In this episode we answer emails from Luc and Nick. We discuss the four levels of investors, the fundamental problems with identity that terms like "saver" and "Boglehead" cause per Morgan Housel, fallacious reasoning often applied to investing and portfolio construction, equity core with growth–value balance and small-cap value tilt, VTI vs VUG trade-offs and tax considerations, tax efficient asset location for bonds, equities, gold, considerations about alternatives like managed futures, and using risk parity portfolios for intermediate term savings during your accumulation phase.
Links:
Luc's Boglehead Forum Link: Golden Ratio Portfolio - Frank Vasquez - Bogleheads.org
Mindy Jensen's Risk Parity Style Portfolio: We Built a 5% SWR Retirement Portfolio Using Fidelity in 48 Minutes (Golden Ratio Portfolio)
Breathless Unedited AI-Bot Summary:
Want a portfolio that funds your life, not your identity? We dig into the fuss around the “Golden Ratio” name and get to what actually matters: principles that increase safe withdrawal rates and reduce stress when markets turn weird. Instead of defending a formula, we show how to use uncorrelated assets, thoughtful macro-allocation, and enough simplicity to keep you invested without blinding you to risk.
We break down four investor levels—from money hygiene and shiny-object traps to the comfort of low-cost indexing—and then the jump to level four, where professional-grade ideas get translated for DIY investors. That’s where uncorrelated assets like Treasuries, gold, and managed futures earn their keep, not because they’re trendy, but because they lower correlation to stocks and smooth cash flows across regimes. We also call out common fallacies that derail portfolio debates: past performance cliches that prove nothing, irrelevant metrics used as cudgels, and cherry-picking that erases the 1970s and 2022 as if rare events never recur.
Then we get practical with a young FI couple: how to build a durable equity core by pairing total market or large-cap growth with a small-cap value tilt, why VTI is usually fine while VUG may diversify better against value in tax-deferred accounts, and how to avoid tax pain when transitioning. We map smart asset location—ordinary-income generators in traditional, long-term growers in Roth, tax-efficient equities in taxable—and set realistic ranges: 40–70 percent stocks, 15–30 percent Treasuries, under 10 percent cash, and 10–25 percent alternatives. No dogma, just ranges that historically support higher withdrawal rates.
We close with a versatile idea: an intermediate risk parity “slush” portfolio you can tap for big purchases without riding the all-stock rollercoaster. Add to laggards, sell winners, keep it simple, and stay focused on the only scoreboard that matters—sustainable spending. If you’re ready to trade identity for outcomes and marketing for math, this one’s for you.
If this resonated, follow the show, leave a review, and share it with a friend who’s rethinking their allocation. Your future self—and your future spending—will thank you.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Voices (00:00):
A foolish consistency is the hobgoblin of little mind,
adored by little statesmen andphilosophers and divine.
If a man does not keep pace withhis companions, perhaps it is
because he hears a differentdrummer.
A different drummer.
Mostly Queen Mary (00:18):
And now, coming to you from Dead Center
on your dial, welcome to RiskParity Radio, where we explore
alternatives and assetallocations for the
do-it-yourself investor.
Broadcasting to you now fromthe 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 (00:59):
And we only have a few mismatched bar stools
and some easy 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 (01:27):
So please enjoy our mostly cold beer
served in cans and our coffeeserved in old chipped and
cracked mugs.
Along with what our little freelibrary has to offer.
But now onward, episode 459.
(01:54):
Today on WrestleMania Radio,we're just going to do we do
best here, of course, which isto answer your emails.
And so without further ado.
Voices (02:03):
Here I go once again with the email.
Mostly Uncle Frank (02:06):
And first off First off, we have an email
from Luke.
Luke from Quebec.
And Luke writes.
Mostly Queen Mary (02:20):
Hi Frank.
I hope all is well with you andyou had a nice trip.
You might have already seenthis, but just in case, I'm
sharing this with you.
Seems like you're causing quitea stir in the Bogleheads
community.
Sister Francine would be proudof you.
Voices (02:38):
It saddens and hurts me that the two young men whom I
raised to believe in the TenCommandments have returned to me
as two thieves with filthymouths and bad attitudes.
Get out.
And don't come back untilyou've redeemed yourselves.
Mostly Queen Mary (03:03):
Maybe you can use the material as inspiration
for a rant.
There hasn't been an officialone in a long time.
Voices (03:10):
I haven't beaten anyone this bad in a long time.
I haven't beaten anyone thisbad in a long time.
You haven't beaten anyone thisbad in a long time.
Oh come on, those beadies, thosepeople are resisting rats.
Mostly Queen Mary (03:25):
He should come and stay with us for a
while if he wants to hear somerants.
Every day.
Voices (03:33):
I I don't want the families over here.
Have a hefty day.
Another big red letter day forthe babies.
Daddy, the browns next door tohave a new car.
You should see it.
What's the message?
I don't know why we don't wantto all have pneumonia.
Why do we have to live here inthe first place and stay around
(04:00):
this measly, crummy old town?
George, what's wrong?
Everything.
Well, you call this a happyfamily.
Why do we have to have allthese kids?
Mostly Uncle Frank (04:10):
Well, first off, Luke, thank you for all you
do for Risk Parity Radio.
Sackgosh.
Luke is not only a donor to theFather McKenna Center, but he's
also the person who hasrecently revamped our entire
website.
Voices (04:24):
We have top men working on it right now.
Who top men.
Mostly Uncle Frank (04:35):
Which is getting rave reviews, by the
way.
He recently rolled out aimproved episode guide page,
which you might want to checkout.
And maybe we'll expand that atsome point, but chances are we
probably not because all of theepisodes are now searchable,
(04:57):
including the transcripts, alsothanks to Luke.
Voices (05:02):
Really top drawer.
Mostly Uncle Frank (05:05):
Now getting to the substance of your email.
No, I had not checked out thisthread on Bogleheads about the
Golden Ratio portfolio and RiskParity Radio in general.
Voices (05:18):
It's not that I'm lazy.
It's that I just don't care.
Mostly Uncle Frank (05:22):
I really do not spend any time on those
kinds of fora or a lot of socialmedia generally.
Voices (05:29):
Not gonna do it.
Wouldn't be prudent at thisjuncture.
Mostly Uncle Frank (05:32):
I tend to keep my diet of social media
limited to a couple of Facebookgroups and then listening to a
lot of podcasts.
Anyway, I did read it.
I will link to it in the shownotes if anybody wants to check
it out.
It is about 113 posts long atthe moment.
And no, I don't really have arant about it, mostly because
(05:53):
you guys have already taken careof the things I would say.
I was very heartened to seethat a lot of our listeners do
participate in that forum andhad really answered or shot down
the questions and critiquesfrom the Hoy Peloy over there.
And that includes Tyler fromPortfolio Charts, who made some
(06:13):
good responses to many of thethings.
He is known there as Tyler9000.
And I wonder how many of youknow why he's known as Tyler
9000 and chose that moniker.
Voices (06:24):
The 9000 series is the most reliable computer ever
made.
No 9000 computer has ever madea mistake or distorted
information.
We are all, by any practicaldefinition of the words,
foolproof and incapable oferror.
Mostly Uncle Frank (06:44):
Anyway, let me just give you a few
observations and random musingsmore generally.
Open the pod bay doors, Hal.
Voices (06:56):
I'm sorry, Dave.
I'm afraid I can't do that.
What's the problem?
I think you know what theproblem is just as well as I do.
What are you talking about,Hal?
This mission is too importantfor me to allow you to
jeopardize it.
I don't know what you're talkingabout, Hal.
(07:20):
I know that you and Frank wereplanning to disconnect me.
And I'm afraid that's somethingI cannot allow to happen.
Mostly Uncle Frank (07:30):
The first is that I tend to divide up
investors into four basiccategories.
And the first category,broadest category, is people
just don't know anything aboutinvesting.
And usually they are worriedabout getting out of debt or
credit scores or you know,popular consumer finance is what
I would call it.
And those people tend togravitate towards things like
(07:52):
Dave Ramsey and Susie Orman.
They're looking for simplesteps to make their financial
life better.
Voices (07:58):
What do you want to buy?
Hey everybody, Susie O here.
Now, can I afford it?
Has been gamified, which meansyou're gonna get to listen to
the caller.
You're gonna say, Show me themoney to yourself anyway, and
then you're gonna get to approveor deny it.
You think you're gonna be rightor wrong?
(08:19):
Let's go and try it right now.
Yeah.
Mostly Uncle Frank (08:24):
Financial media largely markets to that
crowd because the idea is youget people a little bit
interested in something, theneventually you funnel them to
financial advisors, and that'sDave Ramsey's business model and
how he gets paid.
Voices (08:37):
Yeah.
Mostly Uncle Frank (08:39):
The second level up is what I like to call
the shiny object syndrome level.
This is where people havelearned something about
investing or finances ingeneral, but then they get
sucked into one or more popularideas on the internet, and these
things come and go.
But they all resemble shinyobjects, and some of them are
like this infinite velocitybanking on your mama using
(09:02):
insurance products.
Voices (09:04):
You're gonna end up eating a steady diet of
government cheese and living ina van down by the river.
Mostly Uncle Frank (09:13):
Dividend investing is another one.
Shirley, you can't be serious.
Voices (09:17):
I am serious, and don't call me Shirley.
Mostly Uncle Frank (09:20):
These days, these covered call funds are
becoming the shiny objects dujour.
