Mostly Voices [0:00]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer.

Mostly Mary [0:18]

A different drummer. And now, coming to you from dead center on your dial, welcome to Risk Parity Radio, where we explore alternatives and asset allocations for the do-it-yourself investor. Broadcasting to you now from the comfort of his easy chair, here is your host, Frank Vasquez.

Mostly Uncle Frank [0:36]

Thank you, Mary, and welcome to episode 134 of Risk Parity Radio. Today on Risk Parity Radio, it is time for our weekly portfolio reviews of the seven sample portfolios that you can find at www.riskparityradio.com on the portfolios page.

Mostly Voices [0:57]

But before we get to that, I'm intrigued by this, how you say, emails. And?

Mostly Uncle Frank [1:06]

First off, we have an email from Patrick, and Patrick writes,

Mostly Mary [1:11]

hi Frank, first let me say thank you. Thank you for all the time you have dedicated to your podcast. I really appreciate how you thoroughly explain topics and concepts, etc. While I'm not a newbie to investing, I do not consider myself a veteran. I first became acquainted with your work while listening to an episode of the Choose a Fight podcast. I found your podcast sometime last year and I've been an avid listener since episode one. I was not exposed to the risk parity concept until I began listening to your podcast. I've learned so much about the risk parity style and I credit it all to you. I'm finally getting to my question, but I felt the previous accolades were in order. Groovy baby! All of the risk parity sample portfolios have a cash component to them. I know the sample portfolios are held in a Fidelity account and that most brokerages have a Money Market account. I'm trying to mimic the Golden Ratio portfolio within the M1 Finance platform. They do not have a sweep account Money Market component to their platform presently. I'm not sure if you're familiar with M1 Finance and their use of investing pies. I like how M1 makes dynamically rebalancing so simple. No need to fiddle with the percentages of where to allocate my contributions. I'd like to hear your thoughts on how to duplicate the Golden Ratio sample portfolio within a pie on the M1 Finance platform. How critical is the cash component to the Golden Ratio portfolio, seeing that it's only 6% of the portfolio? If I were to leave out the cash component of the Golden Ratio portfolio, where would I allocate the remaining 6%? I asked M1 how I could structure a cash component to an investing pie within the M1 platform, and below is their response. Thanks for reaching out to M1 Finance. Unfortunately, at this time, this is not a feature we have. You can increase the minimum cash balance amount that you want to keep uninvested in your account. This way, you can let your cash trade automatically while ensuring that you have a minimum cash balance to cover any fees and prevent sales of the securities in your portfolio. Thanks in advance for your response, Patrick.

Mostly Voices [3:18]

You may be an open book, SpongeBob, but I'm a bit more complicated than that. The inner machinations of my mind are an enigma.

Mostly Uncle Frank [3:28]

Well, thank you very much for the accolades. They are very much appreciated. It's top drawer. Really top drawer. As to your questions, no, the cash portion of the golden ratio portfolio is the least meaningful component, and it's mostly there if you are going to be drawing down out of such a portfolio, it's nice to have cash there to draw from. But if you wanted to create that same portfolio without a cash component, it would be pretty easy. You take the 6% and you take two of that 6% and you would add it to the stock component. You would take two of the 6% and add it to the long-term treasuries. You would take one of the 6% and add it to the gold component and one of the 6% and add that to the REIT component. component, and that would take care of it. Yes! It would still have its golden ratio proportions just without the cash. Now if you wanted to keep that cash component in an M1 Pi, the easiest thing to do is simply put that in a short-term bond fund, which is going to perform essentially like cash, and maybe slightly better, but not in any significant way. It'll still be just as stable. So what you could use for that is VGSH, which is a Vanguard Short-Term Treasury Bond Fund, which is essentially the same thing as SHY, but has a slightly lower expense fee. So VGSH would be a choice you could make. If you would like to have some tips just to have them, put it in Vtip, VTIP, which is also a short-term bond fund. But really any short-term bond fund could be used for this purpose because it's not going to have that big of an effect overall in this portfolio. I did actually provide an M1 version of the Golden Ratio Portfolio to the Choose FI guys for their M1 Portfolios page, and I will link to that in the show notes so you can check it out. I believe I'm using SHY as the 6% in that particular version. But thank you for that email. I'm glad you're able to implement this on your chosen platform. For doing absolutely nothing longer than anyone else.

Mostly Voices [5:45]

Patrick, this trophy's for you. Yay!

