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 [0:19]

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 160. Today on Risk Parity Radio it is time for our weekly portfolio reviews. Of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page. But before we get to that...

Mostly Voices [2:06]

I'm intrigued by this how you say... emails? And first off...

Mostly Uncle Frank [2:11]

First off we have an email from Thomas. And Thomas writes. Hi, Frank.

Mostly Mary [2:19]

I found your podcast on Chooseify and I'm really liking it. This is a new concept for me. I'm a very, very conservative investor who will never have more than 50% of my net worth in stocks. From the risk parity perspective, what would be the simplest two ETF portfolio, stocks and bonds, and allocation that you found to give you the highest return with the lowest risk in history? Never show any sign of weakness. Always go for the throat.

Mostly Uncle Frank [2:45]

Buy low, sell high. Fear, that's the other guy's problem. Well, Thomas, it shouldn't surprise you that the answer to your question is historically, it's been a 60/40 portfolio, and typically that's been 60% in an S&P 500 fund or similar, and 40% in intermediate treasury bonds. And that is why that is the starting point for discussions of retirement portfolios because that was developed in the decades after Harry Markowitz came up with modern portfolio theory. And so by the 80s or 90s, it was well known that the best risk reward that you could get out of a simple stock and bond allocation was the 60/40. And you could construct that thing with two ETFs like VTI or VOO, For the stock side, which is a total market fund or an S&P 500 fund, they're going to perform similar. And then Vanguard also has an intermediate treasury bond fund now called FGI T. But to me, this is asking the wrong question. That was a good question in the 20th century. We are now 22 years into the 21st century, and we know a lot more about portfolio construction and have a lot more options available to us that are essentially free now since you can buy things with no fees.

Mostly Voices [4:09]

Surely you can't be serious. I am serious. And don't call me Shirley.

Mostly Uncle Frank [4:15]

We have ETFs representing all kinds of different asset classes. So this question in my mind is like asking what is the most efficient eight cylinder rear wheel drive vehicle that uses a carburetor instead of fuel injection?

Mostly Voices [4:28]

How about you just hand over them keys to that Gran Torino? How the hell does everybody want my car? Well, I'm not surprised. Yeah, you don't know the half of it.

Mostly Uncle Frank [4:40]

It was an interesting question at one point in time. It's not that interesting anymore. Get off my lawn. But I will take you up on this question in a more modern parlance, a two fund ETF portfolio that is going to have the best risk reward. And this is the one I came up with very quickly. It is 80% NTSX and 20% gold. I love gold. You can use GLDM or BAR for that ETF. Now NTSX is the Wisdom Tree US Efficient Core Fund that is designed like a 60/40 portfolio with essentially an S&P 500 component and a treasury bond component in it. that is slightly leveraged. We talked about that in episodes 59 and 61 in particular, among others. It has only been around since September of 2018 and is an example of the kinds of new and better ETFs we have available today that were not available in the past. So I went to Portfolio Visualizer and did a nice little analysis of this two fund portfolio I constructed. 80% in TSX and 20% in gold. And I will link to this in the show notes. And I compared it with a portfolio that was a hundred percent stocks invested in the Vanguard Total Stock Market ETF, VTI, and then another portfolio that was a 60/40 portfolio that is VTI and VGIT, both Vanguard funds. And what you'll see is that this simple two fund portfolio I've constructed is just better than the other two. This is only a three-year analysis, but we can look at it and it says that the compounded annual growth rate of the two fund portfolio is 14.9 for this period. The total stock market was 13.65 and the 60/40 was 9.92. The worst year for the two fund portfolio I've constructed was -7.63%. That compares to -14. for the total stock market portfolio and minus 7.52% for the 6040. The best year for the two fund portfolio is 29.29 compared to 30. 67 for the total stock market and 20.88 for the 6040. So what do those figures tell you? They tell you that this two fund portfolio I've constructed has the returns of a 100% stock fund But only the risk of the 60/40 portfolio. It's exactly what we're trying to do with risk parity portfolios. Higher returns and lower volatility and lower risk overall. What this translates to is sharp ratios of 1.02 for this two fund portfolio versus 0.72 and 0.85 for the total stock market and 60/40 portfolio respectively. So which of those three would you pick if those were your only three choices? You can only have two funds? Well, it's obvious you'd pick the first one. The one we just constructed. Because it's pretty much better in all dimensions than one of these 20th century constructions. Welcome to the 21st century.