Voices (09:26):
A guy don't walk on the lot lest he wants to buy.
They're sitting out therewaiting to give you their money.
Are you gonna take it?
Mostly Uncle Frank (09:34):
But most shiny objects have some kind of
story that goes with them, eventhough financially they are
suboptimal in many ways andoften very expensive because
ultimately they are beingpromoted by somebody who is
going to profit from theparticipation or direct selling
of the shiny object itself.
Voices (09:53):
Because only one thing counts in this life.
Get them to sign on the linewhich is dotted.
Mostly Uncle Frank (09:59):
And then you get to level three.
And level three is people whohave recognized that the shiny
objects are not so shiny and areprobably suboptimal, and they
do want to do something that isat least optimal in some way.
And so this is where much ofpersonal finance ends up,
including the Bogleheads.
And this is the formulaiclevel.
(10:20):
You come up with some kind offormula that you follow for your
investments, and that's why youhave a two-fund portfolio or a
three-fund portfolio or a simplepath to wealth or any of those
sorts of things that are justeverybody should do this and
then not spend very much money,and your financial life will be
fine.
(10:40):
And that's true, it'll work,but it also ends up being a form
of groupthink and identity, andwe'll talk a little bit more
about that later.
But then you get to what wecall level four, and in level
four, you are trying to applygood investing principles to
achieve a particular goal.
So this is trying to strip awaythe psychology of things and
(11:04):
focus on the finances and whatpeople on level four are doing
is looking at what the bestprofessional investors do, and
then determining what part ofthat can be adopted, applying
some principles.
And that's what we try to dohere.
Voices (11:20):
Now witness the firepower of this fully armed
and operational battle station.
Mostly Uncle Frank (11:29):
And that's why we have three main
principles (11:31):
the Holy Grail principle about using
uncorrelated assets, themacroallocation principle, which
recognizes thatmacroallocations are a good part
of portfolio construction.
And then the simplicityprinciple.
We use the Einstein'sdefinition of that.
Voices (11:51):
Everything should be made as simple as possible, but
not simpler.
Mostly Uncle Frank (11:56):
And not the boglehead, let's make things as
simple as possible becausesimplicity is more important
than anything else, and we'retoo stupid to handle anything
more than two or three funds.
So we don't use fear-basedsimplicity here, or simplicity
for simplicity's sake.
Voices (12:17):
Always with you what cannot be done.
You must unlearn what you havelearned.
Mostly Uncle Frank (12:25):
And we also recognize that personal finance
is primarily finance, notpersonal.
And what that means is thatyour financial behaviors should
match your financial goals.
So the financial goal we aretrying to achieve here for the
most part is to constructportfolios that will have higher
safe withdrawal rates so thatwe can spend more money while we
(12:46):
are alive.
That's the financial goal we'retrying to achieve.
And personal preferences aboutwhich particular family of funds
we use or brokerage or exactlyhow many funds we have are
secondary.
So the way I viewed that threadthat you pointed to was a clash
between basically people onlevel three and on level four.
(13:09):
And you could tell the peopleon level three a lot of times
because they got caught up inthe name of the golden ratio
portfolio.
The golden ratio.
And wanted to say, oh, you'remaking this silly mystical grab
at publicity or something topromote this thing.
(13:30):
And it shows they really don'tget it because it shows that
that is their perspective, thattheir three fund portfolio is
good because it's the three fundportfolio, and they think that
I think the golden ratioportfolio is good because it's
called the Golden RatioPortfolio or incorporates the
Golden Ratio itself.
A number so perfect, perfect.
(13:53):
We find it everywhere,everywhere.
Secret geometry, secretgeometry.
Which is not true at all, butit is funny to tweak people who
don't get it with the idea that,oh yes, it's a mystical,
magical thing.
A mathematical propertyhardwired into nature.
Voices (14:12):
Secrets, secrets, secrets, secrets.
Mostly Uncle Frank (14:15):
In reality, that portfolio is a sample
portfolio, just like we say,it's a sample portfolio.
It's one of a number ofportfolios on a spectrum that
would have high safe withdrawalrates.
And the main reason we wouldcall it something like the
golden ratio portfolio isbecause we needed to name it
something.
And so the simplest names arethe mathematical names, like
(14:37):
6040 or 50-30-20.
That's all the golden ratio is.
It's a mathematical name forsomething.
We could have called it thefive-slot kind of like 60-40
portfolio, which would be kindof cumbersome.
That goes without saying.
But if you are getting hung upon the name and the specific
(15:02):
details of the math there, youare missing the point because
you are applying a formulaicconstruct or level three kind of
construct to something that isdesigned to be an example of a
application of principles.
And so a lot of Bogleheadsthere were missing the point.
(15:23):
And as a lot of you listenerspointed out, they were missing
the point.
Voices (15:28):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (15:32):
And I'm pleased that a lot of you
listeners did articulate thecounter-arguments and the real
principles so clearly, because Ithought it was a good
discussion, to the point that Idon't have to say anything or do
anything, and the word gets outthere.
I'm very pleased with that, andthank you for it.
I just stare at my desk, but itlooks like I'm working.
Because what is ultimatelyreally going on there is they
(15:54):
are not trying to solve the sameproblem that we're trying to
solve here, which is to spendmore money in retirement and
have a higher safe withdrawalrate in retirement and use
portfolio construction for thatfinancial goal.
They don't have that financialgoal.
They've solved that financialgoal by deciding not to spend
money.
Voices (16:15):
What's with you anyway?
I can't help it.
I'm a greedy slob.
It's my hobby.
Mostly Uncle Frank (16:20):
And once you've decided that you're
really not going to spend muchmoney, then what your specific
portfolio is does becomesomething else.
It becomes part of youridentity.
It becomes part of a reason orway to join a club, if you will.
Voices (16:37):
I've got a good mind to join a club and beat you over
the head with it.
Mostly Uncle Frank (16:41):
And to have some kind of personal talisman
to rely on in the form of aformula.
Voices (16:48):
It's so simple.
Isn't it you guys?
Isn't it simple?
If you followed all theinstructional material, you just
said it every day.
Mostly Uncle Frank (16:57):
It's really part of this savor identity.
And I just got Morgan Housel'sbook a couple of weeks ago, the
new one called Art of Spending.
And I don't usually do this,but I will read this segment
because I think this reallydescribes what is ultimately
going on here and why a lot ofthe people in the Bogleheads
community don't understand orare trying to do something
(17:20):
different or don't want toacknowledge what the reality of
their situation is as comparedto what somebody else is doing
that wants to spend money.
And here's the passage.
It's on pages 150 and 151 inthe chapter about identity.
Morgan writes, Let me share themost common financial identity
that can harm people in waysthey never imagined.
(17:42):
Quote, I am a saver, unquote.
It seems like such a goodtrait, and it sounds so
innocent.
And of course both are true,but a lot of financial planners
will tell you that they're oneof their biggest challenges is
getting clients to spend moneyin retirement.
Even an appropriateconservative amount of money.
Frugality and saving becomesuch a big part of some people's
(18:03):
identity that they can neverswitch gears.
I call it frugality inertia.
It's what happens when alifetime of good saving habits
can't be transitioned into areasonable spending phase.
I think what most people reallywant from money is the ability
to stop thinking about money, tosave enough money that they can
stop thinking about it andfocus on other stuff.
(18:25):
But that ultimate goal canbreak down when your
relationship with saving moneybecomes an ingrained part of
your personality.
You struggle to break away fromfocusing on money because the
focus itself is a big part ofyour identity.
You associate life success withyour bank account going up, up,
up, and you've never been ableto actually spend it, even in a
(18:47):
reasonable way.
If you develop an early systemof saving and living well below
your means, congratulations,that's great.
But if you can never break awayfrom that system and insist on
a heavy saving regimen well intoyour retirement years, what is
that?
Is that still winning?
Those with the ultimate goal tostop thinking about money are
(19:08):
stuck.
Refusing to recognize thatyou've met your goal can be as
bad as never meeting the goal tobegin with.
Unquote.
So if you've essentially solvedyour money problems by just
oversaving and continuing toaccumulate until death, yeah,
(19:28):
you can pick pretty muchwhatever portfolio you want to
and gravitate towards some kindof simple formula.
And when there's a social groupthat surrounds it, it makes it
all that more attractive.
Because then you can nameyourself and have that identity
(19:52):
for yourself.
And on that note, Housel goeson on page 152 of this, where he
writes, quote, it's common ininvesting where people take on
labels like, quote, valueinvestor, unquote, trader, and
tech investor.
The labels seem harmless, butonce you label yourself, you've
formed an identity that canprevent you from seeing the big
(20:12):
picture, finding otheropportunities, or changing your
mind when you need to.
Unquote.
And that's what this club, theBogleheads, is essentially.
Or rather has become over thepast 20 years, because it
certainly didn't set out thatway.
Voices (20:29):
Please accept my resignation.
I don't want to belong to anyclub that'll accept me as a
member.
Mostly Uncle Frank (20:37):
But it's funny how that thread
illustrated how that leads to alot of mental gymnastics and
just fallacious reasoning whenit comes to some of the
critiques in that thread.
A lot of them were of thenature of the general truism
that applies to everything.
And if you say something thatapplies to everything, then it
(20:58):
does not distinguish between twothings like portfolio A and
portfolio B.
The biggest one there is theoft-quoted, past performance
does not predict future results.
