December 17, 2025 • 33 mins
In this episode we answer emails from JT, Phil, and Glenn. We revel in the updates to the TestFolio tools, weigh how tilting toward small cap value can lift safe withdrawal rates but also reduces overall diversification, return to KBWP and how property and casualty insurance companies can provide value-tilted diversification, and discuss the tracking results reported on the About page at the website.
Links:
Testfolio 5% Withdrawal Backtest Comparison: testfol.io/?s=74fuq6N5WWd
Testfolio Comparison of SCV, LCG, LCV and SCG: testfol.io/?s=4eqimbZveGX
Weird Portfolio: Weird Portfolio – Portfolio Charts
Testfolio KWBP and BRK-B Analysis: testfol.io/analysis?s=l34pkinSxde
Fund Seeder Tracker Site: FundSeeder - Empowering Top Traders with Capital and Insights
Breathless Unedited AI-Bot Summary:
Ready to push past rules of thumb and actually pressure-test a retirement portfolio? We dig into how far a DIY investor can tilt toward small cap value to raise a safe withdrawal rate, what history really shows across 30- and 50-year windows, and why correlation—not bravado—decides whether you can keep spending through ugly markets. Using new Testfolio features with 100-year factor data, we compare the Golden Ratio and Golden Butterfly against more value-heavy mixes and pinpoint where the extra “cowbell” helps and where it just adds stress.
We also open a less-traveled door inside equities: property and casualty insurers. Whether you own them through KBWP or direct index the top names, this sleeve has delivered rare intra-equity diversification, often keeping pace with broad markets while zigging in years like 2022. We share the practical trade-offs—expense ratios vs. tracking error, simplicity vs. tax loss harvesting—and explain when the ETF is the smarter, lower-hassle choice. If you already own Berkshire Hathaway for your value core, you’ll hear why insurers can complement or substitute without bloating overlap.
Context matters, so we pull back the curtain on our publicly tracked taxable account and why it can look extreme in a bad year and strong in a good one. The whole-portfolio view is far steadier, closer to a risk parity blend of stocks, long treasuries, and diversifiers like gold and managed futures. The takeaway: if you want a withdrawal rate you can live with, build for multiple regimes—blend small cap value and large cap growth, keep long bonds for deflation shocks, and add real diversifiers that cut correlation when you need it most. Subscribe, share this with a DIY investor who loves data, and leave a review to tell us where you’d tilt next.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Voices (00:00):
A foolish consistency is the hobgoblin of little minds,
adored by little statesmen andphilosophers and divines.
If a man does not keep pace withhis companions, perhaps it is
because he hears a differentdrummer.
A different drummer.
Mostly 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 (00:36):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
And the basic foundationalepisodes are episodes 1, 3, 5,
7, and 9.
Yes, it is still in my memorybanks.
(00:56):
We have also created anadditional resource, a
collection of additionalfoundational episodes and other
popular episodes.
Voices (01:07):
We have top men working on it right now.
Ooh.
Mostly Uncle Frank (01:14):
Top men.
And you can find those on theepisode guide page at
www.riskparodyradio.com.
Inconceivable.
And all thanks to our friendLuke, our volunteer in Quebec.
We'd be helpless without him.
Voices (01:35):
I have always depended on the kindness of strangers.
Mostly Uncle Frank (01:41):
Because other than him, it's just me and
Marion here.
I'll give you the moon, right?
Voices (01:46):
I'll take it.
Mostly Uncle Frank (01:48):
We have no sponsors, we have no guests, and
we have no expansion plans.
Voices (01:52):
I don't think I'd like another job.
Mostly Uncle Frank (01:55):
Over the years, our podcast has become
very audienced focused, and Imust say we do have the finest
podcast audience available.
Voices (02:03):
Top drawer.
Really top drawer.
Mostly Uncle Frank (02:07):
Along with a host named after a hot dog.
Voices (02:10):
Lighten up Francis.
Mostly Uncle Frank (02:13):
But now onward, episode 473.
Today on Risk Party Radio,we're just gonna do what we do
best here, which is attend toyour emails.
Sweet! But before we get tothat, I'd like to thank all
those who were involved in myChristmas present this year.
On a recent podcast, Icommented that it'd be nice if
(02:36):
Testfolio would add thefactor-based investments going
all the way back to the 1920s.
And lo and behold, some of youtook that up, went to the people
who run that site, and it isthere.
Now it is there.
And every time I look at thatsite, there's a new improvement.
Voices (02:57):
Oh, sure.
I think I've improved on yourmethods a bit too.
Mostly Uncle Frank (03:01):
It's very helpful.
It's really become the go-tosite for looking up a lot of
stuff.
And then one of you, I think itwas HydraMod, who first sent it
to me.
Just a back test now of theGolden Ray Show portfolio
against the Golden Butterflyagainst an SP 500, a three-fund
portfolio, and a 6040.
(03:22):
Going back to 1969.
Voices (03:25):
I got my first real six drink, but it at the five and
done.
Played it till my fingers bled.
Mostly Uncle Frank (03:38):
And you can't do managed futures all the
way back there, but I put inutilities for the period when
managed futures are notavailable and subjected it to a
5% withdrawal rate.
And you could all check thatout.
I'll link to this in the shownotes, but basically, you
wouldn't want to hold thosenon-risk parity style portfolios
if you're going to do that inthat time period.
Voices (03:59):
That's not an improvement.
Mostly Uncle Frank (04:01):
So check that out and thank all of you
who participated in that,especially the purveyors of
Testfolio.
It is a really awesome site fordo-it-yourself investors.
But now without further ado.
Voices (04:31):
Here I go once again with the email.
Mostly Uncle Frank (04:34):
And First off.
First off, we have an emailfrom JT.
Voices (04:40):
I've seen fire and I've seen rain.
I've seen sunny days that Ithought would never end.
Mostly Uncle Frank (04:52):
And JT writes.
Mostly Queen Mary (04:54):
Hi Frank and Mary.
Thanks for continuing to investyour time in the podcast and
answering your listenerquestions.
I found Risk Parity Radioearlier this year, so I'm
grateful that you continue toput out new content after five
plus years so that new listenerslike me can still find you.
Voices (05:11):
Wagon Train is a really cool show, but did you ever
notice that they never getanywhere?
Mostly Queen Mary (05:17):
Just keep wagon training.
I made a contribution today tothe Father McKenna Center to
take advantage of theopportunity to move to the front
of the email line and tocontribute to a great cause.
Voices (05:29):
The best, Jerry.
The best.
Mostly Queen Mary (05:32):
Frank, I'd like to get your thoughts on
higher weighting of small capvalue stocks in a portfolio in
order to support higher safewithdrawal rates.