Mostly Voices [8:03]

Yeah, baby, yeah! And thank you for that email. Second off. Second off, we have a treat for you. It's an email from Karen. You need somebody watching your back at all times.

Mostly Mary [8:19]

And Karen writes, Dear Uncle Frank and Aunt Mary, thank you for the conversational approach to learning about risk parity investing and for your position as an alternative voice in the FI space. In my accumulation phase, I was devouring Big Earn's Doom and Gloom about the decades-long financial Armageddon that is surely just around the corner due to high CAPE ratios and fretting that I couldn't retire until I could live on a 2.5% withdrawal rate lest I be eating cat food and living in a cardboard box in my dotage. That's not an improvement. He has very convincing charts and spreadsheets and equations with Greek letters that I had to Google before I could run them for myself. By listening to you and reading everything that Tyler has written at Portfolio Charts, I now understand that Big Earn's doom and gloom is related to his preference for use of just a couple of asset classes, as well as his confidence in CAPE ratios as a forward-looking economic indicator. At least, I think that's what I understand. I appreciate your willingness to repeat yourself over and over as questions are asked and topics come up again. It helps me to have knowledge drilled in by spaced repetition. Please keep doing what you're doing. Sound effects included. Real wrath of God type stuff. They account for at least 95% of my daily pop culture exposure. Even the rants are educational. I make you laugh. I'm here to amuse you. What do you mean funny? Funny how? How am I funny? I wouldn't have read the Death Star's paper on the 4% rule and taken away the realization that their allocation choices are ridiculous and cherry-picked to support their clickbait assertions. Vader, how's my favorite Sith? I expect that sort of behavior from Raymond James, or as I prefer to call them, ravenous jackals, but now I see I can't trust anyone. I have a question and an offering. First off, I've just retired at the age of 41, and I have roughly 50% of my liquid assets accessible to me without penalty or shenanigans prior to age 59 and a half. I think of this as two portfolios. A taxable brokerage account and various inherited IRAs, which should be invested in a risk parity portfolio as I will live off of it for the next 18 years. My 401K, soon to be a rollover IRA, and Roth IRA. I know I could use the Roth contributions now, but I prefer to let them ride. You're going to want that cowbell. That should remain in a total stock market fund. I'm 18 years away from touching that money, so it's still in its accumulation phase. In 13 years or so, it would be time to start strategically selling high and buying low into a risk parity allocation. For my infotainment, would you treat these piles of money as two separate portfolios with different investing horizons, or one big pile that should all be in a risk parity allocation? The numbers all go. to 11. Second off, I've been getting lots of mileage out of Mark's most excellent Portfolio Shortcutter tool from episode 148. To further my enjoyment of it, I've updated the Portfolio Visualizer fund list to use the older ones supplied by Chuck in episode 127, so that the back test will go back further in time.

Mostly Voices [11:38]

And I added support for the Portfolio Visualizer Asset Class Backtester.

Mostly Mary [11:42]

Please share my version with Mark. I'd prefer to see the updates and additions applied to his already publicized version for maximum public utility. Thanks again for everything, Karen.

Mostly Voices [11:54]

The best, Jerry, the best.

Mostly Uncle Frank [11:57]

Well, Karen, first, thanks for all the wonderful things you said. And I'm glad you're getting so much out of this podcast.

Mostly Voices [12:04]

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

Mostly Uncle Frank [12:09]

I wanted to go back and talk about these unrealistically pessimistic forecasts that we see coming out these days and the use of cape ratios to construct them. My name's Sonia.

Mostly Voices [12:21]

I'm going to be showing you the crystal ball and how to use it or how I use it.

Mostly Uncle Frank [12:28]

And I think this is really now coming to a head as to how inappropriate these things are. What do you mean they blew up the Death Star? I'll link to two articles in the show notes. One of them is from Bill Bengen, the guy who invented the 4% rule, and another one is from Michael Kitces, who is really one of the best sources for information about personal finance. The best.