Mostly Uncle Frank [5:57]

Second off, we have an email from Frank. And no, I'm not writing to myself. And Frank writes... Hi, Frank.

Mostly Mary [6:04]

Thank you for your very informative podcast. I am 57, and have accumulated investment assets about 40 times my expenses. I have about 40% in US stocks, 20% international, 30% in total in municipal bond funds, and 10% in cash. My house is paid off. I am working three days a week, but I'm considering retiring. I am thinking of changing my asset allocation to a risk parity portfolio. What is the lowest percentage in gold that is effective? Do you think I should change the percentage of my bonds to TLT? If so, what is the lowest percentage that is effective? Thank you in advance. All right. Thank you for this email.

Mostly Uncle Frank [6:47]

At 40 times your annual expenses, you are sitting pretty. And your biggest problem is that you are going to accumulate too much money. Now, there's only one use for money, and that's to make more money. And then you're going to need to figure out how to distribute it. or somebody who's related to you is going to get a giant jackpot when you die. At 40 times expenses, you could hold just about anything, because even if you held it in some kind of cash that just accounted for inflation, you would last for 40 years and you'd be almost 100 years old. But as for your questions, I think to have a meaningful holding in gold, it would have to be at least 5%. and that would not be very meaningful. Really, you're going to see some benefit out of it if it's about a 10% holding in terms of lowering the overall volatility of your portfolio over time. And you will also lower the overall volatility of your portfolio if you shift your bond component, particularly that total bond component, to all treasuries. If you want to put that in TLT, the long-term treasury bond fund, that's the standard. I would think 15% in TLT would have an impact there. 20% is probably a better choice. But just make sure that you are converting that out of the corporate bond component of your total bond fund, because it's really that shift from the corporate bonds to the treasuries that is going to have the biggest impact on lowering the overall volatility of your portfolio. The municipal bonds you have, I assume, are there for their tax-free income and so are actually a little bit different in terms of what their purpose is in the portfolio. But as I said at the beginning of the answer, you are sitting pretty and are going to be just fine with just about whatever you hold in this portfolio. if you are only withdrawing from it at a 2. 5% withdrawal rate, which means that your problems in retirement will not be financial, but be more personal management and what you want to do with yourself. For that, I would suggest a book called Falling Upward by Richard Rohr, R-O-H-R, and it is about how to move from your first life or your career life to your second life or your semi-retired life, and what to think about when you're doing that. That will probably be more useful to you than the financial advice I just gave you. But thank you very much for that email. And by the way, it's not advice. It's not a tumor. It's just chatter and infotainment.

Mostly Voices [9:44]

It's not a tumor at all.

Mostly Uncle Frank [9:48]

And our next email is from Handler, and Handler writes, I started

Mostly Mary [9:53]

listening to your podcast and looking at your sample portfolios and playing with the portfolio visualizer too. I can't figure out though how you determine the safe withdrawal rate. Appreciate you helping me understand that.

Mostly Uncle Frank [10:05]

All right, Handler, good question. Most of the safe withdrawal rates for these portfolios we are talking about are taken from the Portfolio Charts Safe Withdrawal Rate Calculator. And I will link to that in the show notes and you can put your portfolio in there and then it will give you a nice graphical representation both of your safe withdrawal rate based on how many years that you want to hold it. It goes from zero to 40 years on the graph there. And then it's also got the perpetual or permanent withdrawal rate. which is the withdrawal rate under which you would have a portfolio that had the same amount of money at the end as it did in the beginning. And both those are useful. The other place that you can find this is if you run portfolio analysis at Portfolio Visualizer and then you click on the metrics tab of that. It will also give you a whole bunch of metrics including the safe withdrawal and perpetual withdrawal rates. for the particular portfolios for the time period in question. Now typically those are going to be much higher because these time periods are much shorter. So that's why I like the ones that portfolio charts a little better because we're talking about more data that goes all the way back to 1970. Just some more thoughts on safe withdrawal rates. I was listening to an interesting interview of Michael Kitces recently. It was on the November 30th podcast of Motley Fool Answers if you're looking for it. And what he said in that was interesting. He said that, you know, over the history of safe withdrawal rates, really the average safe withdrawal rate for most of the people most of the time is about 6%. And you only get to those 4% safe withdrawal rates in very specific periods, in particular the worst period being from about 1966 until 1980. His point was that the 4% rule as originally constructed is an extremely conservative rule and he didn't see much point in the kind of catastrophizing we hear these days about, oh, it's not gonna work, it's gotta be 3.3 or some low number like that.

