In this episode we answer emails from Isaiah, Jack, Jon and Luke. We discuss preliminary transition issues and de-risking, Jack's "25 x 4" risk parity style portfolio, Invictus and similar themes, treasury bonds and gold as co-diversifiers and ESG funds. And revel on how we Tom Sawyer'ed Paula Pant into creating a nice 'Risk Parity Portfolio Blueprint" for us.
And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
To donate to the Top of the T-Shirt campaign and double your fun, please visit the Father McKenna Center donation page and note "Risk Parity Radio Match" when making your contribution.
Additional Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
Afford Anything Podcast Episode: #618: How to Retire at 50 While Supporting Aging Parents, with Frank Vasquez - Afford Anything
Paula Pant's Risk Parity Radio Blueprint: Frank Vasquez Risk Parity Portfolio Giveaway.docx
Claudia Moise Paper: Flights to Safety, Volatility Risk, and Monetary Policy by Claudia E. Moise :: SSRN
Professor Aswath Damodaran on ESG Funds: The Difficult Truth about ESG Investing with Aswath Damodaran
FRDM Fund: FRDM – Freedom 100 Emerging Markets ETF – ETF Stock Quote | Morningstar
Breathless AI-bot Summary:
What happens when retirement portfolio theory meets real-life investment challenges? In this illuminating episode of Risk Parity Radio, Frank Vasquez responds to listener questions that cut to the heart of creating resilient, diversified portfolios for financial independence.
A military member with six years left before retirement asks how to transition from a heavy equity allocation to a risk parity approach without triggering unnecessary tax consequences. Frank offers practical guidance on using existing retirement accounts to begin de-risking immediately, demonstrating how macro allocation principles can work within institutional constraints. The advice highlights a crucial lesson: reducing overall market exposure takes precedence over perfecting individual asset selections.
The psychological challenges of portfolio construction take center stage when a medical professional shares his "25 by 4" portfolio, showing equal allocations to large cap blend, small cap value, gold, and intermediate treasuries. While validating the approach, Frank addresses the emotional resilience needed when certain assets inevitably underperform for extended periods. This conversation exposes a troubling disconnect between certified financial planning education and practical portfolio construction, particularly regarding gold's vital diversification benefits.
Misconceptions about long-term treasury bonds receive special attention, with Frank explaining why their value in risk parity portfolios transcends historical performance during falling interest rates. Their tendency to show negative correlation with stocks during recessions provides the portfolio protection that enables sustainable withdrawal strategies.
For those interested in values-based investing, Frank challenges the notion that commercial ESG products truly align with personal ethics. His recommendat
Mark as Played
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 with hiscompanions perhaps it is because
he hears a different drummer, adifferent 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 investor,Broadcasting 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 have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Voices (00:52):
Expect the unexpected.
Mostly Uncle Frank (00:55):
It's a relatively small place.
It's just me and Mary in hereand we only have a few
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
Voices (01:10):
I don't think I'd like another job.
Mostly Uncle Frank (01:13):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Voices (01:23):
Now, who's up for a trip to the library tomorrow?
Mostly Uncle Frank (01:28):
So please enjoy our mostly cold beer
served in cans and our coffeeserved in old chipped and
cracked mugs, along with whatour little free library has to
offer.
Welcome sample portfolios thatyou can find at
(02:02):
wwwriskpartyradarcom on theportfolios page.
Boring and I realize I missed.
Last week I was off in Montanavisiting my parents and
celebrating Father's Day with my96-year-old father.
Voices (02:19):
Grandpa, how'd you take off your underwear without
taking off your pants?
I don't know.
Mostly Uncle Frank (02:26):
We were able to get him out a couple times,
including meeting up with one ofour listeners here, Chuck,
who's become a good friend inthe Missoula area and is also a
lawyer, if you're looking forone there.
Voices (02:40):
He used to be a caveman, but now he's a lawyer, a frozen
caveman lawyer.
Mostly Uncle Frank (02:54):
And so good times were had by all.
Oh, behave, yeah.
But I am back in front of themicrophone again at home and
since the emails continue tostack up, I suppose it's time to
tend to some of them.
But before we get to that, andin late breaking news as I'm
recording this podcast, itappears that Paula Pant has
(03:16):
released an episode on AffordAnything, the Afford Anything
podcast.
That is an interview of meabout risk parity radio and risk
parity concepts.
I know some of you had beenwaiting for that.
Voices (03:28):
Oh, how convenient.
Mostly Uncle Frank (03:30):
And, of course, she did an excellent job
because she is a professionaljournalist and it shows.
Sometimes people think thatinterviewing people on podcasts
is easy.
It's actually quite a skillthat needs to be developed and
she is one of the best.
Voices (03:47):
The best, Jerry the best .
Mostly Uncle Frank (03:50):
For my part, I was able to pull a Tom Sawyer
maneuver on her.
Looks like you've been missinga lot of work lately.
I wouldn't say I've beenmissing it, bob, and get her to
put together a little cheatsheet, if you will, of risk
parity concepts and you candownload that from the podcast
page.
I will link to that in the shownotes, the Afford Anything
(04:11):
podcast page, and I'll try tolink directly to the place where
you can download the cheatsheet.
But I know that will be ofinterest to some of you too.
Imagine having Paula Pant beone of your top men working on
your podcast.
Voices (04:28):
We have top men working on it right now.
Mostly Uncle Frank (04:33):
Who Top men.
I am certainly quite fortunate,Lucky, and for those of you who
have never been here before buthave come over here to listen
to this podcast because you justheard about it on the Afford
Anything podcast, the one thingyou need to know about what we
do here is that this is aretirement hobby for me, so it
(04:53):
does not sound like a commercialpodcast and it's not intended
to and it never will, and so youalso have to put up with my
sense of humor.
Voices (05:01):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (05:06):
Which is actually why some people listen
to this podcast.
Not for the content at all.
Voices (05:16):
What is this?
Wonka Some kind of fun house.
Mostly Uncle Frank (05:17):
Why having fun?
Anyway, if you can bear with me, you'll probably learn
something at some point in time.
Voices (05:25):
You're that smart.
Let me put it this way have youever heard?
of Plato, Aristotle, Socrates.
Mostly Uncle Frank (05:29):
And, if not, have a nice day.
Voices (05:31):
You know what Napoleon?
Mostly Uncle Frank (05:33):
You can leave, but now let's turn to
those emails.
Voices (05:37):
And so, without further ado, here I go once again with
the email go once again with theemail, and first off first off
an email from Isaiah.
Mostly Mary (06:03):
And Isaiah writes.
Hi, frank and Mary, thanks forthe great work you do.
I've learned a ton fromlistening to you and reading the
sources you've recommended.
I also love hearing about theFather McKenna Center and the
generosity of your audience.
I signed up to support onPatreon and plan to stay a
member indefinitely.
My wife and I have accumulated alittle over a million dollars
in retirement assets and livefrugally enough that we could be
financially independent in thenext year or two if accumulation
(06:25):
were the only factor.
However, I have six years ofservice commitment left Air
Force, so I'll be working untilage 44.
She'll probably retire the sametime I do.
I want to transition our assetsfrom our 95% equity allocation
to a risk parity portfolio as weapproach retirement.
I've listened to several ofyour past episodes about
(06:46):
transition and think Iunderstand your views on it, but
I am facing some limitationswith the accounts the money is
in now, the options available inthose accounts and the fact
that there is a high cost inrelationship capital.
If I want my wife to changeanything about her accounts,
here is a spreadsheet with thedetails, but in a narrative
format for the podcast.
(07:07):
We each have 401ks, roth IRAsand taxable brokerage accounts.
I also have some cryptocurrencyand some non-public REITs that
I'm in the process of unwinding.
I'm looking to go to a goldenratio style portfolio that I
extended one more slot with 3.5%at the bottom allocated to
crypto.
The transition plan I drew upputs long-term treasuries and
(07:30):
gold in a taxable account andREITs in a Roth which isn't tax
efficient but works with thedollar amounts I have in each
account to get close to mydesired allocation and the fact
that there aren't any long-termtreasury, gold or REIT options
in either of our 401ks.
I think the cost and taxinefficiency and capital gains
realized in converting fromequities to alternatives is
(07:53):
worth the diversificationleading up to retirement to
avoid negative sequence ofreturns issues, as opposed to
waiting until retirement when Ican roll the 401ks into IRAs and
locate the assets moreappropriately.
What do you think, isaiah?
We can put that check in amoney market mutual fund.
Mostly Uncle Frank (08:11):
Then we'll reinvest the earnings into
foreign currency accounts withcompounding interest.
And it's gone Well.
First off, isaiah has gone tothe front of the email line
because he has become a donor tothe Father McKenna Center.
As most of you know here, we donot have any sponsors on this
podcast, but we do have acharity we support.
It's called the Father McKennaCenter and it supports hungry
(08:34):
and homeless people inWashington DC.
We are currently running apromotion which we're calling
the Top of the T-Shirt Campaign.
One of our listeners put up$15,000 in matching funds and
we're hoping to match that inmore, and in fact we are
matching that in more.
Voices (08:51):
Yes.
Mostly Uncle Frank (08:52):
But we'll be running it for another month
here and we're hoping to get asmany donors as possible.
So if you're thinking ofsending in an email, I suggest
you also send in a donation.
Otherwise it's going to be along wait before I get to your
email.
You can donate in two waysEither go through the support
page and go to Patreon, asIsaiah has done here that's at
(09:14):
our website,wwwriskparityradiocom or go
directly to the Father McKennawebsite.
I'll put it again in the shownotes, the donation page there.
If you donate there, please puta little note in the dedication
box indicating that it's inconnection with Risk Parity
Radio and your donation will begreatly appreciated.
Now let's get to your questions.
(09:35):
I did take a look at yourspreadsheet and I think there
may be some more efficient waysto approach this than what
you're thinking about.
Before I talk about that, Ithink one of the key issues here
is how much of your expensesare going to be covered by your
pension from the Air Force andhow much need to be covered by
(09:55):
this portfolio, because you canbe a lot more flexible on this
portfolio if most or all of yourexpenses are actually being
covered by the pension, andwe'll talk a little bit about
that as to how it plays intothis portfolio.