Mostly Voices [12:46]

And both sharply criticize the Morningstar report.

Mostly Uncle Frank [12:49]

Oh, oh, oh, I'm sorry, I thought my dark lord of the Sith

Mostly Voices [12:54]

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 [13:01]

which relies on these kinds of forecasts. Crystal Ball can help you.

Mostly Voices [13:05]

It can guide you.

Mostly Uncle Frank [13:09]

And for reference, I ranted about the problems with this report back in episode 128, which was the week that the Morningstar report came out. Now, Bill Bengen's article is from November 29th of last year, so a couple weeks after the report came out. And I'll just read you a few sections of what he's got here. And first he says, as you may know, as an outcome of ongoing research, I recently increased my estimate of the worst case withdrawal rate to 4.7% for a 30-year time horizon.

Mostly Voices [13:41]

You are correct, sir, yes!

Mostly Uncle Frank [13:45]

And I'll just note that the reason he was able to do that is because he started using more diversified portfolios in his analysis as opposed to that simple stock bond portfolio that he was using back in 1994. So if you have better diversification, you're going to have a better safe withdrawal rate is what you should glean from that. Bow to your sensei. So he went and got the data from Morningstar as to what they were doing and looked at it, and he writes in his article, to begin with, in an explanatory email, the author of the report made two important revelations. First, the author announced the study used assumptions of very low returns for financial assets. The medium arithmetic return used for their 50% stock 50% bond portfolio was 5.23%. That's like annuity level stuff. This includes an 8.01% return for the stock portion of their portfolio. This means consequently they assumed also a forecast for very low bond returns. The second point made by the author is that the study assumed that the low expectations for returns would last the entire 50 years of the study's time horizon, including of course the standard 30-year time horizon. In other words, mean reversion is not in play in their analysis.

Mostly Voices [15:06]

Now you can also use the ball to connect to the spirit world.

Mostly Uncle Frank [15:10]

And then he writes, Is it any wonder given these two assertions that a very low withdrawal rate is generated by these computations? But 50 years of below average returns, there is no precedent for such in the historical record.

Mostly Voices [15:26]

Forget about it.

Mostly Uncle Frank [15:30]

So they've got a crystal ball that's throwing out imaginary scenarios.

Mostly Voices [15:34]

A really big one here, which is huge.

Mostly Uncle Frank [15:38]

And he says in explanation as to why his methodology yields a higher Safe withdrawal rate. And he says, two factors explain why actual portfolio returns are much higher than this forecast. Low asset correlation. Can anybody say Holy Grail principle? And portfolio rebalancing. Rebalancing at the end of each year is assumed. These two elements exert a powerful effect on portfolio returns. The effect of low correlation between asset classes is well known as a tenet of modern portfolio theory. Less well understood are the benefits of rebalancing. Through rebalancing, we periodically move funds from asset classes which have just outperformed asset classes, which have just underperformed since there is a cyclicality in the performance of most asset classes. This maintains significant portions of the portfolio and asset classes which have better short-term prospects. Any further rights? Who's correct? Question mark. The whole issue comes down to whether you accept their forecast of low returns forever. Or whether you prefer an approach like mine, which has mean reversion built into it. That would be great. I wouldn't presume to make that choice for you. But there's an awful lot riding on this for retirees. Am I right or am I right or am I right?

Mostly Voices [17:02]

Right, right, right. Okay, so that's Bengen's critique.