You've mentioned that sampleportfolios like the Golden Ratio
and Golden Butterfly can helpsupport 30-year withdrawal rates
of around 6%.
When I test alternativeallocations on portfolio charts,
(05:55):
I find that more heavilyweighting U.S.
small cap value can push30-year safe withdrawal rates
closer to 7%, little leveragerequired.
For example, if I modify thegolden ratio portfolio to 42%
U.S.
small cap value, 26% long-termtreasuries, 16% gold, 10% U.S.
(06:20):
large cap growth, and 6% cash,the 30-year safe withdrawal rate
goes up by a half a percentrelative to the standard sample
portfolio.
If the 6% cash portion is alsoreallocated to U.S.
small cap value to make it 48%of the portfolio overall, it
pushes the 30-year safewithdrawal rate higher still.
Voices (06:41):
I gotta have more cowbell.
I gotta have more cowbell.
Mostly Queen Mary (06:44):
Similarly, if I model the golden butterfly
portfolio to 40% U.S.
small cap value and 20% eachacross U.S.
large cap blend, long-termtreasuries, and gold, the
30-year safe withdrawal ratestarts to approach 7%.
Since higher allocations tosmall cap value stocks have
tended to yield higher safewithdrawal rates, at least over
(07:06):
the 55 years available throughportfolio charts, can you talk
about any reservation you'd haveshifting more portfolio weight
to small cap value, like in theexamples above?
Thank you both for your time,JT.
Voices (07:20):
Guess what?
I got a fever.
And the only prescription ismore cowbell.
Mostly Uncle Frank (07:27):
Well, JT, first off, thank you for being a
donor to the Father McKennaCenter.
As most of you know, do nothave any sponsors on this
program who do have a charity wesupport.
It's called the Father McKennaCenter and supports hungry and
homeless people in Washington,D.C.
Full disclosure, I am on theboard of the charity and the
current treasurer.
But if you give to the charity,you get to go to the front of
(07:48):
the email line here.
Two ways to do that.
You can go to the donation pageat the Father McKenna website,
which I'll link to in the shownotes.
Or you be can become one of ourpatrons on Patreon, which you
can do at www.riskpartyradio.com on the support page.
Either way, you get to go tothe front of the email line.
Just make sure you mention itas JD has done here, so I can
(08:10):
duly move you to the front ofthe line.
And I should say, since we'recoming to the end of the year, I
really wanted to thank so manyof you who have supported the
center this year through our topof the t-shirt campaign or
otherwise during the year.
We're a pretty small charity.
We have a budget of about oneand a half million dollars a
year, and we have eight staffmembers.
(08:32):
But we get most of our workthrough volunteers who are
mostly high school students andyoung adults, but also some
older folks.
But they provide anotherequivalent of eight more staff
members, if you can believe thator not.
But we have about a thousandpeople who volunteer at the
center every year.
We don't pay any rent becausewe operate out of the basement
(08:53):
of a church that belongs to theGonzaga College High School.
So pretty much all of thedonations go straight into
providing services for theclients that we serve.
I'm happy to report we've alsobeen able to replace some of our
kitchen equipment this year andalso replace our broken down
van that we use to pick up a lotof the food donations from
(09:15):
local supermarkets.
Voices (09:18):
It's got a cop motor, a 440 cubic inch plant.
It's got cop tires, copsuspension, cop shocks.
It's a model made beforecatalytic converters, so it'll
run good on regular gas.
What do you say?
Is it the new blues mobile orwhat?
Mostly Uncle Frank (09:32):
And now we're actually working on our
plumbing.
Which sounds mundane, but we doprovide showers for a lot of
the clients who need to getcleaned up before they can go to
job interviews and things likethat.
So all of this does go to thedirect support of the people who
really need it.
And I wanted to thank everyonewho's participated this year.
(09:53):
And if you haven't, and youwere thinking about getting in
that 2025 charitable taxdonation since they're changing
the rules for that stuff nextyear, you've still got a couple
of weeks.
So please do consider us if youhave not allocated all of your
charitable donation dollars thisyear yet.
Voices (10:13):
We've got an understanding.
We're on a mission from God.
Mostly Uncle Frank (10:19):
But now let's get to your email.
So you were wondering whetheryou could just go all small cap
value in one of these kind ofrisk parity style portfolios.
And actually, if you go look atthe weird portfolio at
portfolio charts, which is thevalue stock geeks contribution,
that's basically what he's done.
And there's nothing wrong withdoing that, but bear in mind
(10:40):
there is a debate going on infinancial analyst land about
whether small cap value willoutperform in the future.
And if you do look atstatistics like going back
through essentially my investinglifetime back to 1990, you'll
see that small cap value andlarge cap growth have largely
performed the same over the past35 years or so.
(11:04):
They've just performed betteror worse at different times.
And so for that reason, andbecause I don't really want to
be operating a crystal ballwhere I'm trying to pick which
corner of the market is going toperform the best in the future.
Voices (11:19):
We don't know.
What do we know?
You don't know, I don't know,nobody knows.
Mostly Uncle Frank (11:25):
I just assume that those two things
will perform comparably overlong periods of time, and that
it's better just to own some ofeach.
And so that's the theory thatmy allocations are based on, and
that I don't need to engage inthis endless debate about
whether small cap value willoutperform in the future.
I'm not a smart man.
(11:46):
So long as it performs just aswell as the stock market in the
future, we're gonna be fine.
Voices (11:53):
That's the fact, Jack! That's the fact, Jack!
Mostly Uncle Frank (11:57):
But certainly, if you go
particularly prior to 1990, youwill see that small cap value
has outperformed everything ifyou go back the whole hundred
years.
Which you can now do at testfolio.
You can run small cap value byitself or in combinations with
other things and see thehundred-year returns on that
thing.
But then if you move the dateto more recent decades, you'll
(12:20):
see that the performances aremore equaled out.
Another thing that you'll alsosee is that both large cap value
and small cap growth havetended to underperform, which is
why we don't focus on thosekinds of assets in one of these
kind of portfolios, and whywe're not trying to hold
everything in all four cornersof that style box chart, but
(12:42):
it's best to hold the ones inthe lower left-hand corner,
small cap value, and upper righthand corner, large cap growth.
But check all this out onTestfolio.
I will provide a link in theshow notes to get you started.
Voices (12:55):
And uh I'll go ahead and make sure you get another copy
of that memo.
Mostly Uncle Frank (12:59):
Okay.
So that's my thought process.
If you did want to go moretilted towards small cap value,
you're probably gonna havehigher volatility and hopefully
a higher ability to withdrawfrom.