And some of the Bogleheads saidthat, and as some of you
pointed out, it's like, well,that applies to every portfolio,
your portfolio, this portfolio,and does not give you any
(21:19):
mechanism for deciding whetherportfolio A is better than
portfolio B for some particularpurpose.
Voices (21:25):
Are you stupid or something?
Mostly Uncle Frank (21:28):
Another form of fallacious reasoning is to
make up additional tests thatwere not important and probably
aren't important to distinguishfrom one portfolio to another.
Voices (21:39):
These go to 11.
Mostly Uncle Frank (21:41):
So, confronted with the information
in that thread showing thatthese kinds of risk parity style
portfolios tend to have highersafe withdrawal rates and lower
volatility over many periods intime and the longest periods in
time.
There were some of thecommenters who were saying
something like, Well, what aboutthe Sortino ratio in the 1990s?
It's like, where did that comefrom and why is that important?
(22:03):
What goal is that ultimatelyserving?
And this does go back to thefact that a lot of these people
are just applying formulas fortheir identity and have
forgotten what the goalultimately was of having a
particular portfolio.
But unless you define a goalfirst and then apply it to
(22:23):
portfolio A versus portfolio B,you're really just engaging in
fallacious reasoning if you'retrying to say, let me see if I
can think up tests that showthat this particular portfolio
is better than the other one,even if those tests don't have
any meaning in what I'm actuallytrying to achieve.
And then another source offallacious reasoning is simply
(22:44):
the cherry picking of the data.
And a lot of this involves notaccounting for the 1970s as if
things like the 1970s can neveroccur again.
And this is where peopleconfuse the specifics of an
anthistorical period and theeconomic consequences.
(23:06):
And the specifics are alwaysgoing to be different.
This time is always going to bedifferent.
No, you're never going to havethe exact same factual
predicates of the 1970s or ofthe early 2000s.
But the fact of the matter is awhole series of different kinds
of causes can cause similareffects economically.
(23:26):
And so there are a lot ofthings that can cause inflation.
There are a lot of things thatcan cause recessions.
There are a lot of things thatcan cause, say, the price of
gold to go up a lot in a shortperiod of time.
Voices (23:40):
You can't handle the dogs and cats living together.
Mostly Uncle Frank (23:44):
And that's where a lot of these people get
stuck.
In order to make their argumentwork, they have to say that,
oh, that's because there wasthis one situation and that's
never going to happen again.
Those things can both be trueand you can still be wrong.
Voices (24:05):
Wrong!
Mostly Uncle Frank (24:06):
Because the economic conditions can repeat
for more than one reason.
Another way to say that is rareevents do reoccur, just not
very often.
So in 2022, we had the rareevent of an inflationary spike
accompanied by the Fed raisinginterest rates very quickly.
And so you had something thatyou had not seen since the 1970s
(24:29):
in terms of the way stocks andbonds both underperformed.
But that's not the first timethat happened.
It's not the last time it'sgoing to happen.
It's a low probability event,and just because it happened in
2022 doesn't make it more likelyit's going to happen again.
But now you're seeing a similarthing this year.
People said, well, the onlyreason gold went up a whole lot
in the 1970s is because Nixondid this and there was this
(24:52):
occurrence and there was an oilembargo or whatever.
Voices (24:56):
Real wrath of God type stuff.
Exactly.
Mostly Uncle Frank (24:59):
But now we're experiencing the same
thing again.
So the argument that you can'thave a situation like the 1970s
with respect to some of thesealternative assets is just
wrong, and it's always beenwrong.
Voices (25:12):
Right?
Wrong!
Mostly Uncle Frank (25:13):
There's a small probability that you will
have that kind of situationagain, and we'll see gold going
up 50 or 60% in a year, likeit's going up this year.
Suppose it has a 2 or 3% chanceof occurring.
That's just like rolling twosixes on a set of two dice.
No, it doesn't occur veryoften, but it does occur with a
regular frequency if you rollthe dice long enough.
(25:35):
At bottom, if you have tocherry pick data like that and
exclude some periods because ifyou included them, you'd be
wrong.
Voices (25:43):
Wrong!
Mostly Uncle Frank (25:45):
It shows you really don't have a leg to
stand on in terms of yourlogical or analytical reasoning.
Voices (25:52):
I award you no points, and may God have mercy on your
soul.
Mostly Uncle Frank (25:58):
Anyway, I feel like I've gone on now far
too long in this one email.
Because now I only have timefor only one other email.
So I'm going to stop here.
But check out that thread ifyou're interested.
Remember, we're not doingsorcery here or using portfolios
as identities or to form clubsaround.
Voices (26:17):
If you're the police, where are your badges?
Badges?
We ain't got no badges.
We don't need no badges.
I don't have to show you anystinking badges.
Mostly Uncle Frank (26:29):
Thank you for all your contributions to
this podcast, Luke.
And thank you for your email.
Voices (26:36):
A number is so perfect.
Perfect.
We find it everywhere,everywhere.
A mathematical propertyhardwired into nature.
The golden radio.
The golden radio.
(27:05):
The golden radio.
Mostly Uncle Frank (27:12):
Last off.
Last off, we have an email fromNick.
For Nikki, this is a picniccompared to where he's from.
Voices (27:24):
That's a drunk son.
Don't stand in front of them.
Mostly Queen Mary (27:26):
Well, I'll have to take a mulligan on this
one.
Mostly Uncle Frank (27:30):
And Nick writes.
Mostly Queen Mary (27:31):
Hey Frank.
First, I just wanted to say howmuch I appreciate your podcast
and have really enjoyed hearingyou get the platform you deserve
lately on the Bigger PersonalFinance podcast to share your
thoughts about a risk parityportfolio.
Voices (27:45):
Yes!
Mostly Queen Mary (27:46):
I'm a longtime member of the Choose If
I and Bigger Pockets MoneyGroups and have always enjoyed
your posts, willingness to goagainst the status quo, and
overall insight when answeringquestions.
I thought I'd send an email toask a few questions, even though
I feel pretty comfortable in mywife's and my position towards
(28:09):
reaching financial independencearound age 45 for me and 41 for
her.
A little about us.
I am 27, she is 23.
We make about $180,000 a yearjust outside of Raleigh, North
Carolina, although this isexpected to rise to somewhere
around $225,000 to $250,000 inthe next two to three years.
(28:30):
Software, engineer, and techsales.
Our current spend is about$7,000 a month, but I estimate
our retirement spending to besomewhere around $10,000 a month
in today's dollars as wecurrently rent and have no kids.
This is a very gross estimate.
We invest around $3,800 amonth, including $401K match,
split between traditional Rothand taxable accounts.
(28:53):
Our current investments arearound $216,000, including about
$125 in $401Ks invested in aVanguard SP $500 index fund and
$91,000 invested in VTI acrossRoth IRAs, a taxable brokerage
account, and an old HSA.
My questions for you are thefollowing.
(29:13):
Would you change ouraccumulation portfolios to
include small cap value?
If so, how much of a percentagewould you be comfortable with?
Like many in the group, Istarted out with the simple path
to wealth, but as I havelistened more to you, Paul
Merriman, and Joe Salsehai, I dosee the value of having a small
cap value tilt when I lookthrough recency bias and how the
(29:35):
SP has dominated through myadult lifetime, but have heard
anywhere from 10% to 50%.
2.
When I transition to a riskparity portfolio as I get closer
to retirement, I assume VTIwould suffice as my large cap
growth holding.
I am fairly certain I've heardyou say this is fine, but notice
you chose VUG on the BiggerPockets Money podcast when
(29:58):
setting up the portfolio withMindy.
So I just wanted to make sure.
Holding VTI would help reducecapital gains tax in our
brokerage account.
Three, you touched on it a bitat the end of the same episode,
but assuming all things equal,one-third of investments are
each in traditional Roth andtaxable accounts, but we will
want the taxable account tobridge us to 15 years or so
(30:19):
until 59 and a half.
How would you go aboutallocating and pulling from
these accounts?
The obvious would be fill-upbonds, VGLT, and VGIT in
traditional accounts, fill-upstocks, VTI and AVUV in Roth
accounts, put the spilloverstocks in the taxable account.
I would think VTI since AVUVhas slightly more growth
(30:41):
potential, so I would want thatin the Roths.
I would have my 6% cash inSPAXX in the brokerage, but
after that I'm not sure how Ishould think about where to put
gold or managed futures.
Speaking of managed futures,are there any substitutes to
this part of the portfolio?
Thanks so much for any insightand all you do for the financial
(31:02):
independence community.
I appreciate hearing theravings of a lunatic mind.
Voices (31:08):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (31:15):
Well, Nick, thank you for writing in.
I'm glad you're enjoying thepodcast.
You are about the same age asour adult children.
Voices (31:24):
What have children ever done for me?
Mostly Uncle Frank (31:27):
And I see you're whipping and snapping out
there, as you youngsters arewont to do.
Cool.
And it sounds like you are wellon your way to financial
independence.
Voices (31:41):
Fire, fire, fire, fire.
Mostly Uncle Frank (31:45):
So congratulations on that.
Voices (31:47):
That and a nickel get your hot cup, a jack squat.
Mostly Uncle Frank (31:53):
Getting your questions, first ones, would
you change your accumulationportfolio to include small cap
value?
Well, the answer is I probablywould, but I think you want to
think about this in terms ofyour ultimate goals.