But looking at your spreadsheet, what I saw was that you had
(10:18):
about one quarter of your assetsin either the TSP, which is the
government 401k plan or itsequivalent, and a 401k plan or
its equivalent and a 401k plan.
And I think the easiest thingto do with that since you want
to have about that much in bondsand you want it in long-term
treasury bonds eventually is toactually move all of that into
whatever bond funds you haveavailable right now.
(10:38):
I know in the TSP you have theF fund and that would be a good
place to park this until you canmove it out into an IRA and put
it in exactly what you want.
But I think that's close enoughfor the purpose of de-risking
the portfolio, because that'sreally what you're talking about
here.
If we are applying the macroallocation principle, the first
(10:58):
task here is reducing theexposure, the overall exposure,
to the stock market, and so,whether it's in the exact bond
fund you want or some other bondfund, that's close enough for
de-risking purposes.
We can just go ahead, or youcan just go ahead and do that
right now and that will make, Ithink the rest of your proposals
(11:26):
a lot easier to deal with.
The next thing I would belooking at is I'm not sure what
your stocks are actuallyinvested in in terms of the mix
of funds.
That wasn't clear.
If you are trying to move someinto value-tilted funds, which
you should probably be doing, Ithink you can do that most
easily in the Roth, because youhave a lot of Roth money
floating around in there andthat is a reasonable place to
put more stock index funds.
(11:48):
All of this is to try to reducethe number of transactions you
need to actually do in a taxableaccount.
Now, one thing I wasn't sureabout, because I didn't know the
income levels we're talkingabout here, is what is your
long-term capital gains tax rate?
I'm assuming it's probably 15%,because that is true for most
people At least most peoplelisten to this podcast.
(12:09):
If it's 0%, obviously youshould be tax gain harvesting,
but if it's 15%, then maybe wecan reduce the transactions that
you're planning on doing in thenext five years to instead of
$100,000 a year.
You can shift that to maybeonly $50,000 a year or less,
because I think that is whereyou can actually put the gold
(12:31):
and perhaps put the managedfutures, since there doesn't
appear to be room in the Roth ortraditional IRAs, 401ks, tsps
but I think that would be a moreefficient way of approaching
this than what you've proposed.
You'd also suggested putting themanaged futures, or some of the
managed futures, in the RothIRAs.
(12:52):
That would not be a bad choiceeither.
Now it looked like you weregoing to let the REITs run off
and then put that in cash orsomething else.
In that context, I would alsobe turning off any reinvestment
you have of dividends in thetaxable account, so you can just
use those dividends to buywhatever else you're missing and
(13:13):
reduce the number oftransactions you have to do in
terms of conversions.
You can also think about whenyou add money to the portfolio
to build out whatever is missing.
Now you also indicated thatyou'd planned on holding 6% in
cash.
I'm not sure you need that muchcash given your pension, but
it's difficult for me to know.
You didn't put the parametersof that, but I would think about
(13:36):
maybe reducing that and thenputting more of that money maybe
back into an additional stockallocation, because you can be a
little bit more aggressive inthis portfolio than somebody
who's living off it entirelybecause of that pension, but I
would probably not hold 6% cash,given what you've got going on
here, and would use that 6% forother investments in the
(13:59):
portfolio, or most of it.
I think you are doing this atthe right time.
The stock market is at, or nearan all-time high.
It sounds like interest ratesare likely to decline in the
future, although people seem toargue about that every day, at
least from the Fed perspective.
Voices (14:15):
Forget about it.
Mostly Uncle Frank (14:16):
So that means it's a good time to move
some of the money into bonds,even though I would not market
time that.
But if you do shift that TSPmoney and 401k money into the
bonds kind of immediately, thatwill sufficiently de-risk your
overall portfolio a lot and thenyou can take your time building
out the other assets in theportfolio and then once you do
(14:39):
retire you can roll those intoan IRA and buy whatever you want
, as opposed to the limited fundselections you probably have in
there.
I think that's the F fund forthe TSP, but sometimes I mix
those up since I don't have one.
(15:02):
There is probably somethingsimilar to that in your wife's
401k, or maybe a treasury bondfund, an intermediate treasury
bond fund, that you can movethings into.
But I think you're in goodshape and it sounds like it's a
good time to be doing this stuff.
Voices (15:15):
That's the fact, Jack.
That's the fact, Jack.
Mostly Uncle Frank (15:19):
And so hopefully that helps.
Thank you for your donation andthank you for your email, and
so hopefully that helps.
Thank you for your donation.
Voices (15:29):
And thank you for your email.
Mostly Uncle Frank (15:40):
Second off, we have an email from Jack.
Here's Johnny.
Mostly Mary (15:59):
And Jack writes Monkey, watch me pull a rabbit
out of my hat Again.
I've hit financial independence, but haven't pulled the trigger
on retirement yet.
It's tough in the medical field, where any pause of more than a
year or two can make itimpossible to return to your
former specialty due to loss ofskills, certification and
licensure.
Voices (16:19):
As you can see, all communication is shut off.
In spite of our mechanicalmagnificence, if it were not for
this continuous stream of motorimpulses, we would collapse
like a bunch of broccoli.
(16:40):
Oh God.
In conclusion, it should benoted give him an extra dollar.
An extra dollar, yes, sir, thatany more than common injury to
the nerve root is always serious, because once a nerve fiber is
severed, there is no way inheaven or on earth to regenerate
(17:06):
life back into it.
Mostly Mary (17:08):
One more year syndrome is real.
After looking at calculatorslike Portfolio Visualizer,
portfolio Charts and Testfolio,I came up with a simple risk
parity style portfolio thatchecks all the boxes for me.
It starts with a goldenbutterfly portfolio, eliminates
the cash portion and puts all ofthe treasuries in intermediate
(17:29):
term.
I have followed a risk paritystyle portfolio since late 2021,
but arrived at this final formin 2024.
I call it 25 by 4 because itconsists of 25%.
Each large cap blend, small capvalue, gold and intermediate
treasuries.
Portfolio charts says the safewithdrawal rate is over 6%.
(17:51):
I rebalance quarterly and myplan is to withdraw money to
live on.
With each rebalancing I wouldtake out 3% annually for basic
expenses, an additional 1% fornice to have items and another
1% for luxuries if marketconditions allow.
I've run this through someretirement calculators, such as
Bolden, but they don't reallyhandle risk parity style
(18:12):
portfolios all that well.
I had a one-time meeting with aCFP who basically told me gold
has a negative real return andit makes no sense to hold it.
What are they teaching in CFPschool these days?
That's not how it works.
That's not how any of thisworks.
What do you think of thisportfolio?
What am I missing.
Anyway, thanks again for allyou do for us DIY investors.
(18:35):
I've enclosed the readout fromportfolio charts for reference
Jack.
Voices (18:42):
Wendy, I'm home.
Mostly Uncle Frank (18:45):
Well, jack, first thank you for being a
donor to our Top of the T-Shirtcampaign, which is also why
you've gone to the front of theemail line here today.
Voices (18:53):
That is the straight stuff.
Oh funk master.
Mostly Uncle Frank (18:57):
And congratulations on hitting
financial independence.
Yes, I think the next step isto organize your portfolio so
it's all lined up before youactually pull the plug on
employment.
Now, looking at your portfolio,your 25 by 4 portfolio this
(19:19):
actually reminds me of thepermanent portfolio, since it's
got the four asset classes thereis there, and if you took a
permanent portfolio which has25% in cash in it and just flip
that cash into small cap valuestocks, you would get something
that looks almost exactly likethe 25 by 4 portfolio.
Surely you can't be serious.
(19:40):
I am serious and don't call meShirley, but I think this ticks
all the boxes in terms ofportfolios that tend to have
higher safe withdrawal rates.
It has 50% in stocks, which isclose to the sweet spot for that
.
It has between 15 and 30% intreasury bonds, it has between
10 and 25% in alternative assetsand it has less than 10% in
(20:04):
cash, and also you have a 50-50growth and value split in the
stock portion.
So, yeah, it's a veryserviceable portfolio.
Look, it's MacGyver.
Voices (20:19):
Do you know how to pick locks?
Mostly Uncle Frank (20:21):
The one issue you may encounter with it
is psychological and it has todo with the gold in it, because
25% is a lot of gold we'rehaving in a portfolio, and gold
has a habit of having gooddecades and then having bad
decades.
And so, for example, if youwould have retired with this
around 1980, you would have seentwo bad decades in a row for
(20:45):
your gold holdings and it wouldnot have been pleasant.
Of course, your stock andtreasury bond holdings would
have done fantastic, especiallythe treasury bond, since the
interest rates were falling.
But that's the way theseportfolios work.
Something's going to be havinga bad time and something's going
to be having a good time.
If you look at this decade, youwould say, well, treasury bonds
are terrible and they're havinga bad time.
(21:05):
And you hear people say, well,I don't want those, can't be in
those, I want gold.
Now the point of holding bothof them is you don't know what
you're going to get.
It's the old Forrest Gump worldhere.
Mostly Mary (21:18):
My mom always said life was like a box of
chocolates you never know whatyou're going to get, and that's
why you hold both of them.
Mostly Uncle Frank (21:31):
But just be aware that you could have a bad
decade in the next few for goldand it could go nowhere or even
decline.
That doesn't mean you'll have aproblem with the portfolio, but
it does mean that it will looklike it's underperforming the
whole time, even though it'sperforming well enough to take
your withdrawals out of.
If you wanted to reduce thatexposure, you would reduce it by
(21:52):
5% or 10% and then put that ineither a different asset class,
like managed futures, or youcould put it in some kind of
additional stock fund orutilities fund or REIT fund or
something like that, and thenyou'd probably be disappointed
when gold continued to rise likeit has done in the past couple
of years here.
So if you've liked what you'veconstructed here, I think you
(22:13):
can roll with it.
Voices (22:18):
It's 106 miles to Chicago.