But I will leave that up to youbecause there's because there's
more than one way to skin thiscat, if you will.
Anyway, I thought that was agreat observation.
(13:25):
It is the way value stock geeklooks at it, and other people
look at it.
So thank you for your question.
Thank you for being a donor ofthe Father McKenna Center, and
thank you for your email.
Voices (13:40):
Babies, before we're done here, y'all be wearing
gold-plated diapers.
What does that mean?
Never question Bruce Higgins.
Second off.
Mostly Uncle Frank (13:56):
Second off?
We have an email from Phil.
Voices (14:00):
I have been stabbed, shot, poisoned, frozen, hung,
electrocuted, and burned.
Oh, really?
Mostly Uncle Frank (14:08):
I am an immortal.
And Phil writes?
Mostly Queen Mary (14:12):
Was wondering if you've compared the
performance of your stockselection to Direct Index KBWP
with their combined performanceversus the ETF.
Of course, it's a short timeframe.
I get that.
I've been monitoring the sampleportfolios.
I began in March, April, andMay of 2024 and October 2024.
I made an allocation in eachportfolio to property and
(14:35):
casualty insurance companies.
The idea made a lot of sense.
In the October 2024 portfolio,I added some BRKB too.
Only one of the allocations hasoutperformed slightly compared
to KBWP, even considering theexpense ratio.
I used the relative size usedin the portfolio construction of
the top 10 companies in KBWP atthe inception of each of my
(14:59):
sample portfolios for myallocation.
The leading strategy haschanged position over their
short life.
I used Google Sheets to setthese up.
They are continuously updatedin nearly real time using the
Google Finance functions.
No second job here.
There's no ongoing workrequired.
Voices (15:16):
Looks like you've been missing a lot of work lately.
I wouldn't say I've beenmissing it, Bob.
Mostly Queen Mary (15:21):
Monitoring my portfolio's behavior is really
interesting.
Occasionally I add more thingsto answer questions I have.
What do you think about tryingto save an ER by directing
investing now that it's been afew years?
I was on board, not sure now.
Maybe just go all KBWP or maybeBRKB.
(15:41):
Recently, EG and PGR haveoffered some tax loss harvesting
opportunities.
I did TLH some EG for PGR.
It's not a perfect analysis.
I don't want a second jobeither.
It quickly becomes not simple.
The discussion and thoughtprocess is great.
Thanks, Phil.
Mostly Uncle Frank (16:21):
Well, Phil, thank you also for being a donor
of the Father McKenna Center.
Voices (16:26):
I'm a God.
You're a God.
I'm a God, I'm not the God.
Mostly Uncle Frank (16:32):
But now let's get to your question.
So just to orient everyone andwhy we're talking about this at
all, I've mentioned in the pastthat one thing I learned from
Warren Buffett and studyingBerkshire Hathaway is that
Berkshire Hathaway has a verylarge allocation to insurance
companies and property andcasualty insurance companies in
(16:54):
particular.
And so at some point, maybeeight, 10 years ago, when I was
trying to analyze what we shouldhold as part of the value side
of our portfolio, I wondered,well, if you just had an
allocation to property andcasualty insurance companies,
how would that affect returnsand diversification and all
those other things?
And as it turns out, it has avery positive effect.
(17:15):
There is a fund that Phil hasmentioned, KBWP, that invests
just in property and casualtyinsurance companies.
It's got like 20 things in it,and the biggest ones are things
like travelers and progressiveall-state, and of course, the
Chuber.
With a name like Chubb, it'sgotta be good.
(17:35):
With a name like Smuckers, ithas to be good.
And so if you analyze thatfund, it has some very nice
properties.
And you can check this out intest folio, but what you'll see
is that since its existence in2010, first of all, it performs
almost the same as BerkshireHathaway and performs, in fact,
(17:58):
a little bit better.
The second thing you'll see isthat it has a really low
correlation to just aboutanything else in terms of other
combinations of stocks.
And so the correlation with,say, large cap growth or small
cap value is only like 0.4 to0.6.
And so you see things like in2022, that fund, instead of
(18:20):
being down like the rest of themarket, was up 10%, which is
about as good a diversificationyou can get out of just another
fund that is just stocks and notsome other asset entirely.
And then it also tends to keepup and perform in terms of
returns, pretty much like the SP 500 over long periods of time
or over the length of itsexistence.
(18:41):
And so the only drawback I sawto it was the fact that it
charges an expense fee that usedto be 0.45, now it's 0.35,
which I thought was a littleexpensive.
So what I've done in ourpersonal portfolios is create
another allocation to that thatis effectively direct indexed.
We're just taking like the 10top things in that fund, since I
(19:03):
think 40% of the fund is inthose top five companies that I
mentioned, and call that myallocation to property and
casualty companies.
And it's worked out prettywell, and it's useful to have it
direct indexed for the purposeof tax loss harvesting, as
you've been able to do.
So that also helps out.
So, with all that backdrop,what Phil's been analyzing is
(19:25):
whether these allocations,individual direct index
allocations, in fact performbetter or worse than KBWP, and
at least in his experience, haveperformed worse.
I have actually not pulled outexactly what we have and
compared that over time.
And I think it would bedifficult to do at this point
because we bought and sold somethings in there in the six or
(19:48):
seven years I've held this kindof an allocation.
You do notice things likeProgressive used to be the best
performer in there and was thelargest company, but now it's
Chubb that's the largest companyin there.
That fund by cap waiting.
That may be because BerkshireHathaway's been buying Chubb.
I don't know.
With a name like Smuckers, ithas to be good.
(20:10):
So, no, I don't have aparticular explanation as to why
your particular allocations orwhether or not even my
particular allocation toindividual companies has
performed or outperformed KBWP,except to note that that would
be normal.
That anytime you are doingsomething like this, you will
get something that's calledtracking error, either positive
(20:32):
or negative.
And it will change over time.
But oftentimes that's prettyrandomized and there isn't any
way of predicting in advancewhat kind of tracking error
you're going to get.
I would say that you'reprobably correct that if your
allocation to this is relativelysmall anyway, you might as well
just use the fund.
Because the hassle of managinga bunch of companies, even if
(20:54):
it's only ten companies, can bean annoying hassle.
And you can get similar resultsout of just using the fund, as
you've observed here.
Voices (21:02):
That's my only real motivation is not to be hassled.
That in the fear of losing myjob, but you know, Bob, that'll
only make someone work just hardenough not to get fired.
Mostly Uncle Frank (21:13):
For portfolio construction purposes,
I think I do like KBWP a littlebit better than Berkshire
Hathaway, simply because it doeshave a lower correlation to
these other things in theportfolio, whereas Berkshire
Hathaway is going to have somemore overlap with things like
Apple and stuff like that.
