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. A different drummer.

Mostly Mary [0:18]

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 Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program. And those are episodes 1-3-5-7-10. and nine. One of our listeners, Karen, has also reviewed the entire catalog and has additional recommendations as foundational episodes. Ain't nothing wrong with that. And Karen's recommendations are episodes 12, 14, 16, 19, 21, 56, and 82, in addition to the first five that I mentioned. Now, I realize women named Karen get a bad rap these days, but I assure you that all of our listeners are intelligent, thoughtful, and savvy. Yes! And don't forget that the host of this program is named after a hot dog. That's not an improvement.

Mostly Voices [1:41]

Lighten up, Francis.

Mostly Uncle Frank [1:45]

But now onward to episode 158. Today on Risk Parity Radio, it's time for our weekly portfolio reviews. Of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page.

Mostly Voices [2:02]

We got a scary 140 this week. But before we frighten you with that depravity, I'm intrigued by this how you say emails.

Mostly Uncle Frank [2:16]

First off. First off we have an email from Julie T. Now Julie T has gone to the front of the line because she is one of our patrons on Patreon. We few, we happy few. And you can join that august group if you go to the support page at www.riskparityradio.com. All of the money raised there is for a charity. The Father McKenna Center, which you can also learn more about on that support page.

Mostly Mary [2:51]

But getting to her email, Julie T writes：I recently stumbled across Composer, an automated trading platform, and wondered if you were familiar with it, and if so, what your thoughts are. While I'm not comfortable moving everything over from Vanguard to their proprietary trading platform, I am thinking that using it might free me from maintaining portfolios across accounts with my clunky Excel spreadsheet. Also, I early retired about a week ago at the age of 56. So far it's glorious. Yeah, baby, yeah! I wouldn't have been comfortable enough to make this move without having discovered your podcast a year ago. Thank you for all you're doing.

Mostly Uncle Frank [3:26]

Well, first off, we use the buddy system. No more flying solo. First off, congratulations on your retirement. I'm glad you were able to use some of the information here to make that happen. Yes!

Mostly Voices [3:40]

Now as for Composer, no, I wasn't familiar

Mostly Uncle Frank [3:44]

with that. I did go and look it up based on your email. It is an interesting site. It looks like it's trying to be M1 on steroids. So it is a site that allows you to construct portfolios with rules embedded in them, including rebalancing rules and rules that might follow momentum strategies and those sorts of things. It looks like it's hooked up with a brokerage called alpaca, which I am not familiar with at all. But the only way to actually use it to implement your rules is to use this brokerage alpaca. You keep using the word.

Mostly Voices [4:22]

I don't think it means what you think it means.

Mostly Uncle Frank [4:25]

Anyway, if you go there, you'll see they have constructed a number of risk parity and other related style portfolios to consider. including an interesting variation of the Dragon Portfolio, which we have talked about here going back to episodes 53 and 55, among others. So I will be taking a look at that to see how they've done that in terms of the assets they use for the volatility allocation and the assets they used for the trend following allocation. I also went ahead and put in a version of the Golden Ratio Portfolio from our sample page. But I couldn't figure out how you could actually search the portfolios there, other than just looking at what they present to you. I did ask them how to do that. So the website is kind of janky right now. It's not that easy to use or construct portfolios on. But I think it is something interesting and I think it is evidence more of how we are in the golden age of investing for do it yourself investors that these kinds of tools and these abilities that were only available to, say, hedge funds before are going to be more and more available to people such as ourselves. The best, Jerry, the best. So even if this doesn't take off by itself, I could see other platforms adopting this kind of tool for do-it-yourself investors at some point in the future.

Mostly Voices [5:54]

We have the tools, we have the talent. Which would be quite welcome.

Mostly Uncle Frank [5:57]

Offhand, I don't think I'd use a brokerage called Alpaca that I've never heard of before. Forget about it. But it's in development, so we shall let it develop. But thank you for that email and I'm so glad you were doing so well. I can't believe it. It's just not believable, Cotton. Second off. Second off, we have an email from Julie, a different Julie. Now this Julie goes to the front of the line because she's a childhood friend of mine. So if you were friends with me before the age of, say, about 12, I'll let you go to the front of the line at least once. Groovy, baby.

Mostly Mary [6:40]

And my friend Julie writes, Hey Frank, any suggestions on which of your podcasts my son should tune into to learn more about NFTs or top shots? He's going golfing over spring break with a friend and his dad, and NFTs, et cetera, may be a topic of discussion. Jackson is a bit of a Shiba lover, but not as knowledgeable about NFTs.