We got a full tank of gas, halfa pack of cigarettes, it's dark
and we're wearing sunglasses.
Hit it sunglasses.
Mostly Uncle Frank (22:38):
Hit it Now.
As for your encounters withthis CFP, my experience is that
just because someone has a CFPdoesn't mean they actually know
anything, because some peopleseem to have studied for that
and then completely forgoteverything they learned.
I did ask ChatGPT what a CFPwould do in terms of a gold
allocation and ChatGPT said aCFP would put probably 10% in a
retirement portfolio.
I'm not sure that's the case,but that's what it said.
(23:03):
I always find it amusing to askartificial intelligence these
kinds of questions just to seewhat comes up.
The statement you got, fromwhoever you talked to, is
clearly wrong that gold has anegative real return and it
makes no sense to hold it WrongWrong, I mean.
You can just run a back testand you'll see that gold tends
(23:24):
to go up and to the right overtime, at least since it's been
tradable and we've been off thegold standard since 1970.
And it seems to have a returnthat is somewhere between bonds
and stocks and is uncorrelatedwith both of them, which is
really why you're holding it.
You're not holding it togenerate returns.
You would hold more stocks ifyou were just trying to generate
(23:45):
returns.
You're holding it fordiversification purposes so you
have a lower drawdowns andtherefore a higher safe
withdrawal rate.
And if the CFP didn'tunderstand that, then they do
not understand how it works.
Voices (24:00):
I award you no points and may God have mercy on your
soul.
Mostly Uncle Frank (24:05):
But they may also be working for some
company that basically tellsthem what to say and what to
sell, because that is the waythe financial services industry
works.
Voices (24:15):
Am I right or am I right or am I right Right?
right right.
Mostly Uncle Frank (24:19):
And if they are not recommending something
like gold to their clients, thenthey have to come up with a
whole series of excuses tojustify that.
And that's what you often seethe financial services industry
doing is they will come up withkind of a set plan as to what
they do and then come up with aseries of reasons why they don't
(24:43):
do something else.
That may or may not actually bevalid, and oftentimes they're
not valid because they're moremarketing than they are finance.
Voices (24:52):
Because only one thing counts in this life Get them to
sign on the line which is dotted.
Mostly Uncle Frank (24:59):
As for Bolden and many retirement
calculators, they often obscurewhat they're actually doing in
terms of calculations and makeit actually more difficult to
run analyses of portfolios.
And that's the problem you havewith a black box calculator
that's doing both expenseprojections and portfolio
projections, because those aretwo completely different
(25:21):
exercises and I would try tokeep them at least separate in
your head, even if they aren'tseparate in the calculator,
because a projection of expenseshas everything to do with the
person involved, in theirlifestyle, and so that can be
adjusted fairly easily and islargely predictable, in the
sense that it's more about riskand less about uncertainty.
(25:42):
When you're talking aboutprojecting returns out of a
portfolio, then you are talkingabout degrees of uncertainty,
and so you are not going to getprecise readings or printouts
out of a proper portfolioprojection.
What you should be getting outof a portfolio projection is a
range of potential outcomes,like in a Monte Carlo simulation
(26:04):
, and then you work with that.
So it's not the same as justadding up a stream of numbers
and saying this is the number inthe end.
And from what I hear from thecreator of Bolden, I don't think
he really understands properforecasting techniques.
At least it's not clear to methat he does, because it's got a
lot of misleading settings inthere that allow people to
(26:26):
basically set things toconservative or aggressive in
terms of return assumptions, andthat's not how you should be
doing this.
You should put in the bestestimate you have.
The easiest way to get that isto be using historical averages.
But if you're going to beputting in some other numbers
for those returns, then theybetter be the best estimate that
(26:48):
you have, based on whatevercrystal ball you think is the
most accurate.
Mostly Mary (26:54):
A crystal ball can help you, it can guide you.
Mostly Uncle Frank (26:58):
Because if you're not using your best
estimates, you are inserting anerror into the calculator, then
compounding it and it will getyou way off the reservation.
And oftentimes thesecalculators inadvertently
encourage people to do that, andso you get a lot of garbage out
of calculators based on theerroneous assumptions that are
(27:19):
input into them.
And most CFPs don't know how todo that either, because they
don't learn anything aboutproper forecasting techniques in
the CFP curriculum.
Voices (27:29):
Almost as stupid as a stupid does.
Mostly Uncle Frank (27:33):
Anyway, that's my cautionary rant about
retirement calculators onceagain.
Voices (27:38):
You need somebody watching your back at all times.
Mostly Uncle Frank (27:42):
Because they can easily be turned into never
retirement calculators, or veryprecise and precisely wrong.
Voices (27:50):
Forget about it.
Mostly Uncle Frank (27:52):
Thanks for being a loyal listener all these
years, Jack.
I'm glad to see you are gettingto that point of pulling the
plug.
Voices (28:01):
Hearts and kidneys are tinker toys.
Mostly Uncle Frank (28:04):
I'm sure it'll come soon enough and thank
you for your email.
Voices (28:09):
Bow to your sensei.
Bow to your sensei.
Mostly Uncle Frank (28:13):
Next off, we have an email from John.
Mostly Mary (28:16):
Well, how about, john?
That's nice and simple.
Voices (28:20):
What are you serious?
Well, yeah.
John, you want to do that to thekid.
Mostly Uncle Frank (28:26):
And John writes Hi Frank.
Mostly Mary (28:28):
Thanks to you and folks like Tyler at Portfolio
Charts, I'm in such a betterposition to handle stock market
volatility than I was five yearsago when the stock market
dropped at the beginning ofCOVID.
My psychology is so much better, I have so many more tools at
my disposal and I have a muchgreater perspective.
I'm so grateful to have foundRisk Parity Radio.
No questions, just thanks, John.
Mostly Uncle Frank (28:51):
Well, John, I'm glad we have been of
assistance here and I agree thatTyler of Portfolio Charts has
probably been of more assistanceto you.
I just add the coloredcommentary.
Voices (29:02):
Hey, talk about it.
What do you say?
I just got back from the Hordeof the Fae.
Horde of the Fae?
What's an Horde of the Fae?
It's what you ought to do, butyou do anyway.
Mostly Uncle Frank (29:12):
But I think this goes back to kind of an
ethos that we had in the OG firecommunity back in the day, when
I'm talking about 2009,.
2010, on the boards at earlyretirement extreme where both
Tyler and I hung out.
The first rule of Fight Club isyou do not talk about Fight
(29:33):
Club.
The second rule of Fight Clubis you do not talk about Fight
Club, and the idea there waswe're just going to figure
things out, that we can learnthe things we need to learn to
manage our own investments anddo whatever else we needed to do
, and create the things that weneed to learn to manage our own
investments and do whatever elsewe needed to do, and create the
things that we need to createit matters not how straight the
(29:56):
gate, how charged withpunishments the scroll.
Voices (30:03):
I am the master of my fate, I am the captain of my
soul.
Mostly Uncle Frank (30:15):
And we were just going to do it and put it
out there and share it.
No one can stop me and notaccept the kinds of limitations
that seem to be imposed by thefinancial services industry or
even now, a lot of people in thepersonal finance world and
(30:35):
maybe I'm just an old grump, butI feel like some of that has
been lost, because it seems likethere is a lot more of what I
would call learned helplessnessin the fire community these days
, of people making up reasonswhy they can't spend money or
why they have a problem and Ican't change and I can't solve
this and I don't know how, andall of that's just not true.
(31:07):
Where's the spirit?
Voices (31:12):
Where's the guts?
Huh?
This could be the greatest nightof our lives.
But you're going to let it bethe worst.
Oh, we're afraid to go with you, bluto, we might get in trouble
.
Mostly Uncle Frank (31:29):
If you are listening to this program, you
can probably learn this stuff oranything else you need to learn
to manage your own money.
That's the truth and we willhelp you.
Just ask, no charge.
Voices (31:42):
Ludo's right Psychotic, but absolutely right.
In this case, I think we haveto go all out.
We're just the guys to do it.
Let's do it.
Let's do it.
Mostly Uncle Frank (32:07):
Go, go, go Go.
So thank you for your support.
I'm glad your psychology isbetter.
And thank you for your support.
I'm glad your psychology isbetter.
Voices (32:20):
And thank you for your email, always with you.
What cannot be done?
Hear you nothing that I say.
You must unlearn what you havelearned Last off.
Mostly Uncle Frank (32:35):
Last off, we have an email from Luke.
Voices (32:40):
All right, I'll give it a try.
No try, not Do or do not.
There is no try.
Mostly Uncle Frank (32:49):
And Luke writes.
Mostly Mary (32:51):
Frank, two quick questions.
First, I understand the benefitof the lack of correlation of
long-term bonds to stocks, butdoesn't that asset class just
backtest well due to 40 years ofdeclining interest rates?
Second, I haven't heard yourefer to ESG funds at all.
I would be curious to hear yourthoughts on why adding that
(33:12):
level of active management isn'tworth it.
Even if the screening processdoesn't perfectly align with
one's worldview, it seems likesomething might be better than
nothing.
Thanks for the continuedlessons you're passing on, Luke.
Mostly Uncle Frank (33:26):
All right, two questions.
Doesn't the asset class oflong-term bonds backtest well
due to four years of declininginterest rates?
Well, they're not declininganymore, but what you say is
applicable to any period when anasset is doing well.
So you might say well, doesn'tthe stock market just test well
(33:49):
since 2010, since it's beengoing up?
Doesn't gold just test wellbecause it's been going up?
Doesn't gold just test wellbecause it's been going up in
the past five years?
So it's not really a meaningfulquestion.
The real question is dolong-term treasury bonds fulfill
the purpose that you want themto fulfill in a portfolio like
this?
Voices (34:09):
You had only one job.
Mostly Uncle Frank (34:11):
And that question is answered by whether
they will go up and benegatively correlated with
stocks in a recessionaryenvironment.
And the answer to that is yessince the 1950s, and it was true
in the 1970s and 60s it's truetoday.