But it would appear that bothof those things can perform the
same kind of function in aportfolio in terms of being part
(21:36):
of your value allocation, butsomething that has more
diversification than many otherthings that you could pick.
So for us, I definitely willnot be changing our allocations
to this in our taxable accountsimply because most of these
things are now up over 100% inthe time we've held them, and we
need to be judicious about ourtax loss harvesting and other
(22:00):
moves in the taxable account.
But if we're adding some moreof this in a retirement account
for whatever reason, I probablywill be just adding KBWP and
calling it a day with respect tothat.
So since we're being all testfolio all the time these days, I
will link to a little analysisof KBWP against some other
(22:21):
things, including BerkshireHathaway.
So you can check that out onthe show notes and be sure to
check out the correlations therebecause I think they're really
interesting.
For the rest of you who arewondering why we don't include
this in any of the sampleportfolios or anything like
that, it's because it simply hasnot been around since
post-great financial crisis.
And if you did hold some ofthese things like AIG during the
(22:44):
financial crisis, it would havebeen really ugly.
But at that time, a lot ofthese companies were structured
quite differently and were morespeculative instead of just
being straight property andcasualty insurance companies
like the way Berkshire Hathawayholds Geico or something like
that, because that's what I wasreally looking for at the time.
(23:05):
So you should not view this assome kind of necessity to hold
in your portfolio, but justanother option if you are
adventurous and already holdthings like this anyway.
Because if you already holdsomething like Berkshire
Hathaway and were planning onkeeping it, you might also
consider KBWP as a anotheroption there.
Or if you had not created yourvalue allocation yet and were
(23:29):
thinking about what that shouldbe, you might consider KBWP as
part of that allocation asanother option.
Anyway, we're always trying tolearn something here because you
should never stop learning.
Voices (23:41):
We use the Socratic method here.
You come in here with a skullfull of mush, and you leave
thinking like a lawyer.
I'm holding you in contempt atcourt.
Mostly Uncle Frank (23:55):
So thank you for writing in about this
topic.
It is kind of one of the mostpleasing things I've found in my
investing career.
So hopefully it helps.
Thank you for being a donor ofthe Father McKenna Center.
And thank you for your email.
Voices (24:12):
Do you think Phil's gonna come out and see a shadow?
That's right, what Juck Juggersis.
Mostly Uncle Frank (24:38):
And Glenn writes?
Mostly Queen Mary (24:40):
Frank, thanks for being the lone voice in the
wind so many years now.
Voices (24:45):
You're the gray rider.
You would not make peace withthe blue coats.
You may go in peace.
I reckon not.
Mostly Queen Mary (24:56):
I may be asking a somewhat personal
question concerning theperformance results you share on
this page above.
Voices (25:03):
Do you think anybody thinks I'm a failure because I
go home to Sterla at night?
Forget about it.
Mostly Queen Mary (25:10):
For 2022, the results are a disappointing
negative 38.8%.
Voices (25:15):
Of what?
It's gone.
It's all gone.
Mostly Queen Mary (25:18):
I have tried to recreate this dismal result
with the portfolios on the sitefor 2022, but I cannot.
Voices (25:44):
You are correct, sir.
Yes.
Mostly Uncle Frank (25:47):
Now, here's a peculiar thing, and let me
explain why it looks so strange.
Because basically, you're onlylooking at part of an elephant
here.
So this refers to a report ofreturns that you can find on the
about page atwww.riskpartyware.com.
And what it is, it's a trackerof our main taxable account at
(26:11):
Interactive Brokers.
And this is tracked by aservice called Fund Seeder,
S-E-E-D-E-R, which is somethingcreated by Jack Schwager, who
wrote all the market wizardsbooks.
Anyway, about 10 years ago, hecreated this site to attract
people to track portfolios withthe idea that if you were really
(26:33):
good at this, it would be aplace where people could verify
your abilities and then perhapshave you manage a fund or
something like that.
I thought it was kind of a funthing to do, and there weren't
many of these kind of trackersout there at the time.
So we hooked up the InteractiveBrokers account to that, and
it's been running since 2016.
Now that account has changedover time because it's only part
(26:56):
of our holdings.
And as you know here, we lookat all of our holdings as one
big portfolio.
And so, since a lot of ourholdings are in retirement
accounts, they're not accountedfor here.
And so what you see there,particularly since 2020, is
essentially all of the riskieststuff and growtiest stuff, or
(27:16):
most of the grothiest stuff.
So there is a lot of large capgrowth stocks in that thing.
And right now there's a lot ofgold in that account because
we've been selling all of thegold in the retirement accounts
first to avoid the taxes onthem.
And pretty much most or all ofthe managed futures and bond
funds are in the retirementaccounts and not in this
(27:38):
account.
And so when you look at thisaccount, you get these great
distortions.
There's also leveraged in thisaccount, or at least there has
been since 2020, because after Iretired, we were stuck with a
bunch of money that wasessentially locked up in cash
that could not be invested forvarious reasons.
And so to compensate for that,we took leverage in the form of
(28:00):
margin in this account, whichmade it even more volatile.
It is why it was down 38% in2022, because that was mostly
these growth stocks gettinghammered.
Voices (28:16):
Oh, Mr.
Marsh, don't worry.
We can just transfer money fromyour account into a portfolio
with your study, and it's gone.
Mostly Uncle Frank (28:23):
You'll be pleased to know that in a year
like this year, that account isup over 33% right now.
So what goes around comesaround is kind of what you
should get out of that.
Voices (28:39):
What comes around goes around.
I'll tell you why.
Mostly Uncle Frank (28:45):
But to me, that's just interesting.
If you're looking at just partof a portfolio, you may get a
distorted view over what thewhole thing looks like.
Because I can tell you what'sgoing on in the retirement
accounts is very boring whenadded in compared to this, and
is always in the single digitsessentially, in terms of
returns, both positive ornegative.
(29:06):
Boring.
Anyway, if you join the FunCedar website, you can actually
see this account or partialportfolio compared to a whole
bunch of other ones.
It is in the top 8%, I willtell you that, over the past 10
years, according to their ratingsystem, which accounts for both
risk and reward and in amodified Sortino ratio kind of
(29:29):
rating thing.
Right now we are number 69 outof about a thousand portfolios.
So anyway, I realize that'skind of a very convoluted story
over the history of thataccount.
But it is what it is.
Voices (29:46):
Really stones.
Mostly Uncle Frank (29:49):
Our overall portfolios look more like the
golden ratio portfolio, butwithout 6% in cash in it.
It's more like 50% in stocks,25% in long-term treasury bonds,
and the other 25% inalternatives.
