appears to havediminished, given that markets
evolve and inefficiencies tendto shrink.
Once widely recognized, why doso many investors still believe
(14:29):
in factor investing as along-term strategy?
If these factors were truesources of outperformance,
shouldn't they persistregardless of discovery?
Or is it simply a case ofarbitrage, eroding the edge?
Thank you, kevin.
I do my best.
Thinking on the bus.
That's how come I don't drive?
See, you don't even know how todrive.
(14:50):
I don't want to know how.
I don't want to learn.
See, the more you drive, theless intelligent you are.
Mostly Uncle Frank (15:03):
Well, Kevin, I'm not sure what you're saying
is true.
At least if you ask people likeLarry Suedro and Ken French
himself, they would say whatyou're saying is true.
At least if you ask people likeLarry Suedro and Ken French
himself, he would say whatyou're saying is not true.
And the reason they would saythat is there has not been
enough data to make anypronouncements about the edge
going away.
Ken French would say that 10years of data is just noise and
(15:24):
you need something like 25 to 30years of data just to have
anything that is within therealm of statistical
significance.
But he'd even say that in orderto actually determine, say,
whether a manager can outperformthe market, you would need
something like 64 years of data.
I'll link to an interview ofhim recently by Memfavor in the
(15:48):
show notes.
But if you research this, youwill find endless articles
taking both sides of this andsome also distinguishing whether
they think the value factor isless useful these days or the
size factor is less useful thesedays.
I think the size factor getspicked on more often than the
value factor these days.
But from my perspective andwhat we are trying to do here,
(16:12):
this whole discussion completelymisses the point and I've
spoken about this in episode 401recently and another recent
episode the reason we want tosplit our stock holdings into
growth and value and probablyinclude some small cap value on
that side, is not because wethink it's going to outperform
(16:32):
the market.
And let's be clear, we do nothave small cap value funds in
these portfolios because wethink they're going to
outperform the market.
Mary and Voices (16:41):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (16:45):
The reason we have them in our portfolio is
for diversification purposes.
That is the straight stuff, ohfunk master.
That's why we want a portfoliowhere the stocks are half growth
and half value.
And so you can just look at thebad years and what happens to
growth and value in bad stockyears Most recent one, 2022,.
(17:07):
Growth stocks down, over 30%.
Value stocks some of them, wereup.
They were from minus 10% toplus 10%.
If you have those two thingstogether and you rebalance them,
you will get a rebalancingbonus.
It's better than holding eitherone or the other, and this is a
bedrock principle ofdiversification and rebalancing.
(17:28):
That's called Shannon's Demon.
I will link to it in the shownotes again.
It's named after Claude Shannon, the father of information
science, so it's about asironclad as anything, and what
it says is that if you have twoassets that have the same basic
long-term performance but theyare uncorrelated, or at least
(17:49):
not fully correlated, you arebetter off holding some of each
of those assets 50-50 if theirlong-term performance is the
same than you would holdingeither one of them, simply
because, as time goes on, youcan rebalance them, and so you
are always going to be sellingone high and buying the other
one low Buy, low sell, high Fear.
(18:11):
That's the other guy's problem.
And that combination portfoliowill outperform either one of
them individually.
Mary and Voices (18:20):
That's the fact , Jack.
That's the fact, Jack.
Mostly Uncle Frank (18:24):
So it is not a requirement for our
portfolios to work for small capvalue to outperform the rest of
the market, because we're onlyholding part of our portfolio in
that and we are holding therest of the market in the other
side of it or the other side ofthe market, which means that
we're going to win either way,but we're going to win even more
(18:45):
because we have a diversifiedportfolio.
When you're talking aboutdiversifying stocks, the
question is how do you slice upthe market?
That's the real question how doyou slice up the market to get
the best diversification?
And while you can do it bysectors or all kinds of other
metrics, growth versus valueworks really well.
(19:07):
When you're talking abouttrying to get a higher safe
withdrawal rate and you'll seethis when Bill Bengen's new book
comes out in August that thenew portfolio he suggests has a
lot of value in it, which is whyit has a higher safe withdrawal
rate than the old 4%.
The one he's suggesting is 4.7%, but it's actually more
(19:27):
complicated than something likethe golden butterfly or golden
ratio.
But the other problem you havehere, kevin, is it just a
logical one, in that it is notsufficient for you to say that
it seems like the premium hasgone away.
You need to actually say what isthe best holding for you to
have for whatever you're tryingto do.