Mostly Voices [12:28]

Human sacrifice, dogs and cats living together, He doesn't agree with that. I don't agree with that.

Mostly Uncle Frank [12:34]

But I think the way around it, and the best way around it, is to simply construct a better portfolio than what was used for those projections. Which we can do because We have the tools, we have the talent. And thank you for that email.

Mostly Voices [12:50]

And now, last off.

Mostly Uncle Frank [12:54]

Last off, we have a twofer of emails. which are both about our risk parity radio, NFTs, and the struggles that people have had fighting against the Polygon network.

Mostly Voices [13:06]

Everything is proceeding as I have foreseen.

Mostly Uncle Frank [13:15]

But at least two of our intrepid listeners have been able to destroy that Death Star and buy their NFT. and let's hear from them. First we have an email from Peter and Peter writes, hi Frank, just a follow up on the NFTs. I was able to purchase one of them.

Mostly Mary [13:34]

I kept an eye on the gas charges and was able to purchase at a point where the charges were around $60, half of what I previously saw. Looks like they vary widely so you just need to watch it. Here are the steps in case it is useful for anyone. I put Ethereum in my Coinbase wallet. The Coinbase Wallet app is separate from a regular Coinbase account. Clicked Purchase on the NFT in OpenSea, which provides a QR code. Scanned the code with the Wallet app, which initiated the multi-step process to transfer the Ethereum to Polygon. This is where the gas charges are paid. Once the transfer is done, there were a couple more steps between OpenSea and the Wallet app, and the purchase was complete. It was a good learning experience. NFTs clearly have a long way to go for mass adoption, but good to get involved. Thanks for setting it up and always good to do something with a charity component, Peter. And next up, an email from Thomas and Thomas writes, hello, Uncle Frank. Just wanted to inform you that I was able to purchase Ethereum Polygon directly without having to purchase Ethereum and converting it to the Polygon network and paying a large gas fee. One, I went to the Risk Parity Radio NFT Open Seas page, then activated the Google Chrome extension Metamask to purchase Ethereum, Polygon. They use Moonpay as the platform to take care of the transaction. They also require a picture of your driver's license and a selfie for security purposes. Two, I purchased the $30 minimum, which charges $3.99 for this transaction. My first attempt was flagged on my debit card. Wells Fargo had to approve Moonpay. The second transaction went through and within one minute I could see Ethereum Polygon in my Metamask wallet. Have a great holiday season with your family, Thomas and Angela. P.S. Sorry to bury the lead, I ultimately purchased NFT Risk Parity Radio 103. I can see that there is a watermark in the center of the image.

Mostly Uncle Frank [15:41]

Well, thank you guys for taking on the challenge of the Polygon Network and defeating it. What do you mean they blew up the Death Star?

Mostly Voices [15:47]

Oh, who's they? Oh, oh, oh, I'm sorry, I thought my dark lord of the Sith could protect a small thermal exhaust port that's only two meters wide. That thing wasn't even fully paid off yet.

Mostly Uncle Frank [16:06]

I will put your instructions in the show notes and also probably on the support page for Risk Parity Radio, where you can go and buy one of these NFTs if you so desire. There are still 16 left for purchase in this round. Get them now because the price will only go up when those are sold. All of the money collected here will be going to our charity for this podcast, the Father McKenna Center.

Mostly Voices [16:33]

The best, Jerry, the best.

Mostly Uncle Frank [16:37]

So thank you very much for solving these problems for your fellow listeners and thank you for your emails.

Mostly Voices [16:45]

We few, we happy few, we band of

Mostly Uncle Frank [16:48]