Roughly speaking.
Voices (30:05):
Fortune favors the brave!
Mostly Uncle Frank (30:07):
Poof.
But it's good to know somepeople actually are looking at
the corners of the website tosee what's there.
And so I do appreciate yourcuriosity.
Voices (30:16):
Why are you smiling?
Because I know something youdon't know.
And what is that?
I am not lapandon.
Mostly Uncle Frank (30:31):
Hopefully, you find that explanation
somewhat entertaining.
And thank you for your email.
Voices (30:41):
Nothing you have ever experienced can prepare you for
the unbridled carnage you'reabout to witness.
Superfall, the world sturdy,and they don't know what
pressure is.
In this building, it's eitherkill or be killed.
Make no friends in the pits andyou take no prisoners.
One minute you're up half amillion and soybeans, and the
next boom, your kids don't go tocollege and they've repossessed
your bently.
Are you with me?
Mostly Uncle Frank (30:58):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to Frank atRiskPartyRoo.com.
That email is Frank atRiskPartyRear.com.
Or you can go to the websitewww.riskparty.com.
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
(31:20):
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 RiskPurdy Radio.
Signing off.
A foolish consistency is the hobgoblin of little minds,
adored by little statesmen andphilosophers and divines.
If a man does not keep pace withhis companions, perhaps it is
because he hears a differentdrummer.
A different drummer.
Mostly 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 (00:36):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
And the basic foundationalepisodes are episodes 1, 3, 5,
7, and 9.
Yes, it is still in my memorybanks.
(00:56):
We have also created anadditional resource, a
collection of additionalfoundational episodes and other
popular episodes.
Voices (01:07):
We have top men working on it right now.
Ooh.
Mostly Uncle Frank (01:14):
Top men.
And you can find those on theepisode guide page at
www.riskparodyradio.com.
Inconceivable.
And all thanks to our friendLuke, our volunteer in Quebec.
We'd be helpless without him.
Voices (01:35):
I have always depended on the kindness of strangers.
Mostly Uncle Frank (01:41):
Because other than him, it's just me and
Marion here.
I'll give you the moon, right?
Voices (01:46):
I'll take it.
Mostly Uncle Frank (01:48):
We have no sponsors, we have no guests, and
we have no expansion plans.
Voices (01:52):
I don't think I'd like another job.
Mostly Uncle Frank (01:55):
Over the years, our podcast has become
very audienced focused, and Imust say we do have the finest
podcast audience available.
Voices (02:03):
Top drawer.
Really top drawer.
Mostly Uncle Frank (02:07):
Along with a host named after a hot dog.
Voices (02:10):
Lighten up Francis.
Mostly Uncle Frank (02:13):
But now onward, episode 473.
Today on Risk Party Radio,we're just gonna do what we do
best here, which is attend toyour emails.
Sweet! But before we get tothat, I'd like to thank all
those who were involved in myChristmas present this year.
On a recent podcast, Icommented that it'd be nice if
(02:36):
Testfolio would add thefactor-based investments going
all the way back to the 1920s.
And lo and behold, some of youtook that up, went to the people
who run that site, and it isthere.
Now it is there.
And every time I look at thatsite, there's a new improvement.
Voices (02:57):
Oh, sure.
I think I've improved on yourmethods a bit too.
Mostly Uncle Frank (03:01):
It's very helpful.
It's really become the go-tosite for looking up a lot of
stuff.
And then one of you, I think itwas HydraMod, who first sent it
to me.
Just a back test now of theGolden Ray Show portfolio
against the Golden Butterflyagainst an SP 500, a three-fund
portfolio, and a 6040.
(03:22):
Going back to 1969.
Voices (03:25):
I got my first real six drink, but it at the five and
done.
Played it till my fingers bled.
Mostly Uncle Frank (03:38):
And you can't do managed futures all the
way back there, but I put inutilities for the period when
managed futures are notavailable and subjected it to a
5% withdrawal rate.
And you could all check thatout.
I'll link to this in the shownotes, but basically, you
wouldn't want to hold thosenon-risk parity style portfolios
if you're going to do that inthat time period.
Voices (03:59):
That's not an improvement.
Mostly Uncle Frank (04:01):
So check that out and thank all of you
who participated in that,especially the purveyors of
Testfolio.
It is a really awesome site fordo-it-yourself investors.
But now without further ado.
Voices (04:31):
Here I go once again with the email.
Mostly Uncle Frank (04:34):
And First off.
First off, we have an emailfrom JT.
Voices (04:40):
I've seen fire and I've seen rain.
I've seen sunny days that Ithought would never end.
Mostly Uncle Frank (04:52):
And JT writes.
Mostly Queen Mary (04:54):
Hi Frank and Mary.
Thanks for continuing to investyour time in the podcast and
answering your listenerquestions.
I found Risk Parity Radioearlier this year, so I'm
grateful that you continue toput out new content after five
plus years so that new listenerslike me can still find you.
Voices (05:11):
Wagon Train is a really cool show, but did you ever
notice that they never getanywhere?
Mostly Queen Mary (05:17):
Just keep wagon training.
I made a contribution today tothe Father McKenna Center to
take advantage of theopportunity to move to the front
of the email line and tocontribute to a great cause.
Voices (05:29):
The best, Jerry.
The best.
Mostly Queen Mary (05:32):
Frank, I'd like to get your thoughts on
higher weighting of small capvalue stocks in a portfolio in
order to support higher safewithdrawal rates.
You've mentioned that sampleportfolios like the Golden Ratio
and Golden Butterfly can helpsupport 30-year withdrawal rates
of around 6%.
When I test alternativeallocations on portfolio charts,
(05:55):
I find that more heavilyweighting U.S.
small cap value can push30-year safe withdrawal rates
closer to 7%, little leveragerequired.
For example, if I modify thegolden ratio portfolio to 42%
U.S.
small cap value, 26% long-termtreasuries, 16% gold, 10% U.S.
(06:20):
large cap growth, and 6% cash,the 30-year safe withdrawal rate
goes up by a half a percentrelative to the standard sample
portfolio.
If the 6% cash portion is alsoreallocated to U.S.
small cap value to make it 48%of the portfolio overall, it
pushes the 30-year safewithdrawal rate higher still.
Voices (06:41):
I gotta have more cowbell.
I gotta have more cowbell.
Mostly Queen Mary (06:44):
Similarly, if I model the golden butterfly
portfolio to 40% U.S.
small cap value and 20% eachacross U.S.
large cap blend, long-termtreasuries, and gold, the
30-year safe withdrawal ratestarts to approach 7%.