First, just let's get somethingout of the way, which is the
macro allocation principle.
That all 100% index fundportfolios that are reasonably
(32:17):
well diversified, even thoughthere's one, two, three, four
funds in them, they're all goingto work.
They're all going to get you tofinancial independence.
And which one's going to be thebest one, particularly in the
next decade, is a crapshoot.
Voices (32:31):
Shake them up, shake them up, shake them up, shake
them.
Mostly Uncle Frank (32:34):
So you do need to kind of pick something
and stick with it, or pick someplan and stick with it, because
the real danger is not what youpick, but jumping in and out of
different funds trying to chaseperformance or doing things like
that.
That is actually how peopleunderperform and slow themselves
down.
That and making things morecomplicated by using target date
(32:56):
funds and robo thingies andother shiny objects they find
lying around.
Voices (33:02):
Fat, drunk, and stupid is no way to go through
lifestyle.
Mostly Uncle Frank (33:05):
Here's what I think you really should be
thinking about is where do youwant to end up with this
portfolio?
Because whatever you're puttinginto this stock portfolio, this
all stock portfolio, that isprobably going to end up being
the lion's share or a bigportion of what your stock
portion of your retirementportfolio is going to be.
At least it'd be easier if youdidn't have to do too much
(33:26):
transitioning.
And what the research has shownhere is that having a portfolio
that is about half value tiltedand half either large cap total
market or growth tilted, exceptfor small cap growth, tends to
result in portfolios with highersafe withdrawal rates and nice
characteristics in terms ofvolatility and drawdowns.
(33:48):
So that's a good place to tryto get to eventually, half
growth and half value.
Obviously, the easiest way toget there eventually is to just
start there.
So you could do half VTI or anS P 500 fund or a large cap
growth fund.
And the reason I like the largecap growth fund is because it's
(34:10):
the most growth and mostdiversified from the value
stocks in the portfolio.
And then on the other side,you'd have to pick some value
stocks.
Now, regardless of whether youthink small cap value is going
to outperform the rest of theentire market, it is pretty
obvious that small cap value islikely to outperform large cap
value over long periods of time.
(34:31):
Large cap value is mainly heldfor stability purposes and makes
a good addition to a retirementportfolio, but it's probably
not something you want toaccumulate in.
So small cap value is the mostnatural, simple choice to make
in an accumulation portfoliowhen paired with a total market
(34:52):
or large cap growth fund.
But that doesn't mean it's theonly choice.
You could have some large capvalue or some mid-cap value or
some international value.
Whatever you think you aregoing to end up with is probably
what you want to start with.
Or maybe if you're reallycreative, you want to construct
some kind of glide path whereyou are adding to the value
(35:12):
portion as you go on to make iteasier to transition eventually.
There are many paths you cantake here, and since this is an
area of uncertainty and that wedon't know exactly what's going
to perform well in the nearfuture in particular, and the
nearer it is, the less we know.
You should just pick a paththat feels comfortable to you
and then stick with the path andnot get distracted by the news
(35:34):
or what's going on out there andnot be jumping in and out of
things.
Which leads to your questiontwo: when you transition to the
portfolio in retirement, therisk parity style portfolio, you
assume VTI would suffice asyour large cap growth holding.
Yes, that's a pretty safeassumption, particularly the way
the US markets have evolvedover time.
(35:55):
It tends to be more and morefocused on large tech firms, and
that's large cap growth.
And that's likely to be truefor a very long time in the
future.
The reason I chose VUG is thatI do like it for its
diversification propertiesagainst value stocks.
That since it's all growth andall large cap growth, it is more
(36:18):
diversified from value stocksthan VTI or VOO, but not by
much.
And while I might makeadjustments in a retirement
account, I certainly would notbe incurring large tax
liabilities to switch from VTIor VOO to VUG.
Because again, this is notreally that important in the
grand scheme of things.
(36:38):
Don't get hung up on specificfunds or specific formulas.
Well, remember we're trying toapply some principles here.
Voices (36:47):
Don't be saucy with me, Bernays.
Mostly Uncle Frank (36:50):
Okay, you were asking about question
three, about asset location.
Yes, you should treat yourentire collection of assets as
one big portfolio and thenlocate them in different
accounts for tax optimization.
So that basically means thatanything that is paying
significant ordinary income goesin a traditional retirement
(37:13):
account, which includes bonds,managed futures, REITs.
Just look and see whether it'sgenerating significant ordinary
income.
If you're holding a lot ofcash, sometimes you want to put
that in the retirement accountas well, particularly if you're
not really using it yet.
You typically put your bestgrowing assets in Roth accounts.
(37:34):
So that's generally yourequities.
And then in taxable accounts,you want things that either
don't pay income or at least payqualified dividends as income
because they get taxed at alower rate, which again is
generally stocks.
Now with the alternatives,managed futures generally go
into the traditional retirementaccount because they throw off
(37:55):
ordinary income every year.
Something like gold canessentially go anywhere.
It doesn't pay any income.
It does have some peculiar taxrules to it.
But oftentimes when you'retalking about these smaller
allocations to things, you'relooking at where do I have room?
And so put it where you haveroom after you've done all of
the other allocating that I'vejust mentioned.
(38:17):
Okay, is your last question?
Speaking of managed futures,are there any substitutes for to
this part of the portfolio?
And in some respects, that'sjust a bad question because it
assumes that this is a formulaportfolio that you have to have
it in these proportions withthese particular funds.
(38:37):
And that is a level three kindof thinking.
If we're a level four kind ofthinking when we're applying
principles, of course, there aredifferent things you could use
besides manage futures in one ofthese kinds of portfolios.
The general guidelines and whatseems to work well in these
kinds of portfolios is to havebetween 10 and about 25% of your
(38:59):
portfolio in alternativeassets.
And those assets to be analternative asset that you would
want need to be something thathas a very low or no correlation
to both stocks and treasurybonds.
And so gold and managed futuresfit those bills.
But maybe you want to have 10or 15 or 20% in gold and no
(39:22):
managed futures.
Now managed futures and goldare also not very correlated.
So there is some advantage toholding both of them in that
slot.
But you can certainly constructone of these kinds of
portfolios without using managedfutures.
So some people want to havemore of an equity focus or
(39:43):
percentage, a higher equitypercentage in their portfolio.
So it's more like 60% or 50%.
And if you're doing that, youwould take the 16% allocation
slot or the 10% allocation slotin this kind of portfolio and
essentially put more stocks init.
You could put, for example, 10%in a utilities fund or 10% in a
(40:07):
REIT fund because both of thosehave low correlations to the
rest of the stock market.
Or maybe you pick some growthand value international stocks
for something in that part ofthe portfolio.
What that will give you issomething that is likely to have
a higher overall return profilelonger term, but is going to
(40:28):
have higher volatility.
That's the trade-off.
It will likely have similarcharacteristics as far as the
overall safe withdrawal rate.
That's why we say that you wantto have your stocks in this
kind of portfolio to besomewhere in the 40% range to
the 70% range.
Because as Bill Bangin hasfound in his old research and
(40:49):
his new research, that happensto be kind of the sweet spot for
a high safe withdrawal rate.
This is also why we say thebonds should be somewhere
between about 15 and 30%,because that seems to work well
with treasury bonds,intermediate andor long-term
treasury bonds.
And then the fourth guidelineis to have less than 10% in
(41:10):
cash.
And there's nothing to say thatthat 6% in cash needs to be in
cash.
Because maybe you have othersources of cash.
Maybe you don't really need anycash in this portfolio at all.
And that's the kind ofportfolio we constructed with
Mindy Jensen, where she tookthat 6% and allocated it towards
international stocks.
So there are many variations tothese portfolios that will give
(41:32):
you high sale withdrawal rates,and they don't necessarily
require you to hold managedfutures.
That being said, thatparticular allocation does seem
to do much better than justabout any other alternative or
pseudo-alternative that you canthink of, whether that's private
equity or private debt, whichare become popular these days.
They don't make goodalternatives because they are
(41:55):
correlated to public equity andpublic debt.
People sometimes try to usetips as an alternative, and
those don't really work eitherbecause they're bonds, or other
funky weird bond funds involvinghigh yield and things like
that.
Those are also bonds, and theyalso tend to have higher
correlations to stocks andbonds, so they don't work as
(42:16):
well as an alternative assomething like managed futures.
But yes, there are many ways toconstruct these kinds of
portfolios.
And given how young you are,you have plenty of time to think
about it, which is nice becausea lot of these ETFs are still
developing, if you will, and youmay have more and better
options in another 10 years thatwe just don't have today, or we
(42:38):
don't really recognize or knoware good options these days.
As I like to say, personalfinance is an evolving
technology like smartphones.
It's not like a Dead Sea scrollthat you just read and follow
and never deviate from.
That again is level threethinking.
It's not level four thinking.
Voices (42:57):
That's not an improvement.
Mostly Uncle Frank (42:59):
But I am very glad you're thinking about
these things and gettingsomething out of this.
One of the things you mightconsider doing is what our
children use risk parity styleportfolios for now, which is as
intermediate accumulationportfolios.
So they have their retirementportfolios that are 100% stocks,
which is most of their money.
(43:20):
They have an emergency fund,which is their cash.
But in between that, they alsohave a essentially a slush fund
that is in a risk parity styleportfolio because it allows for
some growth, but also kind offree access to it.