Mostly Uncle Frank [17:06]

Now we have the critique from Michael Kitces, an article from January 2022 that I'll also link to in the show notes. I'll just read you a couple of his statements from the executive summary. He also notes that they have an extremely low projected returns in that Morningstar study. And he says, while such conservative return estimates might make sense over a 10 to 20 year time horizon since the research has shown that CAPE ratios are strongly predictive of returns over that time range, extending those assumptions out to 30 years is arguably unrealistic. Forget about it. This is because there is no precedent, even in other eras with high equity valuations, for 30-year returns that low. In reality, markets tend to revert to the mean, meaning that even the periods with the worst safe withdrawal rates in history contain intervals of offsetting below and above average returns, causing each to end out with near average returns over the full 30-year horizon. In this way, Morningstar's choice to focus on historically low 30 year returns for its analysis disregards the evidence of what really drives safe withdrawal rates. You know, I'm just dealing with a lot of crap right now. Death Star blown up by a bunch of teenagers. Then he further writes, Ultimately, however, Morningstar's conservative return assumptions, which are comparable to some of the worst periods in the past 140 years, actually serve to highlight the strength of the 4% rule, which was created to withstand just those types of worst case scenarios. Which means that even if their historically low projections do come to pass, resulting in returns equal to the worst scenarios in history, a 4% initial withdrawal rate would still hold up.

Mostly Voices [18:46]

I think I've improved on your methods a bit, too.

Mostly Uncle Frank [18:50]

And while today's market conditions do merit caution, in reality such conditions were precisely what the 4% rule was created for, to begin with. Exclamation point.

Mostly Voices [18:58]

Yes!

Mostly Uncle Frank [19:01]

So similar to Bill Bengen, Michael Kitces recognizes and calls out the unrealistic assumptions used to put together these pessimistic forecasts that we've been seeing in the past few months and people have been talking about as if they're gospel when they're not. Forget about it. I doubt that they would even make it into the New Testament.

Mostly Voices [19:26]

Forget about it.

Mostly Uncle Frank [19:30]

So why do people make these overly pessimistic forecasts? Well, I have two guesses on that. One is human nature. And human nature says that pessimistic forecasting sounds smarter. It sounds like you actually did more work or more thought into something. If you, A, say you can predict the future, My name's Sonia. And B are pessimistic about the future. Fear attracts attention. It also just sounds a lot better than what we say here about the future. We don't know.

Mostly Voices [20:06]

What do we know? You don't know. I don't know. Nobody knows.

Mostly Uncle Frank [20:11]

The second reason I believe you see these unrealistically pessimistic forecasts coming from Morningstar is that Morningstar's real clients are not us. They're not the customers. They are the financial services industry. It's kind of like that US News and World Report report on colleges that comes out every year. The people that care about that the most are not the people going to college. It's the colleges themselves who are all vying for to get a higher rating. And similarly, Morningstar provides a lot of ratings for fund managers and funds and all sorts of other things. So you can get your stars there. And a lot of those ratings are very subjective. Now, how does a pessimistic report help the financial services industry? It helps them sell products.

Mostly Voices [21:08]

Because only one thing counts in this life. Get them to sign on the line, which is dotted.

Mostly Uncle Frank [21:15]

The first thing you will see in an annuity pitch or a pitch for a structured product is a report like this. See how bad the future is going to be. Trouble, folks. See how bad it's going to be. Right here in River City. Morningstar says so. Trouble with a capital T and that rhymes with P and that stands for pool. Now come over here and buy this product to solve the problem that I just informed you of. from this bad Morningstar report. Always be closing. Pessimistic reports are used to sell financial products. That is their primary use.

Mostly Voices [21:54]

You can't handle the truth.

Mostly Uncle Frank [21:57]

Their secondary use is cover because when you have your financial services person, your advisor underperforming because of all the fees and other things they're taking out and the complications they're putting in, make any sense. They're going to be underperforming. And it's nice to have a report saying that, oh yeah, well, the returns are supposed to be bad. Therefore, the fact that mine are bad means I'm okay.

Mostly Voices [22:19]

You see how that works? If you have a milkshake and I have a straw, there it is. That's a straw, you see. Watching. And my straw reaches a groove. And so come the ravenous jackals. And starts to drink your milkshake. Who want to drink your milkshake. Or worse. I drink your milkshake. I drink it up. But now let's get to your questions.