I'll link to a paper that I'velinked to before by Claudia
(34:34):
Moise, m-o-i-s-e, which is aboutthe volatility of stock markets
and treasury bonds, and thereis a nice little chart that is
appended to the end of it Ithink it's Annex 1 or something
like that which shows you howthe correlation between treasury
bonds and stocks varies overtime.
But it goes negative every timethere's a recession and that's
(34:58):
why you're holding them, notbecause you think there's some
particular crystal ball that'sgoing to tell you what they're
going to do next.
Mostly Mary (35:06):
As you can see, I've got several here.
Mostly Uncle Frank (35:09):
A really big one here, which is huge.
But the point I'm trying to makeis that asset class is no
different than any other assetclass in that it has good
periods and bad periods.
It does kind of go with the lastquestion, though, which is in
that period, particularly in the80s and 90s, when long-term
treasury bonds were one of thebest things to hold, you would
(35:32):
also have been holding gold inyour portfolio, and that would
have performed terribly, and soyou would say, well, doesn't
that asset class just testpoorly because it tested poorly
in the past 20 years?
Well, it's true for that period, but it's not meaningful in
terms of what the future islikely to bring.
So whether one asset classtests well or badly in one
(35:54):
particular period does not tellyou whether it's a good thing to
have in your portfolio or notby itself.
What's more important really ishow does this set of assets
perform in a particular economicenvironment?
I think the other mistake thatis implied by these kinds of
questions that I hear often isthe magic hand of mean reversion
(36:18):
, the idea that, well, treasurybond yields have fallen for a
period of decades, therefore inthe future they will rise for a
period of decades.
That is completely fallaciousreasoning.
Mostly Mary (36:30):
That's not how any of this works.
Mostly Uncle Frank (36:32):
Because we do not know what yields will be
in the future.
If you did, you could be veryrich very quickly.
Mostly Mary (36:39):
You can actually feel the energy from your ball
by just putting your hands inand out.
Mostly Uncle Frank (36:43):
But unless you have an accurate crystal
ball that predicts such things,I suggest you not try to predict
them.
Mostly Mary (36:49):
Now you can also use the ball to connect to the
spirit world.
Mostly Uncle Frank (36:53):
Because I will tell you that in the early
1980s people didn't want to buytreasury bonds.
They didn't want to buy themall through the 80s and into the
90s because they were waitingfor the 70s inflation to return
and it didn't come back.
So somebody who just held themand bought more of them through
(37:13):
the 1970s is the kind of personwho would have benefited.
So if you were holding one ofthese kind of portfolios, say,
through the 60s and 70s and intothe 80s, yeah, your treasury
bonds did terrible in the 1970swhile your gold was doing well.
And then in the 1980s, thetreasury bonds did great while
the gold was doing poorly andstocks were up and down, mostly
(37:36):
down.
In the 1980s, the treasurybonds did great while the gold
was doing poorly and stocks wereup and down, mostly down in the
70s, except for value-tiltedstocks and mostly up in the 80s.
All right.
Second question ESG funds.
Well, my opinion of them is thesame as Oswalt de Moterans, the
professor at NYU who's the godof all things valuation, and
basically what he says is don'tbother for commercially prepared
(37:59):
ESG funds, because if you arereally serious about this, you
need to do direct indexing.
Don't kid yourself.
If you are serious aboutchoosing investments based on
values personal values then itis your job and it is incumbent
on you to actually review allthe companies you are investing
(38:19):
in.
And that is what he does,because his wife his example was
my wife did not want to holdany fund with an investment in
Monsanto, and so he did not holdany index funds that invested
in Monsanto.
Instead, he went through andcreated a portfolio of
individual stocks that suitedwhat they were wanting to invest
in or not invest in.
(38:40):
And if you are reallyinterested in this topic, that
is what you need to do.
Go, take an index fund that youwould have invested in, say, the
S&P 500.
Look at the top 50 stocks inthere.
That'll be basically mimickingthe rest of the index.
Exclude anything that you don'twant to invest in after you've
read all of the informationabout them, and then add on new
(39:04):
ones at the end of it, and thenyou will have created your own
ESG fund and it will be tailoredto your particular values,
because if you're thinking thatsome other company is going to
create something that actuallyconforms to your values, you're
just kidding yourself.
This is one of those thingsthat either you need to do it
(39:24):
the right way, or don't do it atall and don't pretend that
buying some product off theshelf actually makes you more
righteous in some way, becauseit doesn't.
Voices (39:34):
Bing again.
Mostly Uncle Frank (39:41):
Now there are a lot of funds out there
that you may want to take a lookat that are very specific as to
what kind of values they'reinvesting in.
I'll give you an example.
There's a fund called FreedomF-R-D-M that invests in emerging
markets, but only the ones thathave a positive score for
things like human rights.
Now, you can certainly usefunds like that in a risk parity
(40:01):
style portfolio.
Just make sure that you knowwhat they are in terms of growth
versus value and small versuslarge, et cetera, and then put
them in the right category.
As far as that is concerned,now, that particular fund
actually has performed prettywell, particularly this year.
It's up about 20%.
But other than the fact thatit's a large cap blend fund, I
(40:23):
really couldn't tell you much ofanything else about it.
But you can look a lot of thisstuff up on Morningstar if
you're so inclined.
Anyway, that's all I got foryou on that.
Hopefully that helps, and thankyou for your email.
Voices (40:37):
It's a trap, it's a trap , it's a trap.
It's a it's a trap.
And now for somethingcompletely different.
Mostly Uncle Frank (40:48):
And the something completely different
is our weekly portfolio reviewsof the eight sample portfolios
you can find atwwwriskprioritycom on the
portfolios page.
Voices (40:59):
Boring.
Mostly Uncle Frank (41:01):
Yes, it was pretty boring last week Checking
out these markets for the year.
The S&P 500, represented by thefund VOO, is up 2.31% for the
year.
The NASDAQ 100, represented byQQQ, is up 2.31% for the year.
The NASDAQ 100, represented byQQQ, is up 3.2% for the year.
(41:21):
Small cap value, represented bythe fund VIOV, is down 10% for
the year and is still the bigloser.
Gold is still the big winner.
Voices (41:30):
I love gold.
Mostly Uncle Frank (41:33):
Gold is still the big winner.
I love gold.
Gold is currently up 28.22% forthe year, as represented by the
fund GLDM.
Long-term treasuries,represented by the fund VGLT,
are up 1.32% for the year.
Reits, represented by the fundREET, are up 4.49% for the year.
Commodities did have a big weekit is the oil spike week.
(41:56):
Our representative fund, pdvc,is up 7.01% for the year.
Now, preferred shares,represented by the fund PFFV,
are down 0.01% for the year, andmanaged futures, represented by
the fund DBMF, are now down1.18% for the year.
Moving to these portfolios,first one's a reference
portfolio the All Seasons.
(42:16):
It's only 30% in stocks and atotal stock market fund, 55% in
intermediate and long-termtreasury bonds and the remaining
15% in gold and commodities.
It is up 1.59% month-to-date.
For June, it's up 4.41%year-to-date and up 13.35% since
inception in July 2020.
Moving to the bread and butterkind of portfolios, first one's
(42:39):
Golden Butterfly.
This one is 40% in stocks,divided into a total stock
market fund and a small capvalue fund, 40% in treasury
bonds, divided in long and short, and 20% in gold.
In GLDM.
It's up 1.23% Month to date.
For June, it's up 4.89% Year todate and up 40.47% since
(42:59):
inception in July 2020.
Next one's golden ratio.
This one is 42% in stocksdivided into a large cap growth
fund and a small cap value fund,26% in long-term treasury bonds
, 16% in gold, 10% in managedfutures DBMF and 6% in cash in a
money market fund.
It's up 1.33% month to date.
(43:21):
For June, it's up 3.45% year todate and up 34.44% since
inception in July 2020.
Next one's the kitchen sink therisk parity ultimate.
I'm not going to go through all14 of these funds, but it's up
1.03% month to date.
For June, it's up 3.01% year todate and up 22.93% since
(43:42):
inception in July 2020.
Moving to these experimentalportfolios, we do hideous
experiments here, so you don'thave to.
Don't try this at home.
These all involve leveragedfunds.
First one's the AcceleratedPermanent Portfolio.
This one is 27.5% ina leveredbond fund TMF, 25% in a levered
(44:07):
stock fund UPRO, 25% in PFFV, apreferred shares fund, and 22.5%
in gold GLDM.
It's up 1.46% month-to-date,it's up 3.15% year-to-date and
up 4.21% since inception in July2020.
Now, moving to our most hideousexperiment, the aggressive
50-50, which is our leastdiversified and most levered of
(44:33):
these portfolios.
It's one-third in a leveredstock fund Upro, one-third in a
levered bond fund TMF, and theremaining third divided into a
preferred shares fund and anintermediate treasury bond fund.
It's up 1.24% month-to-date,it's down 3.75% year-to-date due
to its lack of diversificationand it's down 15.23% since
(44:55):
inception in July 2020.
Mostly Mary (44:57):
That's not an improvement.
Mostly Uncle Frank (45:00):
Moving to one of our newer ones, the
levered golden ratio.
This one is 35% in a compositefund called NTSX that's, the S&P
500 and and Treasury bondslevered up 1.5 to 1.
20% in gold GLDM, 15% in aninternational small cap value
fund AVDV, 10% in a managedfutures fund KMLM, 10% in a
(45:26):
levered bond fund TMF, and theremaining 10% divided into UDOW
and UTSL, which are leveredfunds following the Dow and a
utilities index.
It's up 0.35% month-to-date,still leading the pack
year-to-date.
It's up 5.59% year-to-date andup 0.92% since inception, july
(45:48):
2021, which was an inauspiciousstart date.
Now moving to the last one, ournewest one, the Optra portfolio
.
It's a return stacked portfolio, so it's 16% in a levered stock
fund UPRO, 24% in a worldwidevalue fund AVGV, 24% in a US
(46:10):
Treasury Strips Fund GOVZ, andthe remaining 36% divided into
gold and managed futures.
It is up 1.62% month-to-date.