So our eldest son has boughtthings like solar panels and now
he's got to buy a new stove forthe house.
(43:42):
So it can be used as kind of anextra emergency fund or
longer-term emergency fund thanyour typical need the cash now
kind of emergency fund.
So you might just set up one ofthose and kind of do a little
practice in it to see what kindof retirement portfolio you
eventually want to hold.
If you're doing something likethat, you don't really need to
(44:03):
do rebalancing, you just keepadding to the things that are
the lowest whenever you'readding money to the portfolio.
And then if you're ever takingmoney out of it, you take from
whatever's doing the best.
And it makes the management ofit simple and the taxes lower.
Anyway, there's another ideafor you.
Hopefully that helps.
And thank you for your email.
(44:23):
But now I see our signal isbeginning to fade.
If you have comments orquestions for me, please send
them to Frank atRiskPardyRadio.com.
That email is Frank atRiskPartyRadio.com.
(44:44):
Or you can go to the websitewww.riskparty radio.com.
Put your message into thecontact format, 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, a follow, a review.
That would be great.
Okay.
Thank you once again for tuningin.
This is Frank Vasquez with RiskParty Radio.
(45:05):
Signing off.
Voices (45:08):
And it's gone.
Poof.
Uh what?
It's gone.
It's all gone.
Mostly Queen Mary (45:16):
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 legaladvice.
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 mind,
adored by little statesmen andphilosophers and divine.
If a man does not keep pace withhis companions, perhaps it is
because he hears a differentdrummer.
A different drummer.
Mostly Queen Mary (00:18):
And now, coming to you from Dead Center
on your dial, welcome to RiskParity Radio, where we explore
alternatives and assetallocations for the
do-it-yourself investor.
Broadcasting to you now fromthe 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 (00:59):
And we only have a few mismatched bar stools
and some easy 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 (01:27):
So please enjoy our mostly cold beer
served in cans and our coffeeserved in old chipped and
cracked mugs.
Along with what our little freelibrary has to offer.
But now onward, episode 459.
(01:54):
Today on WrestleMania Radio,we're just going to do we do
best here, of course, which isto answer your emails.
And so without further ado.
Voices (02:03):
Here I go once again with the email.
Mostly Uncle Frank (02:06):
And first off First off, we have an email
from Luke.
Luke from Quebec.
And Luke writes.
Mostly Queen Mary (02:20):
Hi Frank.
I hope all is well with you andyou had a nice trip.
You might have already seenthis, but just in case, I'm
sharing this with you.
Seems like you're causing quitea stir in the Bogleheads
community.
Sister Francine would be proudof you.
Voices (02:38):
It saddens and hurts me that the two young men whom I
raised to believe in the TenCommandments have returned to me
as two thieves with filthymouths and bad attitudes.
Get out.
And don't come back untilyou've redeemed yourselves.
Mostly Queen Mary (03:03):
Maybe you can use the material as inspiration
for a rant.
There hasn't been an officialone in a long time.
Voices (03:10):
I haven't beaten anyone this bad in a long time.
I haven't beaten anyone thisbad in a long time.
You haven't beaten anyone thisbad in a long time.
Oh come on, those beadies, thosepeople are resisting rats.
Mostly Queen Mary (03:25):
He should come and stay with us for a
while if he wants to hear somerants.
Every day.
Voices (03:33):
I I don't want the families over here.
Have a hefty day.
Another big red letter day forthe babies.
Daddy, the browns next door tohave a new car.
You should see it.
What's the message?
I don't know why we don't wantto all have pneumonia.
Why do we have to live here inthe first place and stay around
(04:00):
this measly, crummy old town?
George, what's wrong?
Everything.
Well, you call this a happyfamily.
Why do we have to have allthese kids?
Mostly Uncle Frank (04:10):
Well, first off, Luke, thank you for all you
do for Risk Parity Radio.
Sackgosh.
Luke is not only a donor to theFather McKenna Center, but he's
also the person who hasrecently revamped our entire
website.
Voices (04:24):
We have top men working on it right now.
Who top men.
Mostly Uncle Frank (04:35):
Which is getting rave reviews, by the
way.
He recently rolled out aimproved episode guide page,
which you might want to checkout.
And maybe we'll expand that atsome point, but chances are we
probably not because all of theepisodes are now searchable,
(04:57):
including the transcripts, alsothanks to Luke.
Voices (05:02):
Really top drawer.
Mostly Uncle Frank (05:05):
Now getting to the substance of your email.
No, I had not checked out thisthread on Bogleheads about the
Golden Ratio portfolio and RiskParity Radio in general.
Voices (05:18):
It's not that I'm lazy.
It's that I just don't care.
Mostly Uncle Frank (05:22):
I really do not spend any time on those
kinds of fora or a lot of socialmedia generally.
Voices (05:29):
Not gonna do it.
Wouldn't be prudent at thisjuncture.
Mostly Uncle Frank (05:32):
I tend to keep my diet of social media
limited to a couple of Facebookgroups and then listening to a
lot of podcasts.
Anyway, I did read it.
I will link to it in the shownotes if anybody wants to check
it out.
It is about 113 posts long atthe moment.
And no, I don't really have arant about it, mostly because
(05:53):
you guys have already taken careof the things I would say.
I was very heartened to seethat a lot of our listeners do
participate in that forum andhad really answered or shot down
the questions and critiquesfrom the Hoy Peloy over there.
And that includes Tyler fromPortfolio Charts, who made some
(06:13):
good responses to many of thethings.
He is known there as Tyler9000.
And I wonder how many of youknow why he's known as Tyler
9000 and chose that moniker.
Voices (06:24):
The 9000 series is the most reliable computer ever
made.
No 9000 computer has ever madea mistake or distorted
information.
We are all, by any practicaldefinition of the words,
foolproof and incapable oferror.
Mostly Uncle Frank (06:44):
Anyway, let me just give you a few
observations and random musingsmore generally.
Open the pod bay doors, Hal.
Voices (06:56):
I'm sorry, Dave.
I'm afraid I can't do that.
What's the problem?
I think you know what theproblem is just as well as I do.
What are you talking about,Hal?
This mission is too importantfor me to allow you to
jeopardize it.
I don't know what you're talkingabout, Hal.
(07:20):
I know that you and Frank wereplanning to disconnect me.
And I'm afraid that's somethingI cannot allow to happen.
Mostly Uncle Frank (07:30):
The first is that I tend to divide up
investors into four basiccategories.
And the first category,broadest category, is people
just don't know anything aboutinvesting.
And usually they are worriedabout getting out of debt or
credit scores or you know,popular consumer finance is what
I would call it.
And those people tend togravitate towards things like
(07:52):
Dave Ramsey and Susie Orman.
They're looking for simplesteps to make their financial
life better.
Voices (07:58):
What do you want to buy?
Hey everybody, Susie O here.
Now, can I afford it?
Has been gamified, which meansyou're gonna get to listen to
the caller.
You're gonna say, Show me themoney to yourself anyway, and
then you're gonna get to approveor deny it.
You think you're gonna be rightor wrong?
(08:19):
Let's go and try it right now.
Yeah.
Mostly Uncle Frank (08:24):
Financial media largely markets to that
crowd because the idea is youget people a little bit
interested in something, theneventually you funnel them to
financial advisors, and that'sDave Ramsey's business model and
how he gets paid.
Voices (08:37):
Yeah.
Mostly Uncle Frank (08:39):
The second level up is what I like to call
the shiny object syndrome level.
This is where people havelearned something about
investing or finances ingeneral, but then they get
sucked into one or more popularideas on the internet, and these
things come and go.
But they all resemble shinyobjects, and some of them are
like this infinite velocitybanking on your mama using
(09:02):
insurance products.
Voices (09:04):
You're gonna end up eating a steady diet of
government cheese and living ina van down by the river.
Mostly Uncle Frank (09:13):
Dividend investing is another one.
Shirley, you can't be serious.
Voices (09:17):
I am serious, and don't call me Shirley.
Mostly Uncle Frank (09:20):
These days, these covered call funds are
becoming the shiny objects dujour.
Voices (09:26):
A guy don't walk on the lot lest he wants to buy.
They're sitting out therewaiting to give you their money.
Are you gonna take it?
Mostly Uncle Frank (09:34):
But most shiny objects have some kind of
story that goes with them, eventhough financially they are
suboptimal in many ways andoften very expensive because
ultimately they are beingpromoted by somebody who is
going to profit from theparticipation or direct selling
of the shiny object itself.
Voices (09:53):
Because only one thing counts in this life.
Get them to sign on the linewhich is dotted.
Mostly Uncle Frank (09:59):
And then you get to level three.
And level three is people whohave recognized that the shiny
objects are not so shiny and areprobably suboptimal, and they
do want to do something that isat least optimal in some way.
And so this is where much ofpersonal finance ends up,
including the Bogleheads.
And this is the formulaiclevel.
(10:20):
You come up with some kind offormula that you follow for your
investments, and that's why youhave a two-fund portfolio or a
three-fund portfolio or a simplepath to wealth or any of those
sorts of things that are justeverybody should do this and
then not spend very much money,and your financial life will be
fine.
(10:40):
And that's true, it'll work,but it also ends up being a form
of groupthink and identity, andwe'll talk a little bit more
about that later.
But then you get to what wecall level four, and in level
four, you are trying to applygood investing principles to
achieve a particular goal.