Mostly Uncle Frank [6:58]

Well, Julie, I hate to disappoint you, but I probably would not recommend this podcast in particular for these topics. I do have one podcast that is devoted to Bitcoin and cryptocurrencies themselves, which is episode 29, but that is more about whether you would include them in a large portfolio or not. You can't handle the gambling problem. We also do have some NFTs for sale on the support page. You can figure out how to buy them. They are at OpenSea and cost about 20 bucks. Well, it's probably about 17 bucks given the drop in Ethereum, which you have to pay Ethereum for them on the OpenSea platform. That's not an improvement. What might be more helpful is to give you some actual podcasts that deal with this in detail. And I would recommend two podcasts from Kevin Rose, who is very much into these things. I would recommend Modern Finance, which is essentially about all things crypto and DeFi. And then he's got another podcast called Proof, which is all about NFTs. So those two podcasts will probably tell you more than you want to know about these topics. Another podcast that I do listen to frequently is called Bitcoin Fundamentals, which is part of the Investors Podcasts suite of podcasts. I will link to all these podcasts in the show notes. But I think Bitcoin Fundamentals is a good place for mere mortals to start out and listen to, because they do interview all of the people in the space and describe the way all of these things work. Their last one was pretty interesting. It was about the downfall of a crypto platform called Quadriga, which was in Canada, which turned out to be some kind of a Ponzi scheme, and they were talking about how that went bankrupt and what's going on with that platform or the remnants of it. It's a trap!

Mostly Voices [9:03]

But as it is said sometimes, danger plus opportunity equals

Mostly Uncle Frank [9:07]

fortune. Just be careful about that danger part.

Mostly Voices [9:11]

Do I feel lucky? Do I feel lucky?

Mostly Uncle Frank [9:15]

And thank you for that email. I hope Jackson enjoys his spring break. Buy low, sell high. Fear, that's the other guy's problem. Next off, we have an email from Jeff, and Jeff writes. Hi.

Mostly Mary [9:31]

Could you explain why growth is not a factor when looking at equity funds? Thanks. Well, first of all, Mary, thanks you for the brevity of your email. The best, Jerry, the best.

Mostly Voices [9:41]

But as to your question, growth is a factor when looking at

Mostly Uncle Frank [9:45]

equity funds, but the issue with growth is that it is basically already included in the common funds you probably invest in already. So anything that is an S&P 500 fund or a total market fund is heavily cap weighted to large cap growth stocks. and you can see that by comparing one of those funds to a dedicated growth fund like VUG in the asset correlation analyzer at Portfolio Visualizer. So most people are starting with a growth oriented portfolio by default simply by holding those kinds of funds. And if you want to diversify from that, you have to get away from growth and seek out smaller cap stocks, value related stocks, You're gonna want that cowbell. And stocks that are in smaller or less favored sectors, like utilities and REITs and things. And hopefully that answers Thank you for that email. Last off. Last off, we have an email from Colin, and Colin writes.

Mostly Mary [10:55]

Hi, it's Colin again from episode 109. I didn't know you were doing one. Oh, sure. In episode 153, you evaluate FXIFX versus Golden Ratio, which got me thinking about an investment in my 401k, PRW CX. This fund managed by David Giroux has a long history since 1994 and appears to have a competitive Sharpe ratio to most of the sample risk parity portfolios on Risk Parity Radio. What's your take on this fund? He seems to be doing something that protects the fund somewhat on the downside. Convertible debt, varying equity slash cash exposure, growth at reasonable price, GARP stocks. I am invested in this fund at 0.46 expense since our 401 gets institutional class pricing and we receive a 0.25% rebate because T Rowe Price administers our plan. Full disclosure, I sat on our 401 investment committee for several years. Secondly, I've been tinkering with a optimized risk parity portfolio for my deferred compensation as it is distributed to me. I did some back testing on portfolio charts with a modified golden butterfly portfolio, I call MGB6 portfolio, modified golden butterfly six factor. It consists of 15% VTI, 30% VIoV, 30% TLT, 15% GLD, 5% REET or O, 5% PD-BC. Using the risk return tool on portfolio charts, it appears to be on the efficient frontier up into the right of the golden butterfly itself. Over a long horizon, 50 plus years, risk reward seems to improve when you add those additional diversifiers, REIT commodities. Lastly, I'm executing on the family match Roth contributions for my kids up to their earned income to move unneeded money out of my estate now. One of my kids has a disability, so I'm able to contribute $16,000 to his ABLE account each year in lieu of a Roth. ABLE accounts may be of interest to those of your listeners who have kids with disabilities, as they don't count against any financial aid or benefits they might receive in the future from the government. Thanks for all you're doing to help educate the community on risk parity. I feel like using an investment advisor to manage my portfolio is a bit like letting the stewardess fly the plane. I'm sure you'll be able to find the sound clip from Airplane. Looks like I picked the wrong week to quit amphetamines. May I recommend some sound clips from any of the Looney Tunes cartoons? There's a lot of fertile ground there.