It's up 4.2% year-to-date andup 7.23% since inception in July
2024.
It's almost a year old now.
Voices (46:29):
Well, la-dee-frickin'-da .
Mostly Uncle Frank (46:33):
But that concludes our portfolio reviews
for the week.
Hopefully you aren't snoringtoo loudly at this point.
Voices (46:40):
Well, you haven't got the knack of being idly rich.
You see, you should do like mejust snooze and dream, dream and
snooze.
The pleasures are unlimited.
Mostly Uncle Frank (46:50):
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 website,wwwriskparityradiocom.
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 and give me some
(47:12):
stars, a follow, a review.
That would be great.
Okay, Thank you once again fortuning in.
This is Frank Vasquez with RiskParty Radio Signing off.
Voices (47:31):
Up we go into the wild sky, yonder.
If the Thank you Fighting menguarding the nation's border,
we'll be there for the fireballIn actual war.
(47:58):
We carry on, for nothing willstop the Air Force, for nothing
will stop the US Air Force.
Mostly Mary (48:21):
The Risk Parody Radio Show is hosted by Frank
Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial, investment
tax or legal advice.
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 little statesmen andphilosophers and divines If a
man does not keep pace with hiscompanions perhaps it is because
he hears a different drummer, adifferent 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 investor,Broadcasting 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 have just stumbled inhere, you will find that this
podcast is kind of like a divebar of personal finance and
do-it-yourself investing.
Voices (00:52):
Expect the unexpected.
Mostly Uncle Frank (00:55):
It's a relatively small place.
It's just me and Mary in hereand we only have a few
mismatched bar stools and someeasy chairs.
We have no sponsors, we have noguests and we have no expansion
plans.
Voices (01:10):
I don't think I'd like another job.
Mostly Uncle Frank (01:13):
What we do have is a little free library of
updated and unconflictedinformation for do-it-yourself
investors.
Voices (01:23):
Now, who's up for a trip to the library tomorrow?
Mostly Uncle Frank (01:28):
So please enjoy our mostly cold beer
served in cans and our coffeeserved in old chipped and
cracked mugs, along with whatour little free library has to
offer.
Welcome sample portfolios thatyou can find at
(02:02):
wwwriskpartyradarcom on theportfolios page.
Boring and I realize I missed.
Last week I was off in Montanavisiting my parents and
celebrating Father's Day with my96-year-old father.
Voices (02:19):
Grandpa, how'd you take off your underwear without
taking off your pants?
I don't know.
Mostly Uncle Frank (02:26):
We were able to get him out a couple times,
including meeting up with one ofour listeners here, Chuck,
who's become a good friend inthe Missoula area and is also a
lawyer, if you're looking forone there.
Voices (02:40):
He used to be a caveman, but now he's a lawyer, a frozen
caveman lawyer.
Mostly Uncle Frank (02:54):
And so good times were had by all.
Oh, behave, yeah.
But I am back in front of themicrophone again at home and
since the emails continue tostack up, I suppose it's time to
tend to some of them.
But before we get to that, andin late breaking news as I'm
recording this podcast, itappears that Paula Pant has
(03:16):
released an episode on AffordAnything, the Afford Anything
podcast.
That is an interview of meabout risk parity radio and risk
parity concepts.
I know some of you had beenwaiting for that.
Voices (03:28):
Oh, how convenient.
Mostly Uncle Frank (03:30):
And, of course, she did an excellent job
because she is a professionaljournalist and it shows.
Sometimes people think thatinterviewing people on podcasts
is easy.
It's actually quite a skillthat needs to be developed and
she is one of the best.
Voices (03:47):
The best, Jerry the best .
Mostly Uncle Frank (03:50):
For my part, I was able to pull a Tom Sawyer
maneuver on her.
Looks like you've been missinga lot of work lately.
I wouldn't say I've beenmissing it, bob, and get her to
put together a little cheatsheet, if you will, of risk
parity concepts and you candownload that from the podcast
page.
I will link to that in the shownotes, the Afford Anything
(04:11):
podcast page, and I'll try tolink directly to the place where
you can download the cheatsheet.
But I know that will be ofinterest to some of you too.
Imagine having Paula Pant beone of your top men working on
your podcast.
Voices (04:28):
We have top men working on it right now.
Mostly Uncle Frank (04:33):
Who Top men.
I am certainly quite fortunate,Lucky, and for those of you who
have never been here before buthave come over here to listen
to this podcast because you justheard about it on the Afford
Anything podcast, the one thingyou need to know about what we
do here is that this is aretirement hobby for me, so it
(04:53):
does not sound like a commercialpodcast and it's not intended
to and it never will, and so youalso have to put up with my
sense of humor.
Voices (05:01):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (05:06):
Which is actually why some people listen
to this podcast.
Not for the content at all.
Voices (05:16):
What is this?
Wonka Some kind of fun house.
Mostly Uncle Frank (05:17):
Why having fun?
Anyway, if you can bear with me, you'll probably learn
something at some point in time.
Voices (05:25):
You're that smart.
Let me put it this way have youever heard?
of Plato, Aristotle, Socrates.
Mostly Uncle Frank (05:29):
And, if not, have a nice day.
Voices (05:31):
You know what Napoleon?
Mostly Uncle Frank (05:33):
You can leave, but now let's turn to
those emails.
Voices (05:37):
And so, without further ado, here I go once again with
the email go once again with theemail, and first off first off
an email from Isaiah.
Mostly Mary (06:03):
And Isaiah writes.
Hi, frank and Mary, thanks forthe great work you do.
I've learned a ton fromlistening to you and reading the
sources you've recommended.
I also love hearing about theFather McKenna Center and the
generosity of your audience.
I signed up to support onPatreon and plan to stay a
member indefinitely.
My wife and I have accumulated alittle over a million dollars
in retirement assets and livefrugally enough that we could be
financially independent in thenext year or two if accumulation
(06:25):
were the only factor.
However, I have six years ofservice commitment left Air
Force, so I'll be working untilage 44.
She'll probably retire the sametime I do.
I want to transition our assetsfrom our 95% equity allocation
to a risk parity portfolio as weapproach retirement.
I've listened to several ofyour past episodes about
(06:46):
transition and think Iunderstand your views on it, but
I am facing some limitationswith the accounts the money is
in now, the options available inthose accounts and the fact
that there is a high cost inrelationship capital.
If I want my wife to changeanything about her accounts,
here is a spreadsheet with thedetails, but in a narrative
format for the podcast.
(07:07):
We each have 401ks, roth IRAsand taxable brokerage accounts.
I also have some cryptocurrencyand some non-public REITs that
I'm in the process of unwinding.
I'm looking to go to a goldenratio style portfolio that I
extended one more slot with 3.5%at the bottom allocated to
crypto.
The transition plan I drew upputs long-term treasuries and
(07:30):
gold in a taxable account andREITs in a Roth which isn't tax
efficient but works with thedollar amounts I have in each
account to get close to mydesired allocation and the fact
that there aren't any long-termtreasury, gold or REIT options
in either of our 401ks.
I think the cost and taxinefficiency and capital gains
realized in converting fromequities to alternatives is
(07:53):
worth the diversificationleading up to retirement to
avoid negative sequence ofreturns issues, as opposed to
waiting until retirement when Ican roll the 401ks into IRAs and
locate the assets moreappropriately.
What do you think, isaiah?
We can put that check in amoney market mutual fund.
Mostly Uncle Frank (08:11):
Then we'll reinvest the earnings into
foreign currency accounts withcompounding interest.
And it's gone Well.
First off, isaiah has gone tothe front of the email line
because he has become a donor tothe Father McKenna Center.
As most of you know here, we donot have any sponsors on this
podcast, but we do have acharity we support.
It's called the Father McKennaCenter and it supports hungry
(08:34):
and homeless people inWashington DC.
We are currently running apromotion which we're calling
the Top of the T-Shirt Campaign.
One of our listeners put up$15,000 in matching funds and
we're hoping to match that inmore, and in fact we are
matching that in more.
Voices (08:51):
Yes.
Mostly Uncle Frank (08:52):
But we'll be running it for another month
here and we're hoping to get asmany donors as possible.
So if you're thinking ofsending in an email, I suggest
you also send in a donation.
Otherwise it's going to be along wait before I get to your
email.
You can donate in two waysEither go through the support
page and go to Patreon, asIsaiah has done here that's at
(09:14):
our website,wwwriskparityradiocom or go
directly to the Father McKennawebsite.
I'll put it again in the shownotes, the donation page there.
If you donate there, please puta little note in the dedication
box indicating that it's inconnection with Risk Parity
Radio and your donation will begreatly appreciated.
Now let's get to your questions.
(09:35):
I did take a look at yourspreadsheet and I think there
may be some more efficient waysto approach this than what
you're thinking about.
Before I talk about that, Ithink one of the key issues here
is how much of your expensesare going to be covered by your
pension from the Air Force andhow much need to be covered by
(09:55):
this portfolio, because you canbe a lot more flexible on this
portfolio if most or all of yourexpenses are actually being
covered by the pension, andwe'll talk a little bit about
that as to how it plays intothis portfolio.
But looking at your spreadsheet, what I saw was that you had
(10:18):
about one quarter of your assetsin either the TSP, which is the
government 401k plan or itsequivalent, and a 401k plan or
its equivalent and a 401k plan.
And I think the easiest thingto do with that since you want
to have about that much in bondsand you want it in long-term
treasury bonds eventually is toactually move all of that into
whatever bond funds you haveavailable right now.
(10:38):
I know in the TSP you have theF fund and that would be a good
place to park this until you canmove it out into an IRA and put
it in exactly what you want.
But I think that's close enoughfor the purpose of de-risking
the portfolio, because that'sreally what you're talking about
here.
If we are applying the macroallocation principle, the first
(10:58):
task here is reducing theexposure, the overall exposure,
to the stock market, and so,whether it's in the exact bond
fund you want or some other bondfund, that's close enough for
de-risking purposes.
We can just go ahead, or youcan just go ahead and do that
right now and that will make, Ithink the rest of your proposals
(11:26):
a lot easier to deal with.