So this is trying to strip awaythe psychology of things and
(11:04):
focus on the finances and whatpeople on level four are doing
is looking at what the bestprofessional investors do, and
then determining what part ofthat can be adopted, applying
some principles.
And that's what we try to dohere.
Voices (11:20):
Now witness the firepower of this fully armed
and operational battle station.
Mostly Uncle Frank (11:29):
And that's why we have three main
principles (11:31):
the Holy Grail principle about using
uncorrelated assets, themacroallocation principle, which
recognizes thatmacroallocations are a good part
of portfolio construction.
And then the simplicityprinciple.
We use the Einstein'sdefinition of that.
Voices (11:51):
Everything should be made as simple as possible, but
not simpler.
Mostly Uncle Frank (11:56):
And not the boglehead, let's make things as
simple as possible becausesimplicity is more important
than anything else, and we'retoo stupid to handle anything
more than two or three funds.
So we don't use fear-basedsimplicity here, or simplicity
for simplicity's sake.
Voices (12:17):
Always with you what cannot be done.
You must unlearn what you havelearned.
Mostly Uncle Frank (12:25):
And we also recognize that personal finance
is primarily finance, notpersonal.
And what that means is thatyour financial behaviors should
match your financial goals.
So the financial goal we aretrying to achieve here for the
most part is to constructportfolios that will have higher
safe withdrawal rates so thatwe can spend more money while we
(12:46):
are alive.
That's the financial goal we'retrying to achieve.
And personal preferences aboutwhich particular family of funds
we use or brokerage or exactlyhow many funds we have are
secondary.
So the way I viewed that threadthat you pointed to was a clash
between basically people onlevel three and on level four.
(13:09):
And you could tell the peopleon level three a lot of times
because they got caught up inthe name of the golden ratio
portfolio.
The golden ratio.
And wanted to say, oh, you'remaking this silly mystical grab
at publicity or something topromote this thing.
(13:30):
And it shows they really don'tget it because it shows that
that is their perspective, thattheir three fund portfolio is
good because it's the three fundportfolio, and they think that
I think the golden ratioportfolio is good because it's
called the Golden RatioPortfolio or incorporates the
Golden Ratio itself.
A number so perfect, perfect.
(13:53):
We find it everywhere,everywhere.
Secret geometry, secretgeometry.
Which is not true at all, butit is funny to tweak people who
don't get it with the idea that,oh yes, it's a mystical,
magical thing.
A mathematical propertyhardwired into nature.
Voices (14:12):
Secrets, secrets, secrets, secrets.
Mostly Uncle Frank (14:15):
In reality, that portfolio is a sample
portfolio, just like we say,it's a sample portfolio.
It's one of a number ofportfolios on a spectrum that
would have high safe withdrawalrates.
And the main reason we wouldcall it something like the
golden ratio portfolio isbecause we needed to name it
something.
And so the simplest names arethe mathematical names, like
(14:37):
6040 or 50-30-20.
That's all the golden ratio is.
It's a mathematical name forsomething.
We could have called it thefive-slot kind of like 60-40
portfolio, which would be kindof cumbersome.
That goes without saying.
But if you are getting hung upon the name and the specific
(15:02):
details of the math there, youare missing the point because
you are applying a formulaicconstruct or level three kind of
construct to something that isdesigned to be an example of a
application of principles.
And so a lot of Bogleheadsthere were missing the point.
(15:23):
And as a lot of you listenerspointed out, they were missing
the point.
Voices (15:28):
That's not how it works.
That's not how any of thisworks.
Mostly Uncle Frank (15:32):
And I'm pleased that a lot of you
listeners did articulate thecounter-arguments and the real
principles so clearly, because Ithought it was a good
discussion, to the point that Idon't have to say anything or do
anything, and the word gets outthere.
I'm very pleased with that, andthank you for it.
I just stare at my desk, but itlooks like I'm working.
Because what is ultimatelyreally going on there is they
(15:54):
are not trying to solve the sameproblem that we're trying to
solve here, which is to spendmore money in retirement and
have a higher safe withdrawalrate in retirement and use
portfolio construction for thatfinancial goal.
They don't have that financialgoal.
They've solved that financialgoal by deciding not to spend
money.
Voices (16:15):
What's with you anyway?
I can't help it.
I'm a greedy slob.
It's my hobby.
Mostly Uncle Frank (16:20):
And once you've decided that you're
really not going to spend muchmoney, then what your specific
portfolio is does becomesomething else.
It becomes part of youridentity.
It becomes part of a reason orway to join a club, if you will.
Voices (16:37):
I've got a good mind to join a club and beat you over
the head with it.
Mostly Uncle Frank (16:41):
And to have some kind of personal talisman
to rely on in the form of aformula.
Voices (16:48):
It's so simple.
Isn't it you guys?
Isn't it simple?
If you followed all theinstructional material, you just
said it every day.
Mostly Uncle Frank (16:57):
It's really part of this savor identity.
And I just got Morgan Housel'sbook a couple of weeks ago, the
new one called Art of Spending.
And I don't usually do this,but I will read this segment
because I think this reallydescribes what is ultimately
going on here and why a lot ofthe people in the Bogleheads
community don't understand orare trying to do something
(17:20):
different or don't want toacknowledge what the reality of
their situation is as comparedto what somebody else is doing
that wants to spend money.
And here's the passage.
It's on pages 150 and 151 inthe chapter about identity.
Morgan writes, Let me share themost common financial identity
that can harm people in waysthey never imagined.
(17:42):
Quote, I am a saver, unquote.
It seems like such a goodtrait, and it sounds so
innocent.
And of course both are true,but a lot of financial planners
will tell you that they're oneof their biggest challenges is
getting clients to spend moneyin retirement.
Even an appropriateconservative amount of money.
Frugality and saving becomesuch a big part of some people's
(18:03):
identity that they can neverswitch gears.
I call it frugality inertia.
It's what happens when alifetime of good saving habits
can't be transitioned into areasonable spending phase.
I think what most people reallywant from money is the ability
to stop thinking about money, tosave enough money that they can
stop thinking about it andfocus on other stuff.
(18:25):
But that ultimate goal canbreak down when your
relationship with saving moneybecomes an ingrained part of
your personality.
You struggle to break away fromfocusing on money because the
focus itself is a big part ofyour identity.
You associate life success withyour bank account going up, up,
up, and you've never been ableto actually spend it, even in a
(18:47):
reasonable way.
If you develop an early systemof saving and living well below
your means, congratulations,that's great.
But if you can never break awayfrom that system and insist on
a heavy saving regimen well intoyour retirement years, what is
that?
Is that still winning?
Those with the ultimate goal tostop thinking about money are
(19:08):
stuck.
Refusing to recognize thatyou've met your goal can be as
bad as never meeting the goal tobegin with.
Unquote.
So if you've essentially solvedyour money problems by just
oversaving and continuing toaccumulate until death, yeah,
(19:28):
you can pick pretty muchwhatever portfolio you want to
and gravitate towards some kindof simple formula.
And when there's a social groupthat surrounds it, it makes it
all that more attractive.
Because then you can nameyourself and have that identity
(19:52):
for yourself.
And on that note, Housel goeson on page 152 of this, where he
writes, quote, it's common ininvesting where people take on
labels like, quote, valueinvestor, unquote, trader, and
tech investor.
The labels seem harmless, butonce you label yourself, you've
formed an identity that canprevent you from seeing the big
(20:12):
picture, finding otheropportunities, or changing your
mind when you need to.
Unquote.
And that's what this club, theBogleheads, is essentially.
Or rather has become over thepast 20 years, because it
certainly didn't set out thatway.
Voices (20:29):
Please accept my resignation.
I don't want to belong to anyclub that'll accept me as a
member.
Mostly Uncle Frank (20:37):
But it's funny how that thread
illustrated how that leads to alot of mental gymnastics and
just fallacious reasoning whenit comes to some of the
critiques in that thread.
A lot of them were of thenature of the general truism
that applies to everything.
And if you say something thatapplies to everything, then it
(20:58):
does not distinguish between twothings like portfolio A and
portfolio B.
The biggest one there is theoft-quoted, past performance
does not predict future results.
And some of the Bogleheads saidthat, and as some of you
pointed out, it's like, well,that applies to every portfolio,
your portfolio, this portfolio,and does not give you any
(21:19):
mechanism for deciding whetherportfolio A is better than
portfolio B for some particularpurpose.
Voices (21:25):
Are you stupid or something?
Mostly Uncle Frank (21:28):
Another form of fallacious reasoning is to
make up additional tests thatwere not important and probably
aren't important to distinguishfrom one portfolio to another.
Voices (21:39):
These go to 11.
Mostly Uncle Frank (21:41):
So, confronted with the information
in that thread showing thatthese kinds of risk parity style
portfolios tend to have highersafe withdrawal rates and lower
volatility over many periods intime and the longest periods in
time.
There were some of thecommenters who were saying
something like, Well, what aboutthe Sortino ratio in the 1990s?
It's like, where did that comefrom and why is that important?
(22:03):
What goal is that ultimatelyserving?
And this does go back to thefact that a lot of these people
are just applying formulas fortheir identity and have
forgotten what the goalultimately was of having a
particular portfolio.
But unless you define a goalfirst and then apply it to
(22:23):
portfolio A versus portfolio B,you're really just engaging in
fallacious reasoning if you'retrying to say, let me see if I
can think up tests that showthat this particular portfolio
is better than the other one,even if those tests don't have
any meaning in what I'm actuallytrying to achieve.