Mostly Uncle Frank [23:00]

And your first one was whether you should view your portfolio in two segments, one being before you get to 59 and a half and one being after you get to 59 and a half. You could do it that way. I think it makes it more complicated. I think I would first evaluate it all as one big portfolio. What you really want to do is back up first though and evaluate your expenses and how those are going to be covered because if you do it with a two portfolio model, then you're going to have to make some determination as to how you're spending down that first portfolio. And is it okay if it all goes away? Because obviously, if your expenses are 7 or 8% of that portfolio, it's likely to be drawn down significantly before you get to the other one. You may end up with a solution that is just more focused on asset allocation itself in terms of which asset goes into which account. So for instance, the cash or cash equivalents you would be holding, those would all be in your taxable account and be available to spend right away. You wouldn't put any of that into the other account. And I would imagine that that 401 account would be heavily tilted towards the stock portion of your overall portfolio. And depending on how you are drawing down or distributing out of your portfolio, if you're like doing something similar to what we're doing with the sample portfolios and taking out every month, you may want some of all of the asset classes in the taxable account so that when one is high, you can easily sell that piece of it. Whereas if you had all of the stocks in the 401 side of things, and none in the taxable, then you wouldn't be able to sell part of those. I think there's more than one way to skin this cat, but I would make it more of a portfolio and expense management issue than a portfolio construction issue, because the portfolio construction side of things is just much easier to think about and manage and project if it's all one thing. Hopefully that helps, but feel free to follow up. If you have more details you'd like to talk about or have us talk about here. And second off, well second off I did share your update on Mark's Shortcutter tool and I will post your new version to the show notes here. Ain't nothing wrong with that. I still haven't really found a home for the Shortcutter tool on the website itself. We'll see what I can do with that. I do have another listener who may be rolling out a blog and reference site in the next few weeks here and we'll see if he could also incorporate it. over there where it might be easier to find and access. But it is incredibly gratifying to see people taking this information and then augmenting it and making it even better for this tiny little risk parity community we have going on here.

Mostly Voices [26:04]

You get a bunch of people around the world who are doing highly skilled work, but they're willing to do it for free. And volunteer their time, 20, sometimes 30 hours a week. Oh, but I'm not done. And then what they create, they give it away rather than sell it. It's going to be huge.

Mostly Uncle Frank [26:27]

I should explain to the audience what this short-cutter tool is. What Mark and Karen have done is taken and created a Google spreadsheet to make it much easier for you to put a portfolio into the spreadsheet and then have it go and put that portfolio into the analyzers, that portfolio visualizer or portfolio charts. So it just makes it much easier to use the tools at those two sites. And it is well worth the price of admission. It's going to be huge. And thank you for that email. Last off.

Mostly Mary [27:10]

Last off, we have an email from Jeffrey, and Jeffrey writes, Frank, do you have any concerns about your stock ETFs being so limited in sector coverage? A large cap growth ETF is mostly focused on technology and healthcare. A small cap value ETF is mostly focused on financials and industrials. So in each case, you are getting virtually no exposure to energy stocks, much less utilities or consumer staples. A 50/50 mix of large cap growth and small cap value gives you about 3% exposure to energy stocks and 4% exposure to consumer staple stocks while giving you 25% exposure to technology and 13% exposure to financial stocks. That balance is a bad one to have in 2022. Thanks, Jeffrey.

Mostly Uncle Frank [27:53]

Well, Jeffrey, is that a crystal ball you have there, or are you just happy to see me?

Mostly Voices [27:57]

A really big one here, which is huge.

Mostly Uncle Frank [28:02]

What you were talking about doing is just basic market timing, looking at current events and trying to guess which sectors will do better than others. You may be right some years, you may be wrong some years, but it's really not a way or an approach that we would use here for portfolio construction. Because we don't want to have to rely upon our ability to interpret and guess at what's going to happen next.

Mostly Voices [28:28]

Fat, drunk, and stupid is no way to go through life, son.