(19:48):
I assume it's have the highestperformance over time, and if
you're just looking at the past10 or 15 years, that would be
large cap growth stocks and techstocks.
But I don't know of anybodythat's running around saying
that the last 10 or 15 years hasproved that large cap growth
stocks and tech stocks are goingto outperform the rest of the
market forever, and that's beenestablished now.
(20:10):
But that is basically what youare trying to argue, and so if
you really want to do somethingproductive, you're going to have
to prove that up, because thequestion is not in your mind
whether these factors work aswell as they did in the past,
but what in fact, are yousupposed to hold?
That was the equation, becausedisproving one thing does not
(20:32):
prove something different.
So that's just a logicalfallacy you're dealing with
there.
Mary and Voices (20:38):
You come in here with a skull full of mush
and you leave thinking like alawyer.
Mostly Uncle Frank (20:45):
So the short answer to your question why do
many investors still believe infactor investing as a long-term
strategy?
It's because there's still alot of data that supports that,
and you can listen to Ken Frenchor Larry Swetter or any other
number of very well-qualifiedacademics and investors who will
tell you that.
That's why people continue tobelieve that you can't handle
(21:07):
the truth.
But I don't need to know theoutcome of that debate to make a
good and useful decision abouthow to use these factors in a
risk parity style portfolio fordiversification purposes.
Hopefully that helps and thankyou for your email.
Mary and Voices (21:24):
Night Watchman Pomona.
Mostly Uncle Frank (21:25):
Yep.
Mary and Voices (21:27):
Asbestos worker .
City of industry.
Yep, french fry maker city ofindustry, yep.
French fry maker Agora.
That's absurd.
Yeah well, you think it's funny, huh?
Mostly Uncle Frank (21:35):
There's room to move.
As a fry cook man, you know, Icould be manager in two years,
king.
Mary and Voices (21:43):
God.
You know, Kevin, I had thiswild dream the other night.
What it was with you and me andwe were working in this sleazy
motel down in Miami Florida andwe were bellhops and we were 65
(22:04):
years old.
It was so real.
It was real, it was realistic,yeah.
Mostly Uncle Frank (22:09):
And then what you woke up in a puddle
Last off.
Last off we have an email fromDale.
I'm Chip, I'm Dave, we're justa couple of crazy rascals out to
have some fun.
Mary and Voices (22:29):
And Dale writes Is there a downloadable
spreadsheet for these portfolios?
I stumbled across your podcasttoday and thought it was great.
I love the movie quotes.
My wife rolls her eyes when Iquote movies all the time.
Love it, dale.
Mostly Uncle Frank (22:47):
I know what you're thinking.
Did he fire six shots or onlyfive?
Well, to tell you the truth, inall this excitement I've kind
of lost track myself.
But, ian, this is a .44 Magnum,the most powerful handgun in
the world, and would blow yourhead clean off.
(23:09):
Well, dale, thank you forappreciating the gratuitous
entertainment that we provide,in addition to the financial
knowledge, to the financialknowledge.
Mary and Voices (23:18):
You are talking about the nonsensical ravings
of a lunatic mind.
Mostly Uncle Frank (23:24):
Now you ask if there was a downloadable
spreadsheet for these portfolios.
The answer is no, there is not.
Not going to do it Wouldn't beprudent at this juncture.
I'm afraid you get what you gethere.
That's all you get, becausethis podcast is a retirement
(23:46):
hobby for me and I do not wishto expand it in any way that
would require more time oreffort than it requires right
now.
And you won't be angry.
I will not be angry, but Ithink it's simple enough to take
the tickers down and put themin a spreadsheet.
My eldest son also tells methat there is a function in
Google Spreadsheets that willactually bring the prices of the
(24:07):
assets into the spreadsheetautomatically.
I don't know how to use that.
Either Are you stupid orsomething, but I think you can
simply take the tickers off ofthe website and do your own
thing with them, and I wouldsuggest you do those things at
Portfolio Visualizer, portfolioCharts and Testfolio.
(24:29):
Check out what Pete has done.
There's a lot of nice new toolsover there for do-it-yourself
investors and a lot of reallylong data sets as well for many
of the tickers.
But the ticker itself is thelast thing you should be
concerning yourself with whenyou are doing portfolio
construction.
When you're doing portfolioconstruction, first you have to
think about what the goal of theportfolio is, and then you
(24:52):
should be looking at broad assetclasses or subclasses as the
things you are manipulating ortrying to decide how much of
this or that I want to have.