The next thing I would belooking at is I'm not sure what
your stocks are actuallyinvested in in terms of the mix
of funds.
That wasn't clear.
If you are trying to move someinto value-tilted funds, which
you should probably be doing, Ithink you can do that most
easily in the Roth, because youhave a lot of Roth money
floating around in there andthat is a reasonable place to
put more stock index funds.
(11:48):
All of this is to try to reducethe number of transactions you
need to actually do in a taxableaccount.
Now, one thing I wasn't sureabout, because I didn't know the
income levels we're talkingabout here, is what is your
long-term capital gains tax rate?
I'm assuming it's probably 15%,because that is true for most
people At least most peoplelisten to this podcast.
(12:09):
If it's 0%, obviously youshould be tax gain harvesting,
but if it's 15%, then maybe wecan reduce the transactions that
you're planning on doing in thenext five years to instead of
$100,000 a year.
You can shift that to maybeonly $50,000 a year or less,
because I think that is whereyou can actually put the gold
(12:31):
and perhaps put the managedfutures, since there doesn't
appear to be room in the Roth ortraditional IRAs, 401ks, tsps
but I think that would be a moreefficient way of approaching
this than what you've proposed.
You'd also suggested putting themanaged futures, or some of the
managed futures, in the RothIRAs.
(12:52):
That would not be a bad choiceeither.
Now it looked like you weregoing to let the REITs run off
and then put that in cash orsomething else.
In that context, I would alsobe turning off any reinvestment
you have of dividends in thetaxable account, so you can just
use those dividends to buywhatever else you're missing and
(13:13):
reduce the number oftransactions you have to do in
terms of conversions.
You can also think about whenyou add money to the portfolio
to build out whatever is missing.
Now you also indicated thatyou'd planned on holding 6% in
cash.
I'm not sure you need that muchcash given your pension, but
it's difficult for me to know.
You didn't put the parametersof that, but I would think about
(13:36):
maybe reducing that and thenputting more of that money maybe
back into an additional stockallocation, because you can be a
little bit more aggressive inthis portfolio than somebody
who's living off it entirelybecause of that pension, but I
would probably not hold 6% cash,given what you've got going on
here, and would use that 6% forother investments in the
(13:59):
portfolio, or most of it.
I think you are doing this atthe right time.
The stock market is at, or nearan all-time high.
It sounds like interest ratesare likely to decline in the
future, although people seem toargue about that every day, at
least from the Fed perspective.
Voices (14:15):
Forget about it.
Mostly Uncle Frank (14:16):
So that means it's a good time to move
some of the money into bonds,even though I would not market
time that.
But if you do shift that TSPmoney and 401k money into the
bonds kind of immediately, thatwill sufficiently de-risk your
overall portfolio a lot and thenyou can take your time building
out the other assets in theportfolio and then once you do
(14:39):
retire you can roll those intoan IRA and buy whatever you want
, as opposed to the limited fundselections you probably have in
there.
I think that's the F fund forthe TSP, but sometimes I mix
those up since I don't have one.
(15:02):
There is probably somethingsimilar to that in your wife's
401k, or maybe a treasury bondfund, an intermediate treasury
bond fund, that you can movethings into.
But I think you're in goodshape and it sounds like it's a
good time to be doing this stuff.
Voices (15:15):
That's the fact, Jack.
That's the fact, Jack.
Mostly Uncle Frank (15:19):
And so hopefully that helps.
Thank you for your donation andthank you for your email, and
so hopefully that helps.
Thank you for your donation.
Voices (15:29):
And thank you for your email.
Mostly Uncle Frank (15:40):
Second off, we have an email from Jack.
Here's Johnny.
Mostly Mary (15:59):
And Jack writes Monkey, watch me pull a rabbit
out of my hat Again.
I've hit financial independence, but haven't pulled the trigger
on retirement yet.
It's tough in the medical field, where any pause of more than a
year or two can make itimpossible to return to your
former specialty due to loss ofskills, certification and
licensure.
Voices (16:19):
As you can see, all communication is shut off.
In spite of our mechanicalmagnificence, if it were not for
this continuous stream of motorimpulses, we would collapse
like a bunch of broccoli.
(16:40):
Oh God.
In conclusion, it should benoted give him an extra dollar.
An extra dollar, yes, sir, thatany more than common injury to
the nerve root is always serious, because once a nerve fiber is
severed, there is no way inheaven or on earth to regenerate
(17:06):
life back into it.
Mostly Mary (17:08):
One more year syndrome is real.
After looking at calculatorslike Portfolio Visualizer,
portfolio Charts and Testfolio,I came up with a simple risk
parity style portfolio thatchecks all the boxes for me.
It starts with a goldenbutterfly portfolio, eliminates
the cash portion and puts all ofthe treasuries in intermediate
(17:29):
term.
I have followed a risk paritystyle portfolio since late 2021,
but arrived at this final formin 2024.
I call it 25 by 4 because itconsists of 25%.
Each large cap blend, small capvalue, gold and intermediate
treasuries.
Portfolio charts says the safewithdrawal rate is over 6%.
(17:51):
I rebalance quarterly and myplan is to withdraw money to
live on.
With each rebalancing I wouldtake out 3% annually for basic
expenses, an additional 1% fornice to have items and another
1% for luxuries if marketconditions allow.
I've run this through someretirement calculators, such as
Bolden, but they don't reallyhandle risk parity style
(18:12):
portfolios all that well.
I had a one-time meeting with aCFP who basically told me gold
has a negative real return andit makes no sense to hold it.
What are they teaching in CFPschool these days?
That's not how it works.
That's not how any of thisworks.
What do you think of thisportfolio?
What am I missing.
Anyway, thanks again for allyou do for us DIY investors.
(18:35):
I've enclosed the readout fromportfolio charts for reference
Jack.
Voices (18:42):
Wendy, I'm home.
Mostly Uncle Frank (18:45):
Well, jack, first thank you for being a
donor to our Top of the T-Shirtcampaign, which is also why
you've gone to the front of theemail line here today.
Voices (18:53):
That is the straight stuff.
Oh funk master.
Mostly Uncle Frank (18:57):
And congratulations on hitting
financial independence.
Yes, I think the next step isto organize your portfolio so
it's all lined up before youactually pull the plug on
employment.
Now, looking at your portfolio,your 25 by 4 portfolio this
(19:19):
actually reminds me of thepermanent portfolio, since it's
got the four asset classes thereis there, and if you took a
permanent portfolio which has25% in cash in it and just flip
that cash into small cap valuestocks, you would get something
that looks almost exactly likethe 25 by 4 portfolio.
Surely you can't be serious.
(19:40):
I am serious and don't call meShirley, but I think this ticks
all the boxes in terms ofportfolios that tend to have
higher safe withdrawal rates.
It has 50% in stocks, which isclose to the sweet spot for that
.
It has between 15 and 30% intreasury bonds, it has between
10 and 25% in alternative assetsand it has less than 10% in
(20:04):
cash, and also you have a 50-50growth and value split in the
stock portion.
So, yeah, it's a veryserviceable portfolio.
Look, it's MacGyver.
Voices (20:19):
Do you know how to pick locks?
Mostly Uncle Frank (20:21):
The one issue you may encounter with it
is psychological and it has todo with the gold in it, because
25% is a lot of gold we'rehaving in a portfolio, and gold
has a habit of having gooddecades and then having bad
decades.
And so, for example, if youwould have retired with this
around 1980, you would have seentwo bad decades in a row for
(20:45):
your gold holdings and it wouldnot have been pleasant.
Of course, your stock andtreasury bond holdings would
have done fantastic, especiallythe treasury bond, since the
interest rates were falling.
But that's the way theseportfolios work.
Something's going to be havinga bad time and something's going
to be having a good time.
If you look at this decade, youwould say, well, treasury bonds
are terrible and they're havinga bad time.
(21:05):
And you hear people say, well,I don't want those, can't be in
those, I want gold.
Now the point of holding bothof them is you don't know what
you're going to get.
It's the old Forrest Gump worldhere.
Mostly Mary (21:18):
My mom always said life was like a box of
chocolates you never know whatyou're going to get, and that's
why you hold both of them.
Mostly Uncle Frank (21:31):
But just be aware that you could have a bad
decade in the next few for goldand it could go nowhere or even
decline.
That doesn't mean you'll have aproblem with the portfolio, but
it does mean that it will looklike it's underperforming the
whole time, even though it'sperforming well enough to take
your withdrawals out of.
If you wanted to reduce thatexposure, you would reduce it by
(21:52):
5% or 10% and then put that ineither a different asset class,
like managed futures, or youcould put it in some kind of
additional stock fund orutilities fund or REIT fund or
something like that, and thenyou'd probably be disappointed
when gold continued to rise likeit has done in the past couple
of years here.
So if you've liked what you'veconstructed here, I think you
(22:13):
can roll with it.
Voices (22:18):
It's 106 miles to Chicago.
We got a full tank of gas, halfa pack of cigarettes, it's dark
and we're wearing sunglasses.
Hit it sunglasses.
Mostly Uncle Frank (22:38):
Hit it Now.
As for your encounters withthis CFP, my experience is that
just because someone has a CFPdoesn't mean they actually know
anything, because some peopleseem to have studied for that
and then completely forgoteverything they learned.
I did ask ChatGPT what a CFPwould do in terms of a gold
allocation and ChatGPT said aCFP would put probably 10% in a
retirement portfolio.
I'm not sure that's the case,but that's what it said.
(23:03):
I always find it amusing to askartificial intelligence these
kinds of questions just to seewhat comes up.
The statement you got, fromwhoever you talked to, is
clearly wrong that gold has anegative real return and it
makes no sense to hold it WrongWrong, I mean.
You can just run a back testand you'll see that gold tends
(23:24):
to go up and to the right overtime, at least since it's been
tradable and we've been off thegold standard since 1970.
And it seems to have a returnthat is somewhere between bonds
and stocks and is uncorrelatedwith both of them, which is
really why you're holding it.
You're not holding it togenerate returns.