Mostly Voices [13:29]

Actually, it's the Buck and a Quarter, Quarter Staff, but I'm not telling him that. All right, let's go through your queries and comments here.

Mostly Uncle Frank [13:36]

First of all, on this fund, PRWCX. Yes, I had a look at it. It looks like a pretty good fund. did a analysis at Portfolio Visualizer comparing it to a Golden Ratio Portfolio for the past 20 years. And you'll see they have similar Sharpe ratios. It has a higher amount of risk and a higher amount of reward, but looks like a pretty good fund as far as managed funds are concerned. What I always worry about with managed funds is that they will stop performing at some point because The manager loses his magic touch. This is what famously happened to the funds run by Bill Miller at Legg Mason, who had this awesome track record for 15 years. And then he kind of lost his way after the financial crisis and the funded quite poorly for several years. Eventually he moved on to cryptocurrencies in the past eight years or so. That fund does seem to have lots of Common names of stocks, it looks like a kind of a low volatility value kind of portfolio along with some fixed income and things like that. Two other things about it. The first one being it's a closed fund. So if you're not already in a system that can invest in that through a 401k or institutionally or some other way like that, it's not available. And then the second thing is you should be very wary of its distributions. So for example, last year it had a distribution in December of about 8% and so it's not something you would want to hold outside of retirement funds. And that's one of the big disadvantages to managed mutual funds is you can get these nasty tax surprises where there's just a giant distribution that you don't have any control over but you have to pay the taxes on in a taxable account. But if you had it available in your 401 it might be something you'd want to consider depending on what else is available in your 401. Now looking at your six factor golden butterfly. I think the biggest difference between what you're doing and the original golden butterfly portfolio is the original one has that 20% devoted to short-term treasury bonds, which are pretty close to cash. And the one you constructed does not have that. In fact, it has a larger allocation to stocks and risk on type assets, it's closer to 60% than the 40% you see in the original Golden Butterfly. So in fact, it's kind of closer to the Golden Ratio portfolio, really, but even a little bit more aggressive than that one. It is, though, a very good example of what I hope my listeners will be able to do with these ideas here, not so much to take the sample portfolios off the shelf, But to look at them and construct things that are appropriate for their particular situations, using the information they've gleaned from here.

Mostly Voices [16:40]

You are talking about the nonsensical ravings of a lunatic mind.

Mostly Uncle Frank [16:44]

I'm also glad you're able to use that ABLE account to get some of that money out of your estate and into an estate or person that has lower taxes and longer to go to take advantage of tax free growth in their account, it's very good that you can implement that. In case anybody's wondering what we are referring to when we talk about the family match, it is the idea that if you have a lot of money in your accounts and you know that some of it's going to just get inherited by various people in your family, it makes a whole lot more sense to start getting that money to them early on, particularly if they have Roth IRA space that they can use. So if you have a child that only makes $5,000 in a year, you can give them $5,000 to stick in a Roth IRA and it's going to grow much better and longer there than it is in your own pocket. So moving this money downstream while you are still alive is one of the most effective ways to manage your estate overall. before it becomes an estate, because you have become a decedent. Dead is dead.

Mostly Voices [17:59]

Now, as for flight attendants flying planes, there's no reason to become alarmed, and we hope you enjoy the rest of your flight. By the way, is there anyone on board who knows how to fly a plane? And of course I do appreciate Looney Tunes as well. And thank you for that email. And now for something completely different.

Mostly Uncle Frank [18:41]

And the something completely different is our weekly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio.com Now is an ugly week out there, the fifth week that the stock market has declined itself. Everything is proceeding as I have foreseen. And I'm afraid our risk parity portfolios were also subjected to that downturn, even though they were all up last week when the stock market was down. They're all down this week. and some of them pretty significantly. But going to the markets themselves, just for comparison purposes, the S&P 500 was down 2.88% last week. The Nasdaq was down 3.53% for the week. Gold was about the only thing that was up. It was up 0.75% for the week.

Mostly Voices [19:37]

I love gold.

Mostly Uncle Frank [19:41]

Long-term treasury bonds represented by the fund TLT were down 3.8% for the week. They've been very volatile recently going up a lot the prior week and now they're down a lot this week. REITs represented by the fund REET were down 0.99% for the week. The commodities fund, PDBC, came off of its gigantic highs. It was down 3.59% for the week after being up over 13% the prior week due in large part to the war. and then the preferred shares fund PFF was down 1% for the week. Now moving to our portfolios, the first one is the All Seasons. This one's only 30% in stocks and it's got 55% in treasury bonds and then the remaining 15% is divided into gold and commodities. It was down 2.65% for the week. It is up 6.85% since inception in July 2020. It's probably the most that's ever been down in one week. We have a couple of portfolios like that this week. But now moving to our more bread and butter risk parity style portfolios. These ones didn't do too bad. The Golden Butterfly is the first one up here. This one is 40% in stocks divided into a small cap value fund and a total market fund. Then it's got 40% in treasury bonds divided into Short-term bonds and long-term treasury bonds. And then it's got 20% in gold GLDM. It was down 1.33% for the week, so not bad. It's up 19.22% since inception in July of 2020. This portfolio is really giving a pretty smooth ride through all of the chaos we've been experiencing so far this year in these markets.