I'm talking about things likelarge cap growth or small cap
value or international value orgold or intermediate treasury
bonds, and you need to make sureyou're doing it at that level,
(25:15):
because a lot of the oldercalculators I'm talking about
things like Seafire or FIRECalconly had very limited broad
asset classes like stocks orbonds or cash.
That kind of calculator is notuseful for this.
It doesn't have enough features.
So you do need to be usingsomething that distinguishes
(25:36):
asset classes, like a portfoliovisualizer or a portfolio charts
for any of this work.
So you construct your portfoliousing the asset class
descriptions or sub-asset classdescriptions, and only after you
figure those out do you then golooking around for well, which
ticker am I going to use for mylarge cap growth or my small cap
(26:00):
value, and how does it fittogether with the other ones I
have chosen?
And so when you do look at theportfolios on the website, those
tickers are not magical.
Those are just representativesof one ticker in an asset class
that is either widely used andor is cheap.
Usually the criteria thatyou're looking for.
(26:21):
You're looking for somethingthat is indexed in some way and
is relatively inexpensivecompared to the other choices in
the asset class, but there isnothing magical about any of
those tickers per se and, giventhe era we live in, where we
have multiple ETFs foreverything, there are many good
choices out there.
When it comes to the specifictickers you are using, I would
(26:45):
use ETFs whenever possible andnot mutual funds, because they
are more efficient and they areportable, and there's no reason
not to be using them in the erawe live in, which we have no fee
trading and fractional shares,which we didn't have prior to
2020.
So the mutual fund is prettymuch obsolete at this point and
should only be used if you haveto.
(27:07):
That doesn't mean I would sellthe old ones if it's going to
cause you tax headaches.
I'm just talking about goingforward.
Anyway, that was probably morethan you wanted to hear about
that.
I will continue to pepper youwith movie quotes and other
quotes for your entertainment.
Mary and Voices (27:23):
Who wants an orange whip?
Whip, orange whip, three orangewhips and thank you for your
email.
Mostly Uncle Frank (27:31):
You're a dinosaur, callahan.
Your ideas don't fit today.
You know who you're talking to.
You know my record.
Yeah, you're a legend in yourown mind.
Mary and Voices (27:45):
And now for something completely different.
What is that?
What is that?
What is it?
Oh no, not the bees, not thebees.
Ah, I don't love my eyes.
My eyes, ah, ah, I love my eyes, my eyes, ah, ah.
Mostly Uncle Frank (28:04):
And the something completely different
is our weekly portfolio reviewsof the eight sample portfolios
you can find atwwwriskprioritycom on the
portfolios page.
Actually, it wasn't that badthis past week, it just wasn't
very good.
Looking at the markets so farthis year, the S&P 500,
represented by VOO, is down0.85% for the year.
(28:25):
The NASDAQ 100, represented byQQQ, is down 0.24% for the year.
Small cap value, represented bythe fund VIOV, is the big loser
still this year.
It's down 12.83% for the year.
But gold continues to be thebig winner I love gold
(28:45):
representative fund gldm is up28.04 for the year.
I think it went up like six orseven percent last week, nearing
all-time highs again and that'sthe way.
Mary and Voices (28:57):
Uh-huh, uh, uh-huh.
Mostly Uncle Frank (28:58):
I like it.
Okay, see you on the SunshineBond.
Long-term treasury bondsrepresented by the fund VGLT are
down 1.16% for the year.
Wreaths, represented by thefund REET, are up 1.44% for the
year.
Commodities, represented by thefund PDBC are down 1% for the
year.
Preferred shares, representedby the fund PFFV are down 0.66%
(29:21):
for the year.
Preferred shares represented bythe fund PFFV are down 0.66%
for the year and managed futuresare still managing to be down,
although not as much.
Representative fund DBMF isdown at 2.49% for the year so
far.
Moving to these portfolios,they're all up marginally for
the year, except for the onethat's not very well diversified
.
But the first one is the AllSeasons.
This is a reference portfolio.
(29:43):
It's only 30% in stocks and atotal stock market fund VTI, 55%
in intermediate and long-termtreasury bonds, 15% in gold and
commodities and it's down 0.27%for the month of May.
It's up 1.83% year-to-date andup 10.54% since inception in
(30:03):
July 2020.
Moving to our bread and butterrisk parity style portfolios,
first one's Golden Butterfly.