And then another source offallacious reasoning is simply
(22:44):
the cherry picking of the data.
And a lot of this involves notaccounting for the 1970s as if
things like the 1970s can neveroccur again.
And this is where peopleconfuse the specifics of an
anthistorical period and theeconomic consequences.
(23:06):
And the specifics are alwaysgoing to be different.
This time is always going to bedifferent.
No, you're never going to havethe exact same factual
predicates of the 1970s or ofthe early 2000s.
But the fact of the matter is awhole series of different kinds
of causes can cause similareffects economically.
(23:26):
And so there are a lot ofthings that can cause inflation.
There are a lot of things thatcan cause recessions.
There are a lot of things thatcan cause, say, the price of
gold to go up a lot in a shortperiod of time.
Voices (23:40):
You can't handle the dogs and cats living together.
Mostly Uncle Frank (23:44):
And that's where a lot of these people get
stuck.
In order to make their argumentwork, they have to say that,
oh, that's because there wasthis one situation and that's
never going to happen again.
Those things can both be trueand you can still be wrong.
Voices (24:05):
Wrong!
Mostly Uncle Frank (24:06):
Because the economic conditions can repeat
for more than one reason.
Another way to say that is rareevents do reoccur, just not
very often.
So in 2022, we had the rareevent of an inflationary spike
accompanied by the Fed raisinginterest rates very quickly.
And so you had something thatyou had not seen since the 1970s
(24:29):
in terms of the way stocks andbonds both underperformed.
But that's not the first timethat happened.
It's not the last time it'sgoing to happen.
It's a low probability event,and just because it happened in
2022 doesn't make it more likelyit's going to happen again.
But now you're seeing a similarthing this year.
People said, well, the onlyreason gold went up a whole lot
in the 1970s is because Nixondid this and there was this
(24:52):
occurrence and there was an oilembargo or whatever.
Voices (24:56):
Real wrath of God type stuff.
Exactly.
Mostly Uncle Frank (24:59):
But now we're experiencing the same
thing again.
So the argument that you can'thave a situation like the 1970s
with respect to some of thesealternative assets is just
wrong, and it's always beenwrong.
Voices (25:12):
Right?
Wrong!
Mostly Uncle Frank (25:13):
There's a small probability that you will
have that kind of situationagain, and we'll see gold going
up 50 or 60% in a year, likeit's going up this year.
Suppose it has a 2 or 3% chanceof occurring.
That's just like rolling twosixes on a set of two dice.
No, it doesn't occur veryoften, but it does occur with a
regular frequency if you rollthe dice long enough.
(25:35):
At bottom, if you have tocherry pick data like that and
exclude some periods because ifyou included them, you'd be
wrong.
Voices (25:43):
Wrong!
Mostly Uncle Frank (25:45):
It shows you really don't have a leg to
stand on in terms of yourlogical or analytical reasoning.
Voices (25:52):
I award you no points, and may God have mercy on your
soul.
Mostly Uncle Frank (25:58):
Anyway, I feel like I've gone on now far
too long in this one email.
Because now I only have timefor only one other email.
So I'm going to stop here.
But check out that thread ifyou're interested.
Remember, we're not doingsorcery here or using portfolios
as identities or to form clubsaround.
Voices (26:17):
If you're the police, where are your badges?
Badges?
We ain't got no badges.
We don't need no badges.
I don't have to show you anystinking badges.
Mostly Uncle Frank (26:29):
Thank you for all your contributions to
this podcast, Luke.
And thank you for your email.
Voices (26:36):
A number is so perfect.
Perfect.
We find it everywhere,everywhere.
A mathematical propertyhardwired into nature.
The golden radio.
The golden radio.
(27:05):
The golden radio.
Mostly Uncle Frank (27:12):
Last off.
Last off, we have an email fromNick.
For Nikki, this is a picniccompared to where he's from.
Voices (27:24):
That's a drunk son.
Don't stand in front of them.
Mostly Queen Mary (27:26):
Well, I'll have to take a mulligan on this
one.
Mostly Uncle Frank (27:30):
And Nick writes.
Mostly Queen Mary (27:31):
Hey Frank.
First, I just wanted to say howmuch I appreciate your podcast
and have really enjoyed hearingyou get the platform you deserve
lately on the Bigger PersonalFinance podcast to share your
thoughts about a risk parityportfolio.
Voices (27:45):
Yes!
Mostly Queen Mary (27:46):
I'm a longtime member of the Choose If
I and Bigger Pockets MoneyGroups and have always enjoyed
your posts, willingness to goagainst the status quo, and
overall insight when answeringquestions.
I thought I'd send an email toask a few questions, even though
I feel pretty comfortable in mywife's and my position towards
(28:09):
reaching financial independencearound age 45 for me and 41 for
her.
A little about us.
I am 27, she is 23.
We make about $180,000 a yearjust outside of Raleigh, North
Carolina, although this isexpected to rise to somewhere
around $225,000 to $250,000 inthe next two to three years.
(28:30):
Software, engineer, and techsales.
Our current spend is about$7,000 a month, but I estimate
our retirement spending to besomewhere around $10,000 a month
in today's dollars as wecurrently rent and have no kids.
This is a very gross estimate.
We invest around $3,800 amonth, including $401K match,
split between traditional Rothand taxable accounts.
(28:53):
Our current investments arearound $216,000, including about
$125 in $401Ks invested in aVanguard SP $500 index fund and
$91,000 invested in VTI acrossRoth IRAs, a taxable brokerage
account, and an old HSA.
My questions for you are thefollowing.
(29:13):
Would you change ouraccumulation portfolios to
include small cap value?
If so, how much of a percentagewould you be comfortable with?
Like many in the group, Istarted out with the simple path
to wealth, but as I havelistened more to you, Paul
Merriman, and Joe Salsehai, I dosee the value of having a small
cap value tilt when I lookthrough recency bias and how the
(29:35):
SP has dominated through myadult lifetime, but have heard
anywhere from 10% to 50%.
2.
When I transition to a riskparity portfolio as I get closer
to retirement, I assume VTIwould suffice as my large cap
growth holding.
I am fairly certain I've heardyou say this is fine, but notice
you chose VUG on the BiggerPockets Money podcast when
(29:58):
setting up the portfolio withMindy.
So I just wanted to make sure.
Holding VTI would help reducecapital gains tax in our
brokerage account.
Three, you touched on it a bitat the end of the same episode,
but assuming all things equal,one-third of investments are
each in traditional Roth andtaxable accounts, but we will
want the taxable account tobridge us to 15 years or so
(30:19):
until 59 and a half.
How would you go aboutallocating and pulling from
these accounts?
The obvious would be fill-upbonds, VGLT, and VGIT in
traditional accounts, fill-upstocks, VTI and AVUV in Roth
accounts, put the spilloverstocks in the taxable account.
I would think VTI since AVUVhas slightly more growth
(30:41):
potential, so I would want thatin the Roths.
I would have my 6% cash inSPAXX in the brokerage, but
after that I'm not sure how Ishould think about where to put
gold or managed futures.
Speaking of managed futures,are there any substitutes to
this part of the portfolio?
Thanks so much for any insightand all you do for the financial
(31:02):
independence community.
I appreciate hearing theravings of a lunatic mind.
Voices (31:08):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Uncle Frank (31:15):
Well, Nick, thank you for writing in.
I'm glad you're enjoying thepodcast.
You are about the same age asour adult children.
Voices (31:24):
What have children ever done for me?
Mostly Uncle Frank (31:27):
And I see you're whipping and snapping out
there, as you youngsters arewont to do.
Cool.
And it sounds like you are wellon your way to financial
independence.
Voices (31:41):
Fire, fire, fire, fire.
Mostly Uncle Frank (31:45):
So congratulations on that.
Voices (31:47):
That and a nickel get your hot cup, a jack squat.
Mostly Uncle Frank (31:53):
Getting your questions, first ones, would
you change your accumulationportfolio to include small cap
value?
Well, the answer is I probablywould, but I think you want to
think about this in terms ofyour ultimate goals.
First, just let's get somethingout of the way, which is the
macro allocation principle.
That all 100% index fundportfolios that are reasonably
(32:17):
well diversified, even thoughthere's one, two, three, four
funds in them, they're all goingto work.
They're all going to get you tofinancial independence.
And which one's going to be thebest one, particularly in the
next decade, is a crapshoot.
Voices (32:31):
Shake them up, shake them up, shake them up, shake
them.
Mostly Uncle Frank (32:34):
So you do need to kind of pick something
and stick with it, or pick someplan and stick with it, because
the real danger is not what youpick, but jumping in and out of
different funds trying to chaseperformance or doing things like
that.
That is actually how peopleunderperform and slow themselves
down.
That and making things morecomplicated by using target date
(32:56):
funds and robo thingies andother shiny objects they find
lying around.
Voices (33:02):
Fat, drunk, and stupid is no way to go through
lifestyle.
Mostly Uncle Frank (33:05):
Here's what I think you really should be
thinking about is where do youwant to end up with this
portfolio?
Because whatever you're puttinginto this stock portfolio, this
all stock portfolio, that isprobably going to end up being
the lion's share or a bigportion of what your stock
portion of your retirementportfolio is going to be.
At least it'd be easier if youdidn't have to do too much
(33:26):
transitioning.