You would hold more stocks ifyou were just trying to generate
(23:45):
returns.
You're holding it fordiversification purposes so you
have a lower drawdowns andtherefore a higher safe
withdrawal rate.
And if the CFP didn'tunderstand that, then they do
not understand how it works.
Voices (24:00):
I award you no points and may God have mercy on your
soul.
Mostly Uncle Frank (24:05):
But they may also be working for some
company that basically tellsthem what to say and what to
sell, because that is the waythe financial services industry
works.
Voices (24:15):
Am I right or am I right or am I right Right?
right right.
Mostly Uncle Frank (24:19):
And if they are not recommending something
like gold to their clients, thenthey have to come up with a
whole series of excuses tojustify that.
And that's what you often seethe financial services industry
doing is they will come up withkind of a set plan as to what
they do and then come up with aseries of reasons why they don't
(24:43):
do something else.
That may or may not actually bevalid, and oftentimes they're
not valid because they're moremarketing than they are finance.
Voices (24:52):
Because only one thing counts in this life Get them to
sign on the line which is dotted.
Mostly Uncle Frank (24:59):
As for Bolden and many retirement
calculators, they often obscurewhat they're actually doing in
terms of calculations and makeit actually more difficult to
run analyses of portfolios.
And that's the problem you havewith a black box calculator
that's doing both expenseprojections and portfolio
projections, because those aretwo completely different
(25:21):
exercises and I would try tokeep them at least separate in
your head, even if they aren'tseparate in the calculator,
because a projection of expenseshas everything to do with the
person involved, in theirlifestyle, and so that can be
adjusted fairly easily and islargely predictable, in the
sense that it's more about riskand less about uncertainty.
(25:42):
When you're talking aboutprojecting returns out of a
portfolio, then you are talkingabout degrees of uncertainty,
and so you are not going to getprecise readings or printouts
out of a proper portfolioprojection.
What you should be getting outof a portfolio projection is a
range of potential outcomes,like in a Monte Carlo simulation
(26:04):
, and then you work with that.
So it's not the same as justadding up a stream of numbers
and saying this is the number inthe end.
And from what I hear from thecreator of Bolden, I don't think
he really understands properforecasting techniques.
At least it's not clear to methat he does, because it's got a
lot of misleading settings inthere that allow people to
(26:26):
basically set things toconservative or aggressive in
terms of return assumptions, andthat's not how you should be
doing this.
You should put in the bestestimate you have.
The easiest way to get that isto be using historical averages.
But if you're going to beputting in some other numbers
for those returns, then theybetter be the best estimate that
(26:48):
you have, based on whatevercrystal ball you think is the
most accurate.
Mostly Mary (26:54):
A crystal ball can help you, it can guide you.
Mostly Uncle Frank (26:58):
Because if you're not using your best
estimates, you are inserting anerror into the calculator, then
compounding it and it will getyou way off the reservation.
And oftentimes thesecalculators inadvertently
encourage people to do that, andso you get a lot of garbage out
of calculators based on theerroneous assumptions that are
(27:19):
input into them.
And most CFPs don't know how todo that either, because they
don't learn anything aboutproper forecasting techniques in
the CFP curriculum.
Voices (27:29):
Almost as stupid as a stupid does.
Mostly Uncle Frank (27:33):
Anyway, that's my cautionary rant about
retirement calculators onceagain.
Voices (27:38):
You need somebody watching your back at all times.
Mostly Uncle Frank (27:42):
Because they can easily be turned into never
retirement calculators, or veryprecise and precisely wrong.
Voices (27:50):
Forget about it.
Mostly Uncle Frank (27:52):
Thanks for being a loyal listener all these
years, Jack.
I'm glad to see you are gettingto that point of pulling the
plug.
Voices (28:01):
Hearts and kidneys are tinker toys.
Mostly Uncle Frank (28:04):
I'm sure it'll come soon enough and thank
you for your email.
Voices (28:09):
Bow to your sensei.
Bow to your sensei.
Mostly Uncle Frank (28:13):
Next off, we have an email from John.
Mostly Mary (28:16):
Well, how about, john?
That's nice and simple.
Voices (28:20):
What are you serious?
Well, yeah.
John, you want to do that to thekid.
Mostly Uncle Frank (28:26):
And John writes Hi Frank.
Mostly Mary (28:28):
Thanks to you and folks like Tyler at Portfolio
Charts, I'm in such a betterposition to handle stock market
volatility than I was five yearsago when the stock market
dropped at the beginning ofCOVID.
My psychology is so much better, I have so many more tools at
my disposal and I have a muchgreater perspective.
I'm so grateful to have foundRisk Parity Radio.
No questions, just thanks, John.
Mostly Uncle Frank (28:51):
Well, John, I'm glad we have been of
assistance here and I agree thatTyler of Portfolio Charts has
probably been of more assistanceto you.
I just add the coloredcommentary.
Voices (29:02):
Hey, talk about it.
What do you say?
I just got back from the Hordeof the Fae.
Horde of the Fae?
What's an Horde of the Fae?
It's what you ought to do, butyou do anyway.
Mostly Uncle Frank (29:12):
But I think this goes back to kind of an
ethos that we had in the OG firecommunity back in the day, when
I'm talking about 2009,.
2010, on the boards at earlyretirement extreme where both
Tyler and I hung out.
The first rule of Fight Club isyou do not talk about Fight
(29:33):
Club.
The second rule of Fight Clubis you do not talk about Fight
Club, and the idea there waswe're just going to figure
things out, that we can learnthe things we need to learn to
manage our own investments anddo whatever else we needed to do
, and create the things that weneed to learn to manage our own
investments and do whatever elsewe needed to do, and create the
things that we need to createit matters not how straight the
(29:56):
gate, how charged withpunishments the scroll.
Voices (30:03):
I am the master of my fate, I am the captain of my
soul.
Mostly Uncle Frank (30:15):
And we were just going to do it and put it
out there and share it.
No one can stop me and notaccept the kinds of limitations
that seem to be imposed by thefinancial services industry or
even now, a lot of people in thepersonal finance world and
(30:35):
maybe I'm just an old grump, butI feel like some of that has
been lost, because it seems likethere is a lot more of what I
would call learned helplessnessin the fire community these days
, of people making up reasonswhy they can't spend money or
why they have a problem and Ican't change and I can't solve
this and I don't know how, andall of that's just not true.
(31:07):
Where's the spirit?
Voices (31:12):
Where's the guts?
Huh?
This could be the greatest nightof our lives.
But you're going to let it bethe worst.
Oh, we're afraid to go with you, bluto, we might get in trouble
.
Mostly Uncle Frank (31:29):
If you are listening to this program, you
can probably learn this stuff oranything else you need to learn
to manage your own money.
That's the truth and we willhelp you.
Just ask, no charge.
Voices (31:42):
Ludo's right Psychotic, but absolutely right.
In this case, I think we haveto go all out.
We're just the guys to do it.
Let's do it.
Let's do it.
Mostly Uncle Frank (32:07):
Go, go, go Go.
So thank you for your support.
I'm glad your psychology isbetter.
And thank you for your support.
I'm glad your psychology isbetter.
Voices (32:20):
And thank you for your email, always with you.
What cannot be done?
Hear you nothing that I say.
You must unlearn what you havelearned Last off.
Mostly Uncle Frank (32:35):
Last off, we have an email from Luke.
Voices (32:40):
All right, I'll give it a try.
No try, not Do or do not.
There is no try.
Mostly Uncle Frank (32:49):
And Luke writes.
Mostly Mary (32:51):
Frank, two quick questions.
First, I understand the benefitof the lack of correlation of
long-term bonds to stocks, butdoesn't that asset class just
backtest well due to 40 years ofdeclining interest rates?
Second, I haven't heard yourefer to ESG funds at all.
I would be curious to hear yourthoughts on why adding that
(33:12):
level of active management isn'tworth it.
Even if the screening processdoesn't perfectly align with
one's worldview, it seems likesomething might be better than
nothing.
Thanks for the continuedlessons you're passing on, Luke.
Mostly Uncle Frank (33:26):
All right, two questions.
Doesn't the asset class oflong-term bonds backtest well
due to four years of declininginterest rates?
Well, they're not declininganymore, but what you say is
applicable to any period when anasset is doing well.
So you might say well, doesn'tthe stock market just test well
(33:49):
since 2010, since it's beengoing up?
Doesn't gold just test wellbecause it's been going up?
Doesn't gold just test wellbecause it's been going up in
the past five years?
So it's not really a meaningfulquestion.
The real question is dolong-term treasury bonds fulfill
the purpose that you want themto fulfill in a portfolio like
this?
Voices (34:09):
You had only one job.
Mostly Uncle Frank (34:11):
And that question is answered by whether
they will go up and benegatively correlated with
stocks in a recessionaryenvironment.
And the answer to that is yessince the 1950s, and it was true
in the 1970s and 60s it's truetoday.
I'll link to a paper that I'velinked to before by Claudia
(34:34):
Moise, m-o-i-s-e, which is aboutthe volatility of stock markets
and treasury bonds, and thereis a nice little chart that is
appended to the end of it Ithink it's Annex 1 or something
like that which shows you howthe correlation between treasury
bonds and stocks varies overtime.
But it goes negative every timethere's a recession and that's
(34:58):
why you're holding them, notbecause you think there's some
particular crystal ball that'sgoing to tell you what they're
going to do next.
Mostly Mary (35:06):
As you can see, I've got several here.
Mostly Uncle Frank (35:09):
A really big one here, which is huge.
But the point I'm trying to makeis that asset class is no
different than any other assetclass in that it has good
periods and bad periods.
It does kind of go with the lastquestion, though, which is in
that period, particularly in the80s and 90s, when long-term
treasury bonds were one of thebest things to hold, you would
(35:32):
also have been holding gold inyour portfolio, and that would
have performed terribly, and soyou would say, well, doesn't
that asset class just testpoorly because it tested poorly
in the past 20 years?
Well, it's true for that period, but it's not meaningful in
terms of what the future islikely to bring.