This one is 40% in stocks in atotal stock market fund and a
small cap value fund, 40% intreasury bonds divided into long
and short, and 20% in gold.
It is down 0.87% month to date.
(30:23):
For the month of May, it's up3.13% year to date and up 38.12%
since inception in July 2020.
Next one's the golden ratio.
This one's 42% in stocks dividedinto a large cap growth fund
and a small cap value fund, 26%in long-term treasury bonds, 16%
in gold, 10% in managed futuresand 6% in cash in a money
(30:47):
market fund.
It's up 1.21% for the month ofMay and it's up 1.33%
year-to-date and up 31.69% sinceinception in July 2020.
Next one's the risk parityultimate our kitchen sink.
I won't go through all 15 ofthese funds, but the crypto is
doing really well again thesedays.
We'll probably be taking adistribution out of that for
(31:09):
June.
For the month of May, it is up0.79%.
It's up 1.21% year-to-date andup 21.14% since inception in
July 2020.
And now we're moving to theseexperimental portfolios that all
involve leveraged funds and areall over the map.
Don't try this at home.
Mary and Voices (31:29):
Look away, I'm hitting you.
Mostly Uncle Frank (31:32):
First one's the accelerated permanent
portfolio.
It is 27.5% in a leveraged bondfund TMF, 25% in a leveraged
stock fund Upro, 25% in PFFV, apreferred shares fund, and 22.5%
in gold.
It's down 1.96% month to date.
It's down 0.36% year to dateand up 0.66% since inception,
(31:56):
july 2020.
Next one's the aggressive 50-50.
This is the most levered andleast diversified of these
portfolios and it shows it'sone-third in a levered bond fund
TMF, one-third in a leveredstock fund UPRO and the
remaining third divided into apreferred shares fund and an
intermediate treasury bond fund.
It's down 2.41% month-to-datefor the month of May.
(32:18):
It's down 8.17% year-to-dateand down 19.12% since inception
in July 2020.
Next one's the levered goldenratio.
This one is 35% in a compositefund called NTSX that's, the S&P
500 and treasury bonds, 20% ingold GLDM, 15 percent in a
(32:40):
international small cap valuefund, avdv, 10 percent in KMLM,
which is a managed futures fund,10 percent in TMF, a levered
bond fund, and the remaining 10percent divided into UDOW and
UTSL, which are levered fundsthat follow the Dow and
Utilities indexes.
It's up 1.43% for the month ofMay.
(33:01):
It's up 3.93% year-to-date anddown 0.67% since inception in
July 2021.
And the last one and newest oneis the Optra portfolio.
It's a return-stacked kind ofportfolio.
Mary and Voices (33:15):
It is 16% in a levered stock fund.
Mostly Uncle Frank (33:17):
It is 16% in a levered stock fund, Upro, 24%
in a worldwide value fundcalled AVGV, 24% in GOVZ, a
government treasury strips fund,and the remaining 36% divided
into gold and managed futures.
It's up 1.59% for the month ofMay.
(33:46):
It's up 1.38% year-to-date andup 4.33% since inception in July
2024.
And that concludes ourportfolio reviews for the week.
I guess we'll be talking aboutdistributions for June when we
get to this next weekend, butnow 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.
Or you can go to the websitewwwriskparityradarcom.
(34:07):
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike subscribe.
Give me some stars.
Follow review.
That would be great, Okay,Thank you once again for tuning
in.
This is Frank Vasquez, withRisk Party Radio signing off.
Mary and Voices (34:52):
Tell me where is Gandalf, for I much desire to
speak with him About RokofMorkoth.
What do you say Now, taking thehobbits to Isengard, Struggle
for gold.
Mostly Uncle Frank (35:02):
I'm taking the hobbits to Isengard Struggle
for gold.
I'm taking the hobbits toIsengard.
I'm taking the hobbits toIsengard.
I'm taking the hobbits toIsengard Struggle for gold.
They know and never come back,back, back, back, back, back,
back, back, back, back, back,back, back, back, back, back,
back back.
Come back, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks.
Mary and Voices (35:20):
Sparks, sparks, sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks,
sparks, sparks, sparks, sparks,sparks, sparks, sparks, sparks
purposes only and does notconstitute financial investment,
tax or legal advice.
(35:40):
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
Popular Podcasts
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Special Summer Offer: Exclusively on Apple Podcasts, try our Dateline Premium subscription completely free for one month! With Dateline Premium, you get every episode ad-free plus exclusive bonus content.