Since higher allocations tosmall cap value stocks have
tended to yield higher safewithdrawal rates, at least over
(07:06):
the 55 years available throughportfolio charts, can you talk
about any reservation you'd haveshifting more portfolio weight
to small cap value, like in theexamples above?
Thank you both for your time,JT.
Voices (07:20):
Guess what?
I got a fever.
And the only prescription ismore cowbell.
Mostly Uncle Frank (07:27):
Well, JT, first off, thank you for being a
donor to the Father McKennaCenter.
As most of you know, do nothave any sponsors on this
program who do have a charity wesupport.
It's called the Father McKennaCenter and supports hungry and
homeless people in Washington,D.C.
Full disclosure, I am on theboard of the charity and the
current treasurer.
But if you give to the charity,you get to go to the front of
(07:48):
the email line here.
Two ways to do that.
You can go to the donation pageat the Father McKenna website,
which I'll link to in the shownotes.
Or you be can become one of ourpatrons on Patreon, which you
can do at www.riskpartyradio.com on the support page.
Either way, you get to go tothe front of the email line.
Just make sure you mention itas JD has done here, so I can
(08:10):
duly move you to the front ofthe line.
And I should say, since we'recoming to the end of the year, I
really wanted to thank so manyof you who have supported the
center this year through our topof the t-shirt campaign or
otherwise during the year.
We're a pretty small charity.
We have a budget of about oneand a half million dollars a
year, and we have eight staffmembers.
(08:32):
But we get most of our workthrough volunteers who are
mostly high school students andyoung adults, but also some
older folks.
But they provide anotherequivalent of eight more staff
members, if you can believe thator not.
But we have about a thousandpeople who volunteer at the
center every year.
We don't pay any rent becausewe operate out of the basement
(08:53):
of a church that belongs to theGonzaga College High School.
So pretty much all of thedonations go straight into
providing services for theclients that we serve.
I'm happy to report we've alsobeen able to replace some of our
kitchen equipment this year andalso replace our broken down
van that we use to pick up a lotof the food donations from
(09:15):
local supermarkets.
Voices (09:18):
It's got a cop motor, a 440 cubic inch plant.
It's got cop tires, copsuspension, cop shocks.
It's a model made beforecatalytic converters, so it'll
run good on regular gas.
What do you say?
Is it the new blues mobile orwhat?
Mostly Uncle Frank (09:32):
And now we're actually working on our
plumbing.
Which sounds mundane, but we doprovide showers for a lot of
the clients who need to getcleaned up before they can go to
job interviews and things likethat.
So all of this does go to thedirect support of the people who
really need it.
And I wanted to thank everyonewho's participated this year.
(09:53):
And if you haven't, and youwere thinking about getting in
that 2025 charitable taxdonation since they're changing
the rules for that stuff nextyear, you've still got a couple
of weeks.
So please do consider us if youhave not allocated all of your
charitable donation dollars thisyear yet.
Voices (10:13):
We've got an understanding.
We're on a mission from God.
Mostly Uncle Frank (10:19):
But now let's get to your email.
So you were wondering whetheryou could just go all small cap
value in one of these kind ofrisk parity style portfolios.
And actually, if you go look atthe weird portfolio at
portfolio charts, which is thevalue stock geeks contribution,
that's basically what he's done.
And there's nothing wrong withdoing that, but bear in mind
(10:40):
there is a debate going on infinancial analyst land about
whether small cap value willoutperform in the future.
And if you do look atstatistics like going back
through essentially my investinglifetime back to 1990, you'll
see that small cap value andlarge cap growth have largely
performed the same over the past35 years or so.
(11:04):
They've just performed betteror worse at different times.
And so for that reason, andbecause I don't really want to
be operating a crystal ballwhere I'm trying to pick which
corner of the market is going toperform the best in the future.
Voices (11:19):
We don't know.
What do we know?
You don't know, I don't know,nobody knows.
Mostly Uncle Frank (11:25):
I just assume that those two things
will perform comparably overlong periods of time, and that
it's better just to own some ofeach.
And so that's the theory thatmy allocations are based on, and
that I don't need to engage inthis endless debate about
whether small cap value willoutperform in the future.
I'm not a smart man.
(11:46):
So long as it performs just aswell as the stock market in the
future, we're gonna be fine.
Voices (11:53):
That's the fact, Jack! That's the fact, Jack!
Mostly Uncle Frank (11:57):
But certainly, if you go
particularly prior to 1990, youwill see that small cap value
has outperformed everything ifyou go back the whole hundred
years.
Which you can now do at testfolio.
You can run small cap value byitself or in combinations with
other things and see thehundred-year returns on that
thing.
But then if you move the dateto more recent decades, you'll
(12:20):
see that the performances aremore equaled out.
Another thing that you'll alsosee is that both large cap value
and small cap growth havetended to underperform, which is
why we don't focus on thosekinds of assets in one of these
kind of portfolios, and whywe're not trying to hold
everything in all four cornersof that style box chart, but
(12:42):
it's best to hold the ones inthe lower left-hand corner,
small cap value, and upper righthand corner, large cap growth.
But check all this out onTestfolio.
I will provide a link in theshow notes to get you started.
Voices (12:55):
And uh I'll go ahead and make sure you get another copy
of that memo.
Mostly Uncle Frank (12:59):
Okay.
So that's my thought process.
If you did want to go moretilted towards small cap value,
you're probably gonna havehigher volatility and hopefully
a higher ability to withdrawfrom.
But I will leave that up to youbecause there's because there's
more than one way to skin thiscat, if you will.
Anyway, I thought that was agreat observation.
(13:25):
It is the way value stock geeklooks at it, and other people
look at it.
So thank you for your question.
Thank you for being a donor ofthe Father McKenna Center, and
thank you for your email.
Voices (13:40):
Babies, before we're done here, y'all be wearing
gold-plated diapers.
What does that mean?
Never question Bruce Higgins.
Second off.
Mostly Uncle Frank (13:56):
Second off?
We have an email from Phil.
Voices (14:00):
I have been stabbed, shot, poisoned, frozen, hung,
electrocuted, and burned.
Oh, really?
Mostly Uncle Frank (14:08):
I am an immortal.
And Phil writes?
Mostly Queen Mary (14:12):
Was wondering if you've compared the
performance of your stockselection to Direct Index KBWP
with their combined performanceversus the ETF.
Of course, it's a short timeframe.
I get that.
I've been monitoring the sampleportfolios.
I began in March, April, andMay of 2024 and October 2024.
I made an allocation in eachportfolio to property and
(14:35):
casualty insurance companies.
The idea made a lot of sense.
In the October 2024 portfolio,I added some BRKB too.
Only one of the allocations hasoutperformed slightly compared
to KBWP, even considering theexpense ratio.