So whether one asset classtests well or badly in one
(35:54):
particular period does not tellyou whether it's a good thing to
have in your portfolio or notby itself.
What's more important really ishow does this set of assets
perform in a particular economicenvironment?
I think the other mistake thatis implied by these kinds of
questions that I hear often isthe magic hand of mean reversion
(36:18):
, the idea that, well, treasurybond yields have fallen for a
period of decades, therefore inthe future they will rise for a
period of decades.
That is completely fallaciousreasoning.
Mostly Mary (36:30):
That's not how any of this works.
Mostly Uncle Frank (36:32):
Because we do not know what yields will be
in the future.
If you did, you could be veryrich very quickly.
Mostly Mary (36:39):
You can actually feel the energy from your ball
by just putting your hands inand out.
Mostly Uncle Frank (36:43):
But unless you have an accurate crystal
ball that predicts such things,I suggest you not try to predict
them.
Mostly Mary (36:49):
Now you can also use the ball to connect to the
spirit world.
Mostly Uncle Frank (36:53):
Because I will tell you that in the early
1980s people didn't want to buytreasury bonds.
They didn't want to buy themall through the 80s and into the
90s because they were waitingfor the 70s inflation to return
and it didn't come back.
So somebody who just held themand bought more of them through
(37:13):
the 1970s is the kind of personwho would have benefited.
So if you were holding one ofthese kind of portfolios, say,
through the 60s and 70s and intothe 80s, yeah, your treasury
bonds did terrible in the 1970swhile your gold was doing well.
And then in the 1980s, thetreasury bonds did great while
the gold was doing poorly andstocks were up and down, mostly
(37:36):
down.
In the 1980s, the treasurybonds did great while the gold
was doing poorly and stocks wereup and down, mostly down in the
70s, except for value-tiltedstocks and mostly up in the 80s.
All right.
Second question ESG funds.
Well, my opinion of them is thesame as Oswalt de Moterans, the
professor at NYU who's the godof all things valuation, and
basically what he says is don'tbother for commercially prepared
(37:59):
ESG funds, because if you arereally serious about this, you
need to do direct indexing.
Don't kid yourself.
If you are serious aboutchoosing investments based on
values personal values then itis your job and it is incumbent
on you to actually review allthe companies you are investing
(38:19):
in.
And that is what he does,because his wife his example was
my wife did not want to holdany fund with an investment in
Monsanto, and so he did not holdany index funds that invested
in Monsanto.
Instead, he went through andcreated a portfolio of
individual stocks that suitedwhat they were wanting to invest
in or not invest in.
(38:40):
And if you are reallyinterested in this topic, that
is what you need to do.
Go, take an index fund that youwould have invested in, say, the
S&P 500.
Look at the top 50 stocks inthere.
That'll be basically mimickingthe rest of the index.
Exclude anything that you don'twant to invest in after you've
read all of the informationabout them, and then add on new
(39:04):
ones at the end of it, and thenyou will have created your own
ESG fund and it will be tailoredto your particular values,
because if you're thinking thatsome other company is going to
create something that actuallyconforms to your values, you're
just kidding yourself.
This is one of those thingsthat either you need to do it
(39:24):
the right way, or don't do it atall and don't pretend that
buying some product off theshelf actually makes you more
righteous in some way, becauseit doesn't.
Voices (39:34):
Bing again.
Mostly Uncle Frank (39:41):
Now there are a lot of funds out there
that you may want to take a lookat that are very specific as to
what kind of values they'reinvesting in.
I'll give you an example.
There's a fund called FreedomF-R-D-M that invests in emerging
markets, but only the ones thathave a positive score for
things like human rights.
Now, you can certainly usefunds like that in a risk parity
(40:01):
style portfolio.
Just make sure that you knowwhat they are in terms of growth
versus value and small versuslarge, et cetera, and then put
them in the right category.
As far as that is concerned,now, that particular fund
actually has performed prettywell, particularly this year.
It's up about 20%.
But other than the fact thatit's a large cap blend fund, I
(40:23):
really couldn't tell you much ofanything else about it.
But you can look a lot of thisstuff up on Morningstar if
you're so inclined.
Anyway, that's all I got foryou on that.
Hopefully that helps, and thankyou for your email.
Voices (40:37):
It's a trap, it's a trap , it's a trap.
It's a it's a trap.
And now for somethingcompletely different.
Mostly Uncle Frank (40:48):
And the something completely different
is our weekly portfolio reviewsof the eight sample portfolios
you can find atwwwriskprioritycom on the
portfolios page.
Voices (40:59):
Boring.
Mostly Uncle Frank (41:01):
Yes, it was pretty boring last week Checking
out these markets for the year.
The S&P 500, represented by thefund VOO, is up 2.31% for the
year.
The NASDAQ 100, represented byQQQ, is up 2.31% for the year.
The NASDAQ 100, represented byQQQ, is up 3.2% for the year.
(41:21):
Small cap value, represented bythe fund VIOV, is down 10% for
the year and is still the bigloser.
Gold is still the big winner.
Voices (41:30):
I love gold.
Mostly Uncle Frank (41:33):
Gold is still the big winner.
I love gold.
Gold is currently up 28.22% forthe year, as represented by the
fund GLDM.
Long-term treasuries,represented by the fund VGLT,
are up 1.32% for the year.
Reits, represented by the fundREET, are up 4.49% for the year.
Commodities did have a big weekit is the oil spike week.
(41:56):
Our representative fund, pdvc,is up 7.01% for the year.
Now, preferred shares,represented by the fund PFFV,
are down 0.01% for the year, andmanaged futures, represented by
the fund DBMF, are now down1.18% for the year.
Moving to these portfolios,first one's a reference
portfolio the All Seasons.
(42:16):
It's only 30% in stocks and atotal stock market fund, 55% in
intermediate and long-termtreasury bonds and the remaining
15% in gold and commodities.
It is up 1.59% month-to-date.
For June, it's up 4.41%year-to-date and up 13.35% since
inception in July 2020.
Moving to the bread and butterkind of portfolios, first one's
(42:39):
Golden Butterfly.
This one is 40% in stocks,divided into a total stock
market fund and a small capvalue fund, 40% in treasury
bonds, divided in long and short, and 20% in gold.
In GLDM.
It's up 1.23% Month to date.
For June, it's up 4.89% Year todate and up 40.47% since
(42:59):
inception in July 2020.
Next one's golden ratio.
This one is 42% in stocksdivided into a large cap growth
fund and a small cap value fund,26% in long-term treasury bonds
, 16% in gold, 10% in managedfutures DBMF and 6% in cash in a
money market fund.
It's up 1.33% month to date.
(43:21):
For June, it's up 3.45% year todate and up 34.44% since
inception in July 2020.
Next one's the kitchen sink therisk parity ultimate.
I'm not going to go through all14 of these funds, but it's up
1.03% month to date.
For June, it's up 3.01% year todate and up 22.93% since
(43:42):
inception in July 2020.
Moving to these experimentalportfolios, we do hideous
experiments here, so you don'thave to.
Don't try this at home.
These all involve leveragedfunds.
First one's the AcceleratedPermanent Portfolio.
This one is 27.5% ina leveredbond fund TMF, 25% in a levered
(44:07):
stock fund UPRO, 25% in PFFV, apreferred shares fund, and 22.5%
in gold GLDM.
It's up 1.46% month-to-date,it's up 3.15% year-to-date and
up 4.21% since inception in July2020.
Now, moving to our most hideousexperiment, the aggressive
50-50, which is our leastdiversified and most levered of
(44:33):
these portfolios.
It's one-third in a leveredstock fund Upro, one-third in a
levered bond fund TMF, and theremaining third divided into a
preferred shares fund and anintermediate treasury bond fund.
It's up 1.24% month-to-date,it's down 3.75% year-to-date due
to its lack of diversificationand it's down 15.23% since
(44:55):
inception in July 2020.
Mostly Mary (44:57):
That's not an improvement.
Mostly Uncle Frank (45:00):
Moving to one of our newer ones, the
levered golden ratio.
This one is 35% in a compositefund called NTSX that's, the S&P
500 and and Treasury bondslevered up 1.5 to 1.
20% in gold GLDM, 15% in aninternational small cap value
fund AVDV, 10% in a managedfutures fund KMLM, 10% in a
(45:26):
levered bond fund TMF, and theremaining 10% divided into UDOW
and UTSL, which are leveredfunds following the Dow and a
utilities index.
It's up 0.35% month-to-date,still leading the pack
year-to-date.
It's up 5.59% year-to-date andup 0.92% since inception, july
(45:48):
2021, which was an inauspiciousstart date.
Now moving to the last one, ournewest one, the Optra portfolio
.
It's a return stacked portfolio, so it's 16% in a levered stock
fund UPRO, 24% in a worldwidevalue fund AVGV, 24% in a US
(46:10):
Treasury Strips Fund GOVZ, andthe remaining 36% divided into
gold and managed futures.
It is up 1.62% month-to-date.
It's up 4.2% year-to-date andup 7.23% since inception in July
2024.
It's almost a year old now.
Voices (46:29):
Well, la-dee-frickin'-da .
Mostly Uncle Frank (46:33):
But that concludes our portfolio reviews
for the week.
Hopefully you aren't snoringtoo loudly at this point.
Voices (46:40):
Well, you haven't got the knack of being idly rich.
You see, you should do like mejust snooze and dream, dream and
snooze.
The pleasures are unlimited.
Mostly Uncle Frank (46:50):
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 website,wwwriskparityradiocom.
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 and give me some
(47:12):
stars, a follow, a review.
That would be great.
Okay, Thank you once again fortuning in.
This is Frank Vasquez with RiskParty Radio Signing off.
Voices (47:31):
Up we go into the wild sky, yonder.
If the Thank you Fighting menguarding the nation's border,
we'll be there for the fireballIn actual war.
(47:58):
We carry on, for nothing willstop the Air Force, for nothing
will stop the US Air Force.
Mostly Mary (48:21):
The Risk Parody Radio Show is hosted by Frank
Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial, investment
tax or legal advice.
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.
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