And what the research has shownhere is that having a portfolio
that is about half value tiltedand half either large cap total
market or growth tilted, exceptfor small cap growth, tends to
result in portfolios with highersafe withdrawal rates and nice
characteristics in terms ofvolatility and drawdowns.
(33:48):
So that's a good place to tryto get to eventually, half
growth and half value.
Obviously, the easiest way toget there eventually is to just
start there.
So you could do half VTI or anS P 500 fund or a large cap
growth fund.
And the reason I like the largecap growth fund is because it's
(34:10):
the most growth and mostdiversified from the value
stocks in the portfolio.
And then on the other side,you'd have to pick some value
stocks.
Now, regardless of whether youthink small cap value is going
to outperform the rest of theentire market, it is pretty
obvious that small cap value islikely to outperform large cap
value over long periods of time.
(34:31):
Large cap value is mainly heldfor stability purposes and makes
a good addition to a retirementportfolio, but it's probably
not something you want toaccumulate in.
So small cap value is the mostnatural, simple choice to make
in an accumulation portfoliowhen paired with a total market
(34:52):
or large cap growth fund.
But that doesn't mean it's theonly choice.
You could have some large capvalue or some mid-cap value or
some international value.
Whatever you think you aregoing to end up with is probably
what you want to start with.
Or maybe if you're reallycreative, you want to construct
some kind of glide path whereyou are adding to the value
(35:12):
portion as you go on to make iteasier to transition eventually.
There are many paths you cantake here, and since this is an
area of uncertainty and that wedon't know exactly what's going
to perform well in the nearfuture in particular, and the
nearer it is, the less we know.
You should just pick a paththat feels comfortable to you
and then stick with the path andnot get distracted by the news
(35:34):
or what's going on out there andnot be jumping in and out of
things.
Which leads to your questiontwo: when you transition to the
portfolio in retirement, therisk parity style portfolio, you
assume VTI would suffice asyour large cap growth holding.
Yes, that's a pretty safeassumption, particularly the way
the US markets have evolvedover time.
(35:55):
It tends to be more and morefocused on large tech firms, and
that's large cap growth.
And that's likely to be truefor a very long time in the
future.
The reason I chose VUG is thatI do like it for its
diversification propertiesagainst value stocks.
That since it's all growth andall large cap growth, it is more
(36:18):
diversified from value stocksthan VTI or VOO, but not by
much.
And while I might makeadjustments in a retirement
account, I certainly would notbe incurring large tax
liabilities to switch from VTIor VOO to VUG.
Because again, this is notreally that important in the
grand scheme of things.
(36:38):
Don't get hung up on specificfunds or specific formulas.
Well, remember we're trying toapply some principles here.
Voices (36:47):
Don't be saucy with me, Bernays.
Mostly Uncle Frank (36:50):
Okay, you were asking about question
three, about asset location.
Yes, you should treat yourentire collection of assets as
one big portfolio and thenlocate them in different
accounts for tax optimization.
So that basically means thatanything that is paying
significant ordinary income goesin a traditional retirement
(37:13):
account, which includes bonds,managed futures, REITs.
Just look and see whether it'sgenerating significant ordinary
income.
If you're holding a lot ofcash, sometimes you want to put
that in the retirement accountas well, particularly if you're
not really using it yet.
You typically put your bestgrowing assets in Roth accounts.
(37:34):
So that's generally yourequities.
And then in taxable accounts,you want things that either
don't pay income or at least payqualified dividends as income
because they get taxed at alower rate, which again is
generally stocks.
Now with the alternatives,managed futures generally go
into the traditional retirementaccount because they throw off
(37:55):
ordinary income every year.
Something like gold canessentially go anywhere.
It doesn't pay any income.
It does have some peculiar taxrules to it.
But oftentimes when you'retalking about these smaller
allocations to things, you'relooking at where do I have room?
And so put it where you haveroom after you've done all of
the other allocating that I'vejust mentioned.
(38:17):
Okay, is your last question?
Speaking of managed futures,are there any substitutes for to
this part of the portfolio?
And in some respects, that'sjust a bad question because it
assumes that this is a formulaportfolio that you have to have
it in these proportions withthese particular funds.
(38:37):
And that is a level three kindof thinking.
If we're a level four kind ofthinking when we're applying
principles, of course, there aredifferent things you could use
besides manage futures in one ofthese kinds of portfolios.
The general guidelines and whatseems to work well in these
kinds of portfolios is to havebetween 10 and about 25% of your
(38:59):
portfolio in alternativeassets.
And those assets to be analternative asset that you would
want need to be something thathas a very low or no correlation
to both stocks and treasurybonds.
And so gold and managed futuresfit those bills.
But maybe you want to have 10or 15 or 20% in gold and no
(39:22):
managed futures.
Now managed futures and goldare also not very correlated.
So there is some advantage toholding both of them in that
slot.
But you can certainly constructone of these kinds of
portfolios without using managedfutures.
So some people want to havemore of an equity focus or
(39:43):
percentage, a higher equitypercentage in their portfolio.
So it's more like 60% or 50%.
And if you're doing that, youwould take the 16% allocation
slot or the 10% allocation slotin this kind of portfolio and
essentially put more stocks init.
You could put, for example, 10%in a utilities fund or 10% in a
(40:07):
REIT fund because both of thosehave low correlations to the
rest of the stock market.
Or maybe you pick some growthand value international stocks
for something in that part ofthe portfolio.
What that will give you issomething that is likely to have
a higher overall return profilelonger term, but is going to
(40:28):
have higher volatility.
That's the trade-off.
It will likely have similarcharacteristics as far as the
overall safe withdrawal rate.
That's why we say that you wantto have your stocks in this
kind of portfolio to besomewhere in the 40% range to
the 70% range.
Because as Bill Bangin hasfound in his old research and
(40:49):
his new research, that happensto be kind of the sweet spot for
a high safe withdrawal rate.
This is also why we say thebonds should be somewhere
between about 15 and 30%,because that seems to work well
with treasury bonds,intermediate andor long-term
treasury bonds.
And then the fourth guidelineis to have less than 10% in
(41:10):
cash.
And there's nothing to say thatthat 6% in cash needs to be in
cash.
Because maybe you have othersources of cash.
Maybe you don't really need anycash in this portfolio at all.
And that's the kind ofportfolio we constructed with
Mindy Jensen, where she tookthat 6% and allocated it towards
international stocks.
So there are many variations tothese portfolios that will give
(41:32):
you high sale withdrawal rates,and they don't necessarily
require you to hold managedfutures.
That being said, thatparticular allocation does seem
to do much better than justabout any other alternative or
pseudo-alternative that you canthink of, whether that's private
equity or private debt, whichare become popular these days.
They don't make goodalternatives because they are
(41:55):
correlated to public equity andpublic debt.
People sometimes try to usetips as an alternative, and
those don't really work eitherbecause they're bonds, or other
funky weird bond funds involvinghigh yield and things like
that.
Those are also bonds, and theyalso tend to have higher
correlations to stocks andbonds, so they don't work as
(42:16):
well as an alternative assomething like managed futures.
But yes, there are many ways toconstruct these kinds of
portfolios.
And given how young you are,you have plenty of time to think
about it, which is nice becausea lot of these ETFs are still
developing, if you will, and youmay have more and better
options in another 10 years thatwe just don't have today, or we
(42:38):
don't really recognize or knoware good options these days.
As I like to say, personalfinance is an evolving
technology like smartphones.
It's not like a Dead Sea scrollthat you just read and follow
and never deviate from.
That again is level threethinking.
It's not level four thinking.
Voices (42:57):
That's not an improvement.
Mostly Uncle Frank (42:59):
But I am very glad you're thinking about
these things and gettingsomething out of this.
One of the things you mightconsider doing is what our
children use risk parity styleportfolios for now, which is as
intermediate accumulationportfolios.
So they have their retirementportfolios that are 100% stocks,
which is most of their money.
(43:20):
They have an emergency fund,which is their cash.
But in between that, they alsohave a essentially a slush fund
that is in a risk parity styleportfolio because it allows for
some growth, but also kind offree access to it.
So our eldest son has boughtthings like solar panels and now
he's got to buy a new stove forthe house.
(43:42):
So it can be used as kind of anextra emergency fund or
longer-term emergency fund thanyour typical need the cash now
kind of emergency fund.
So you might just set up one ofthose and kind of do a little
practice in it to see what kindof retirement portfolio you
eventually want to hold.
If you're doing something likethat, you don't really need to
(44:03):
do rebalancing, you just keepadding to the things that are
the lowest whenever you'readding money to the portfolio.
And then if you're ever takingmoney out of it, you take from
whatever's doing the best.
And it makes the management ofit simple and the taxes lower.
Anyway, there's another ideafor you.
Hopefully that helps.
And thank you for your email.
(44:23):
But now I see our signal isbeginning to fade.
If you have comments orquestions for me, please send
them to Frank atRiskPardyRadio.com.
That email is Frank atRiskPartyRadio.com.
(44:44):
Or you can go to the websitewww.riskparty radio.com.
Put your message into thecontact format, 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, a follow, a review.
That would be great.
Okay.
Thank you once again for tuningin.
This is Frank Vasquez with RiskParty Radio.
(45:05):
Signing off.
Voices (45:08):
And it's gone.
Poof.
Uh what?
It's gone.
It's all gone.
Mostly Queen Mary (45:16):
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 legaladvice.
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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