Mostly Uncle Frank [28:32]

In fact, if you look at these funds over long periods of time, the sector makeup of large cap growth and small cap value tends to change and so may or may not include more or less energy at any given point in time. I believe that large cap used to contain lots and lots of energy because Exxon used to be the largest Cab company in the S&P 500 at one point. But now let's talk about data because I think you should use data to analyze this question. The first data point you want to ask when you're talking about using a sector fund is how correlated or uncorrelated is it with the rest of the stock market? And it turns out that energy is about 0.7 on the correlation scale when you compare that to the rest of the overall market. which is lower than some sectors, but it's not really low enough to provide significant diversification unless you were to really seriously overweight it. The only two sectors that are really diversified and make a difference in small amounts appear to be utilities and REITs. And that's why you might add one or both of those as a separate component in your risk parity style portfolio in addition to whatever broad stock funds that you're holding. But I went ahead and also did a little back test analysis of two portfolios. One that is just a large cap growth fund and a small cap value fund. I use VIGAX and VISVX, both Vanguard funds. And so the one portfolio is 50/50 that. And then I took another portfolio and said, let's make 10% of that energy. We'll put 10% of XLE. So that one's 45/45/10. and I compared them in this goes back about 20 years. And what you see is that the performance is almost the same. The portfolio without the energy does a little bit better. It has a higher compounded annual growth rate, 9.58% versus 9.5%. But you look across and the numbers are almost the same. The Sharpe ratios are the same and the Sortino ratios are the same. So what is that telling you? It's telling you that adding some energy fund to your portfolio as a substitute for some other stock funds isn't going to make much of a difference over time. It's just not. Now, that doesn't mean it won't be different at some points in time, but we want to construct a portfolio that we can just hold and rebalance and not be consulting the news every three months to figure out which sector to buy next. If you really want exposures that are qualitatively different and have an effect on a portfolio, in this circumstance, you wouldn't be buying the energy stocks. You go buy the commodities funds like we have in some of our portfolios, and those were largely up 30 or 40% last year. So you're getting a lot more bang for your buck with respect to something like that. I think one of them, PDBC, after the war was declared or initiated, went up 13% in one week. So if you're going to market time, do it with the most effective instruments that are available. and that leads us to the last point of this is that your stock portfolio is only going to be part of your entire risk parity style portfolio. And you should not be looking at your stock portfolio by itself and trying to tweak it to make it do certain things by itself. It's got a particular role in your portfolio, which is to have high returns over time, despite its higher volatility than some other assets. use other assets to fulfill other roles. In particular, that inflationary role if you're worried about serious inflation over a long period of time, that is going to be covered by things like commodities and gold. Although gold is not going to have as big of an impact on that side of things because it tends to require sustained inflation over years to really get a ramp up and reacts in other ways. as just kind of this crisis asset that people go to whether you're in an inflationary time or a deflationary time. But thank you for that email because it gets us back to these core ideas of portfolio construction is that you need to have a process and you need to apply these principles that we talk about, the macro allocation principle, the simplicity principle, and that holy grail principle. and look at your portfolio as a whole and not a bunch of pieces that you are tweaking based on extraneous information. Do you want a chocolate? But I believe it's time to move on. Now we're going to do something extremely fun. And the extremely fun thing we'll do now is our weekly portfolio reviews of the seven sample portfolios that you can find at www.riskparityradio.com on the portfolio's page. This was more of a fun week than the last week we had or some other weeks we've had recently. The stock market finally went up a week instead of going down like it had for the past four or five weeks. And it did in a big way. The S&P 500 was up 6.16% for the week. The NASDAQ was up 8.18% for the week. Gold was actually down for the week. It was down 3.55%.

Mostly Voices [33:54]

I think you've made your point, Goldfinger. Thank you for the demonstration.

Mostly Uncle Frank [33:58]

I guess everybody felt a little bit better about the world and so they dumped all the gold they've been buying, at least the short-term traders. Long-term treasury bonds represented by the fund TLT were down 1.09% for the week. REITs represented by the fund REET were up 2.93% for the week. Commodities represented by the fund PDBC were down 1.3% for the week. and preferred shares represented by the fund PFF were up 2.09% for the week. I think this week was a good example of the volatility and unpredictability of markets that if you would have sold out in recent weeks, you would have missed this big rally. And we really never do know what's going to happen next.

Mostly Voices [34:46]

You never know what you're going to get.