I used the relative size usedin the portfolio construction of
the top 10 companies in KBWP atthe inception of each of my
(14:59):
sample portfolios for myallocation.
The leading strategy haschanged position over their
short life.
I used Google Sheets to setthese up.
They are continuously updatedin nearly real time using the
Google Finance functions.
No second job here.
There's no ongoing workrequired.
Voices (15:16):
Looks like you've been missing a lot of work lately.
I wouldn't say I've beenmissing it, Bob.
Mostly Queen Mary (15:21):
Monitoring my portfolio's behavior is really
interesting.
Occasionally I add more thingsto answer questions I have.
What do you think about tryingto save an ER by directing
investing now that it's been afew years?
I was on board, not sure now.
Maybe just go all KBWP or maybeBRKB.
(15:41):
Recently, EG and PGR haveoffered some tax loss harvesting
opportunities.
I did TLH some EG for PGR.
It's not a perfect analysis.
I don't want a second jobeither.
It quickly becomes not simple.
The discussion and thoughtprocess is great.
Thanks, Phil.
Mostly Uncle Frank (16:21):
Well, Phil, thank you also for being a donor
of the Father McKenna Center.
Voices (16:26):
I'm a God.
You're a God.
I'm a God, I'm not the God.
Mostly Uncle Frank (16:32):
But now let's get to your question.
So just to orient everyone andwhy we're talking about this at
all, I've mentioned in the pastthat one thing I learned from
Warren Buffett and studyingBerkshire Hathaway is that
Berkshire Hathaway has a verylarge allocation to insurance
companies and property andcasualty insurance companies in
(16:54):
particular.
And so at some point, maybeeight, 10 years ago, when I was
trying to analyze what we shouldhold as part of the value side
of our portfolio, I wondered,well, if you just had an
allocation to property andcasualty insurance companies,
how would that affect returnsand diversification and all
those other things?
And as it turns out, it has avery positive effect.
(17:15):
There is a fund that Phil hasmentioned, KBWP, that invests
just in property and casualtyinsurance companies.
It's got like 20 things in it,and the biggest ones are things
like travelers and progressiveall-state, and of course, the
Chuber.
With a name like Chubb, it'sgotta be good.
(17:35):
With a name like Smuckers, ithas to be good.
And so if you analyze thatfund, it has some very nice
properties.
And you can check this out intest folio, but what you'll see
is that since its existence in2010, first of all, it performs
almost the same as BerkshireHathaway and performs, in fact,
(17:58):
a little bit better.
The second thing you'll see isthat it has a really low
correlation to just aboutanything else in terms of other
combinations of stocks.
And so the correlation with,say, large cap growth or small
cap value is only like 0.4 to0.6.
And so you see things like in2022, that fund, instead of
(18:20):
being down like the rest of themarket, was up 10%, which is
about as good a diversificationyou can get out of just another
fund that is just stocks and notsome other asset entirely.
And then it also tends to keepup and perform in terms of
returns, pretty much like the SP 500 over long periods of time
or over the length of itsexistence.
(18:41):
And so the only drawback I sawto it was the fact that it
charges an expense fee that usedto be 0.45, now it's 0.35,
which I thought was a littleexpensive.
So what I've done in ourpersonal portfolios is create
another allocation to that thatis effectively direct indexed.
We're just taking like the 10top things in that fund, since I
(19:03):
think 40% of the fund is inthose top five companies that I
mentioned, and call that myallocation to property and
casualty companies.
And it's worked out prettywell, and it's useful to have it
direct indexed for the purposeof tax loss harvesting, as
you've been able to do.
So that also helps out.
So, with all that backdrop,what Phil's been analyzing is
(19:25):
whether these allocations,individual direct index
allocations, in fact performbetter or worse than KBWP, and
at least in his experience, haveperformed worse.
I have actually not pulled outexactly what we have and
compared that over time.
And I think it would bedifficult to do at this point
because we bought and sold somethings in there in the six or
(19:48):
seven years I've held this kindof an allocation.
You do notice things likeProgressive used to be the best
performer in there and was thelargest company, but now it's
Chubb that's the largest companyin there.
That fund by cap waiting.
That may be because BerkshireHathaway's been buying Chubb.
I don't know.
With a name like Smuckers, ithas to be good.
(20:10):
So, no, I don't have aparticular explanation as to why
your particular allocations orwhether or not even my
particular allocation toindividual companies has
performed or outperformed KBWP,except to note that that would
be normal.
That anytime you are doingsomething like this, you will
get something that's calledtracking error, either positive
(20:32):
or negative.
And it will change over time.
But oftentimes that's prettyrandomized and there isn't any
way of predicting in advancewhat kind of tracking error
you're going to get.
I would say that you'reprobably correct that if your
allocation to this is relativelysmall anyway, you might as well
just use the fund.
Because the hassle of managinga bunch of companies, even if
(20:54):
it's only ten companies, can bean annoying hassle.
And you can get similar resultsout of just using the fund, as
you've observed here.
Voices (21:02):
That's my only real motivation is not to be hassled.
That in the fear of losing myjob, but you know, Bob, that'll
only make someone work just hardenough not to get fired.
Mostly Uncle Frank (21:13):
For portfolio construction purposes,
I think I do like KBWP a littlebit better than Berkshire
Hathaway, simply because it doeshave a lower correlation to
these other things in theportfolio, whereas Berkshire
Hathaway is going to have somemore overlap with things like
Apple and stuff like that.
But it would appear that bothof those things can perform the
same kind of function in aportfolio in terms of being part
(21:36):
of your value allocation, butsomething that has more
diversification than many otherthings that you could pick.
So for us, I definitely willnot be changing our allocations
to this in our taxable accountsimply because most of these
things are now up over 100% inthe time we've held them, and we
need to be judicious about ourtax loss harvesting and other
(22:00):
moves in the taxable account.
But if we're adding some moreof this in a retirement account
for whatever reason, I probablywill be just adding KBWP and
calling it a day with respect tothat.
So since we're being all testfolio all the time these days, I
will link to a little analysisof KBWP against some other
(22:21):
things, including BerkshireHathaway.
So you can check that out onthe show notes and be sure to
check out the correlations therebecause I think they're really
interesting.
For the rest of you who arewondering why we don't include
this in any of the sampleportfolios or anything like
that, it's because it simply hasnot been around since
post-great financial crisis.
And if you did hold some ofthese things like AIG during the
(22:44):
financial crisis, it would havebeen really ugly.
But at that time, a lot ofthese companies were structured
quite differently and were morespeculative instead of just
being straight property andcasualty insurance companies
like the way Berkshire Hathawayholds Geico or something like
that, because that's what I wasreally looking for at the time.