brothers. Now we're going to do something extremely fun. And the extremely fun thing we're going to do next is our weekly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page. But just taking a look at the markets this past week, basically we saw a reversal from what they did the prior week. So the S&P 500 was up 3.82% for the week, NASDAQ was up 3.61% for the week, gold was down 0.04%, didn't do very much there. Long-term treasury bonds represented by TLT were down 3.49% for the week. after about a 3% rise the prior week. REITs represented by the fund REET were up 2.46% for the week. Commodities represented by the fund PBDC were up 4.36% for the week. They were the big winners. And preferred shares represented by the fund PFF were up 1.02% for the week. So what does this all mean in risk parity land for our sample portfolios? Well, it ultimately means they didn't go up or down very much at all. Like the prior week when we saw stocks fall and bonds rise, this week we had stocks rising and bonds falling. And so we saw very muted or moderated performance in both those weeks, which is what you want for one of these portfolios, because the idea is to reduce that volatility while still having sufficient returns to support drawdowns. And so now going through our portfolios, our most conservative one, it's this all seasons portfolio that is only 30% in stocks. It's got 55% in treasury bonds and intermediate and long term, and then the remaining 15% is divided into commodities, the fund, PDVC and gold, the fund GLDM. It was down 0.14% for the week. It is up 12.38% since inception in July 2020. And yes, it will put you to sleep. I'm putting you to sleep. And now we go to our three kind of bread and butter portfolios that are designed to have the same risk profiles as a 60/40 portfolio. The first one is the Golden Butterfly. This one is 40% in stocks divided into a total stock market fund, VTI, and a small cap value fund, VIOV. Then it's got 40% in bonds divided into short-term and long-term treasuries and 20% in gold. It was up 0.51% for the week. It is up 22.42% since inception in July 2020. And our next portfolio is the Golden Ratio Portfolio. This one is 42% in stocks, 26% in long-term treasuries, 16% in gold, 10% in REITs, and 6% in cash for distributions. It is up 0.73% for the week and is up 24.09% since inception in July 2020. And our third bread and butter portfolio is the Risk Parity Ultimate, where we've included the kitchen sink. I won't go through all of these funds, but it is roughly 40% in stocks, 25% in long-term treasury bonds, and then it's got components of Commodities, gold, REITs preferred shares, and a little bit of crypto. It was up 0.20% for the week. It is up 23.92% since inception in July 2020. And now we move to our experimental portfolios that involve leverage funds.

Mostly Voices [20:40]

Tony Stark was able to build this in a cave with a bunch of scraps.

Mostly Uncle Frank [20:44]

and are usually more volatile, but not this week. The first one is the Accelerated Permanent Portfolio. This one's got 27.5% in a leveraged bond fund, TMF, 25% in a leveraged stock fund, UPRO, 25% in preferred shares, PFF, and 22.5% in gold, GLDM. It was up a whopping 0.18% for the week. It is up 28.65% since inception in July 2020. And now we move to the aggressive 5050 portfolio, which is our most leveraged. It has 33% in a leveraged stock fund, UPRO, 33% in a leveraged bond fund, TMF, and it's got the remaining 34% divided into intermediate treasury bonds, VGIT, and preferred shares, PFF. It was up a whopping 0.25% for the week, and is up 37.63% since inception in July 2020. And our last portfolio, our newest one, is the Levered Golden Ratio. This one is 35% in a composite stock and treasury bond fund that is leveraged called NTSX. It's got 25% in gold, GLDM, 15% in a Reit fund, O. with a spinoff called ONL for just a tiny slice of that. Then it's got two levered funds that are at 10%. One is a levered small cap fund, TNA, another is a levered bond fund, TMF. And the remaining 5% is divided into a volatility fund, VIXM, and 2% in cryptocurrency funds, BITQ and BITW. It was down 0.10% for the week. It is up 2.91% since inception in July 2021. It has gone slightly under its watermark, so it's at 99. 94 instead of the 10,000 it started with, but we are withdrawing from this portfolio at an annualized rate of 7% per year, so it is under some stress and being able to take it and withstand it so far. But that's really the point of these is to stress test them a lot harder than you might if you were actually using them. But now I see our signal is beginning to fade. We will pick up this week with some more emails, I believe. I'm also going to try to create another tutorial video, I think on another portfolio visualizer calculator. that you can have a look at. Hopefully we'll get that done in the next few days here. If you have comments or questions for me, please send them to frank@riskparityradio.com that email is frank@riskparityradio.com or you can go to the website www.riskparityradio.com and fill out the contact form and I'll get your message that way. If you haven't had a chance to do it, please go to where you get this podcast and like, subscribe, give it some stars, A review, whatever you're allowed to do there. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mostly Voices [24:06]

Is this the Krusty Krab? No, this is Patrick. Is this the Krusty Krab? No, this is Patrick. Is this the Krusty Krab? No! This is Patrick!

Mostly Mary [24:24]

The Risk Parity Radio show is hosted by Frank Vasquez. The content provided is for entertainment and informational purposes only and does not constitute financial, investment, tax, or legal advice. Please consult with your own advisors before taking any actions based on any information you have heard here, making sure to take into account your own personal circumstances.