Mostly Uncle Frank [34:49]

But looking at these sample portfolios, the first one is this All Seasons Portfolio that is a reference portfolio. It's the most conservative one with only 30% in stocks in it and a total stock market fund. It has 55% in treasury bonds that are long term and intermediate term. And then the remaining 15% is divided into gold and commodities, GLDM and PBDC. It was up 0.91% for the week. It is down 4.78% year to date and is up 7.76% since inception in July 2020. You'll note that I do have added now the year to date percentages since we have enough of a year to make it worth tracking. But now let's move to our three kind of bread and butter portfolios that are a little better balanced in terms of their stock and other asset mixes. The next one is the Golden Butterfly. This one is 40% in stocks divided into a total market fund and a small cap value fund. It's got 40% in bonds divided into long-term and short-term treasuries, and then it is 20% in gold, GLDM. It was up 0.83% for the week. It is down 2.79% year to date and is up 20.13% since inception in July 2020. You can really see in this portfolio how having these varied asset classes really dampens the volatility of it overall. So in past weeks, the gold was keeping it afloat. This week, the gold went down, but the stocks went up. And the result is a portfolio with very low volatility and being down 2.79% year to date. in a year like this, I think just about anyone would be happy with that. Our next portfolio is the Golden Ratio Portfolio. It's 42% in stocks, 26% in long-term treasuries, 16% in gold, and 10% in REITs. It's also got 6% in cash that we take our distributions out of for the year. And it was up 1.71% for the week. It is down 4. 92% year to date and is up 19.73% since inception in July 2020. So again, being down less than 5% for the year so far is a nice result for the kind of year we've been having. Now, our next portfolio is a risk parity ultimate. It's got 14 funds in it that I won't go through, but it's got all kinds of things from stocks to commodities to volatility funds and a little bit of Cryptocurrency. It was up 1.69% for the week. It is down 5.95%, slightly less than 6% year to date. It is up 17.57% since inception in July 2020. And now we'll move to these experimental portfolios with the leveraged funds in it. The first one is the Accelerated Permanent Portfolio. This one is 27.5% in a long-term treasury bond fund, TMF. 25% in UPRO, that's a leveraged stock fund. I should have said TMF is a leveraged bond fund. PFF then is 25%, that's preferred shares, and 22. 5% is in gold. GLDM, it also had a good week. It was up 3.26% for the week. It is down 12.99% year to date. It is up 14.42% since inception in July 2020. And you can see how volatile these portfolios have been with these leveraged funds in them. Good thing they're experimental. Our next one is the aggressive 5050, which is our most leveraged and most volatile. It has 33% in the leveraged bond fund TMF, 33% in the leveraged stock fund UPRO, and the remaining third is divided into PFF That's a preferred shares fund in VGIT, a intermediate treasury bond fund. This was the big winner last week, no surprise. It was up 5.48% for the week. It is down 17.29% year to date. It is up 15.31% since inception in July 2020. At one point this was up almost 40% just a few months back. We'll have to see if it continues to rebound. It has less diversification in that it does not have any gold or any other alternative assets in it. So it tends to be even more volatile than some of the others. And our last one is the levered golden ratio. This one is 35% in that composite stock bond fund, NTSX. It has 1.5% leverage in it. It has 25% in gold, GLDM, 15% in a REIT O, it's Realty Income Corp, and then 10% each in a leveraged bond fund, TMF, and a leveraged small cap fund, TNA. And the remaining 5% is divided into a volatility fund, VIXM, for 3% and two crypto funds for the remaining 2%. It was up 1.76% for the week, seems to have found its bearings. It is down 7.68% year to date, not too bad, and is down 3.86% since inception in July 2021. So all in all a decent week all around. I think what's most striking or interesting about these portfolios is how little they tend to move compared to their components. And that's due to the diversification of these kinds of portfolios. You can combine very volatile assets that tend to move in different directions and you get a much less volatile portfolio overall. But now I see our signal is beginning to fade. 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 podcast provider and like, subscribe, give me a few stars or review. That would be great. Okay? Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio. Signing off.

Mostly Voices [41:33]

Hang on, I got another call. What? I'm very busy right now. What the hell is an aluminum Falcon?

Mostly Mary [41:41]

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.