(23:05):
So you should not view this assome kind of necessity to hold
in your portfolio, but justanother option if you are
adventurous and already holdthings like this anyway.
Because if you already holdsomething like Berkshire
Hathaway and were planning onkeeping it, you might also
consider KBWP as a anotheroption there.
Or if you had not created yourvalue allocation yet and were
(23:29):
thinking about what that shouldbe, you might consider KBWP as
part of that allocation asanother option.
Anyway, we're always trying tolearn something here because you
should never stop learning.
Voices (23:41):
We use the Socratic method here.
You come in here with a skullfull of mush, and you leave
thinking like a lawyer.
I'm holding you in contempt atcourt.
Mostly Uncle Frank (23:55):
So thank you for writing in about this
topic.
It is kind of one of the mostpleasing things I've found in my
investing career.
So hopefully it helps.
Thank you for being a donor ofthe Father McKenna Center.
And thank you for your email.
Voices (24:12):
Do you think Phil's gonna come out and see a shadow?
That's right, what Juck Juggersis.
Mostly Uncle Frank (24:38):
And Glenn writes?
Mostly Queen Mary (24:40):
Frank, thanks for being the lone voice in the
wind so many years now.
Voices (24:45):
You're the gray rider.
You would not make peace withthe blue coats.
You may go in peace.
I reckon not.
Mostly Queen Mary (24:56):
I may be asking a somewhat personal
question concerning theperformance results you share on
this page above.
Voices (25:03):
Do you think anybody thinks I'm a failure because I
go home to Sterla at night?
Forget about it.
Mostly Queen Mary (25:10):
For 2022, the results are a disappointing
negative 38.8%.
Voices (25:15):
Of what?
It's gone.
It's all gone.
Mostly Queen Mary (25:18):
I have tried to recreate this dismal result
with the portfolios on the sitefor 2022, but I cannot.
Voices (25:44):
You are correct, sir.
Yes.
Mostly Uncle Frank (25:47):
Now, here's a peculiar thing, and let me
explain why it looks so strange.
Because basically, you're onlylooking at part of an elephant
here.
So this refers to a report ofreturns that you can find on the
about page atwww.riskpartyware.com.
And what it is, it's a trackerof our main taxable account at
(26:11):
Interactive Brokers.
And this is tracked by aservice called Fund Seeder,
S-E-E-D-E-R, which is somethingcreated by Jack Schwager, who
wrote all the market wizardsbooks.
Anyway, about 10 years ago, hecreated this site to attract
people to track portfolios withthe idea that if you were really
(26:33):
good at this, it would be aplace where people could verify
your abilities and then perhapshave you manage a fund or
something like that.
I thought it was kind of a funthing to do, and there weren't
many of these kind of trackersout there at the time.
So we hooked up the InteractiveBrokers account to that, and
it's been running since 2016.
Now that account has changedover time because it's only part
(26:56):
of our holdings.
And as you know here, we lookat all of our holdings as one
big portfolio.
And so, since a lot of ourholdings are in retirement
accounts, they're not accountedfor here.
And so what you see there,particularly since 2020, is
essentially all of the riskieststuff and growtiest stuff, or
(27:16):
most of the grothiest stuff.
So there is a lot of large capgrowth stocks in that thing.
And right now there's a lot ofgold in that account because
we've been selling all of thegold in the retirement accounts
first to avoid the taxes onthem.
And pretty much most or all ofthe managed futures and bond
funds are in the retirementaccounts and not in this
(27:38):
account.
And so when you look at thisaccount, you get these great
distortions.
There's also leveraged in thisaccount, or at least there has
been since 2020, because after Iretired, we were stuck with a
bunch of money that wasessentially locked up in cash
that could not be invested forvarious reasons.
And so to compensate for that,we took leverage in the form of
(28:00):
margin in this account, whichmade it even more volatile.
It is why it was down 38% in2022, because that was mostly
these growth stocks gettinghammered.
Voices (28:16):
Oh, Mr.
Marsh, don't worry.
We can just transfer money fromyour account into a portfolio
with your study, and it's gone.
Mostly Uncle Frank (28:23):
You'll be pleased to know that in a year
like this year, that account isup over 33% right now.
So what goes around comesaround is kind of what you
should get out of that.
Voices (28:39):
What comes around goes around.
I'll tell you why.
Mostly Uncle Frank (28:45):
But to me, that's just interesting.
If you're looking at just partof a portfolio, you may get a
distorted view over what thewhole thing looks like.
Because I can tell you what'sgoing on in the retirement
accounts is very boring whenadded in compared to this, and
is always in the single digitsessentially, in terms of
returns, both positive ornegative.
(29:06):
Boring.
Anyway, if you join the FunCedar website, you can actually
see this account or partialportfolio compared to a whole
bunch of other ones.
It is in the top 8%, I willtell you that, over the past 10
years, according to their ratingsystem, which accounts for both
risk and reward and in amodified Sortino ratio kind of
(29:29):
rating thing.
Right now we are number 69 outof about a thousand portfolios.
So anyway, I realize that'skind of a very convoluted story
over the history of thataccount.
But it is what it is.
Voices (29:46):
Really stones.
Mostly Uncle Frank (29:49):
Our overall portfolios look more like the
golden ratio portfolio, butwithout 6% in cash in it.
It's more like 50% in stocks,25% in long-term treasury bonds,
and the other 25% inalternatives.
Roughly speaking.
Voices (30:05):
Fortune favors the brave!
Mostly Uncle Frank (30:07):
Poof.
But it's good to know somepeople actually are looking at
the corners of the website tosee what's there.
And so I do appreciate yourcuriosity.
Voices (30:16):
Why are you smiling?
Because I know something youdon't know.
And what is that?
I am not lapandon.
Mostly Uncle Frank (30:31):
Hopefully, you find that explanation
somewhat entertaining.
And thank you for your email.
Voices (30:41):
Nothing you have ever experienced can prepare you for
the unbridled carnage you'reabout to witness.
Superfall, the world sturdy,and they don't know what
pressure is.
In this building, it's eitherkill or be killed.
Make no friends in the pits andyou take no prisoners.
One minute you're up half amillion and soybeans, and the
next boom, your kids don't go tocollege and they've repossessed
your bently.
Are you with me?
Mostly Uncle Frank (30:58):
But now I see our signal is beginning to
fade.
If you have comments orquestions for me, please send
them to Frank atRiskPartyRoo.com.
That email is Frank atRiskPartyRear.com.
Or you can go to the websitewww.riskparty.com.
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
(31:20):
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 RiskPurdy Radio.
Signing off.
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