Mostly Voices [21:31]

dogs and cats living together mass hysteria moving to

Mostly Uncle Frank [21:36]

our next portfolio the golden ratio this is 42 in stocks 26 in long-term treasury bonds 16 in Gold 10 in REITs represented by reet and then six percent in cash this one was down 1.92 for the week so less than two percent it is up 17.86 7% since inception in July 2020. So again, this wasn't so bad given that it was up over a percent the week before in particular. Moving to the Risk Parity Ultimate, I won't go through these 14 funds that are in this portfolio, but it's slightly more risky than the Golden Ratio Portfolio. It was down 2.44% for the week. It is up 15.8% since inception in July 2020. It is interesting looking through some of the funds in this portfolio. In recent times the best performers have been the commodities fund, C.O.M., the gold fund, GLDM, and then on the equity side, the small cap value fund, VIOV, which is down for the year but not nearly as much as the total market or large cap growth stocks. Now moving to our experimental portfolios, the ones with leverage in them, and these looked particularly ugly last week. It's like I took the wrong week to quit drinking. Good thing they're experiments. And the first one is the Accelerated Permanent Portfolio. This one is 27.5% in a leveraged treasury bond fund, TMF, 25% in UPRO, which is a leveraged stock fund, 25% in PFF of preferred shares fund, and 22.5% in gold, GLDM. It was down 4.91% for the week. It is up 11.26% since inception in July 2020. And you can see how the leverage in a portfolio like this adds substantially to its volatility. There is a small chance it could be rebalanced next week. We check it on the 15th. The gold percentage in the portfolio has risen to 27. 64% if it were to get over 30% of the entire portfolio that would trigger a rebalancing. And our next portfolio is the most leveraged and the most volatile. This is the aggressive 5050. It's one-third in UPRO, the leveraged stock fund, one-third in TMF, the leveraged bond fund, and the remaining third is divided into PFF, a preferred shares fund, and VGIT, an intermediate treasury bond fund. This one was down 7.13% for the week, so you can see how this leverage does increase the volatility substantially. It's up 10.09% since inception in July 2020. And you can see how this portfolio, which at the beginning of the year was the best performer, is now one of the laggards in this group of portfolios. Looks like I picked the wrong week to quit sniffing glue. A lot of its problems are due to the fact that it's just much less diversified than some of these other portfolios. It does not have any gold or commodities or anything like that in it, which makes it more volatile overall. It also does not have a small cap value component in it. I could have used a little more cowbell. Which makes it more volatile overall. But this is also going to be the same kind of problem you would have with an unleveraged version of this. which might look something like 50% VTSAX and 50% Vanguard Total Bond Fund, VTBX, I believe it is, or BND. Those kinds of standard portfolios also suffer from the lack of diversification that this portfolio does just on a unleveraged basis. And finally going to our levered golden ratio portfolio. this one didn't do too bad considering its leverage. This one is 35% in NTSX, which is a composite S&P 500 and Treasury Bond fund that is leveraged up 1.5 times. It has 25% in Gold, GLDM, 15% in a REIT, Realty Income Corp, ticker symbol O, 10% each in TMF, a leveraged bond fund, and TNA, a leveraged small cap fund, and the remaining 5% has 3% in VIXM, which is a volatility fund, and 2% into Bitcoin funds, crypto funds. It was down 2.55% for the week, and it is down 5.65% since inception, which was just last year, July 2021. Two things interesting about this portfolio is that it is also close to a rebalancing. If we check it on March 15th in the gold component, has gone over 30%, then we will rebalance the entire portfolio. It is currently at 29.34%. If it does not rebalance this month, there's a good chance that we will be taking the distribution out of the volatility fund in this portfolio, as that is one of the better performers. And if the chaos continues in the markets, it may be the best performer by the end of the month. But we shall see what happens next. Rivers and seas boiling. 40 years of darkness, earthquakes, volcanoes, the dead rising from the grave. You never know what you're gonna get. But now I see our signal is beginning to fade. We will pick up again this next week, probably with some more emails. I'm still trying to figure out whether I've got a rant to do this month. And I think I owe you another tutorial video on YouTube. But, you know, I am retired, so these things will come out when they come out. 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 put your message in the contact form and I'll get it that way. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars and a review. That would be great. Mmmkay? Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mostly Voices [28:22]

You keep out of this. He doesn't have to shoot you now. He just so have to shoot me now. I demand that you shoot me now.

Mostly Mary [28:36]

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.