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 [0:38]

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 1357, 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 179. Today on Risk Parity Radio, gonna dive back into some of these emails I received in May. Hopefully make a dent in the rest of them. And so without further ado.

Mostly Voices [2:02]

Here I go once again with the email. And, first off.

Mostly Uncle Frank [2:07]

First off, we have an email from Karen. This is a different Karen than the one you heard about before. Surely you can't be serious. I am serious. And don't call me Shirley.

Mostly Mary [2:23]

And Karen writes：hi Frank, saw this podcast mentioned on a Facebook group, Fat Fire. Fire, fire, fire. Looks like a lot of good info and we'll read through it. Thanks. Also, you are local to me, Northern Virginia. Is there a certified financial planner slash wealth manager you might recommend? Thanks much.

Mostly Uncle Frank [2:42]

Well, Karen, I am probably the wrong person to ask this question. Forget about it. Since this podcast is dedicated to do-it-yourself investing in terms of wealth management. Funny how, how am I funny? So allow me to use this opportunity to shamelessly plug some family and friends. And then I'll give you some additional thoughts as to the process that I would undertake if I were in the market. for such a person. And my first shameless plug goes to Bridget Patel. Bridget Patel is with Values Added Financial in the District of Columbia. She also serves people in Virginia and in Maryland. Before going into personal finance, Bridget worked at the Federal Reserve, where she was a Senior Financial Analyst.

Mostly Voices [3:42]

Crystal Ball can help you. It can guide you.

Mostly Uncle Frank [3:46]

For about eight years, I believe. She has a BS in economics and then a Master's of Science in Finance from Johns Hopkins University. I have known Bridget since she was a child. And when she first moved here to the DC area, she lived with us for a little while in our basement. We are known to take in stray millennials from time to time, and she was one of them. Young America, yes sir. We used to commute in together, and I would drop her off there at the big marble Federal Reserve building on Constitution Avenue. I love money. Which I gleefully referred to as Bridget's money printing land. Ha ha. Money printer go brrr. And I would ask her every day whether she had printed any money and whether I would be entitled to get some. Not gonna do it. Wouldn't be prudent at this juncture.

Mostly Voices [4:57]

Forget about it.

Mostly Uncle Frank [5:01]

But she has moved on to bigger and better things. You are correct, sir, yes. And now she serves a variety of people who need what you're looking for some wealth management and advice in their financial planning. Personally, you will find her extremely diligent and extremely responsive. and she's the kind of person that you feel like will listen to what you have to say and figure out what's best for you as opposed to steering you through a program or to certain products, so on and so forth. So if you are interested in those sorts of things, my advice to you is you better call Bridget. Don't ever take sides with anyone against the family. And I will Link to her contact information in the show notes. The best Jerry, the best.

Mostly Voices [5:54]

The second person I would like to shamelessly plug

Mostly Uncle Frank [5:58]

is a woman whom I met and have become friends with through the Choose FI group in Northern Virginia and in DC. And her name is Holly Grosswoner and her website is microstuff. Now, she may not be exactly what you personally are looking for if you've been on your personal finance journey for some time and you know a lot and have accumulated a lot, but she would be excellent for somebody who just needs to get their financial house in order and has needs for somebody to help with budgeting and saving and getting things going. Because believe it or not, that's where most people are. in their personal finance journey. I did not know that. I did not know that. So if you have needs for those kinds of services or know somebody that does, you should contact Holly and I will leave that contact information also in the show notes. The third person I would like to shamelessly plug today is a Facebook friend of mine named Cody Garrett of Measure Twice Financial. Now, Cody does not manage money. In fact, the whole point of his services is not to manage your money, but to be an independent fiduciary helping you come up with a management plan that you can implement.

Mostly Voices [7:22]

Real wrath of God type stuff.

Mostly Uncle Frank [7:26]

He was featured in the Michael Kitces Financial Advisors Podcast number 255. which I will link to in the show notes, and I would recommend you listen to that to get a good idea of who he is and what he does to see whether it'd be something that you'd be interested in. But I think the personal finance world needs a lot more people like that because that kind of service is going to be better and more useful for most people in the 21st century when it comes to personal finances where so much of this is easy to do on the internet by ourselves. Buy low, sell high, fear, that's the other guy's problem. And that concludes my shameless plugs. Now let me give you some other thoughts that I have about looking for a financial advisor or wealth manager. First of all, I think what most people who have accumulated a lot of wealth actually need first off First off, is tax advice from a good CPA, especially somebody that has worked with people in your particular field?

Mostly Voices [8:38]

You need somebody watching your back at all times.

Mostly Uncle Frank [8:41]

I work with Kaplan and Company in Rockville, Maryland for that because my profession was being a partner at a large law firm and we had complicated K-1 returns. and the necessity of filing in multiple jurisdictions. You probably have different needs, so you should probably look for someone who does tax returns for people in your line of work. Second thing you need is good trusts and estates attorneys. We use Cochran Allen, who has an office in what is known as the shopping bag building in Tyson's Corner. And they have decades of experience with all manner of wills and trusts in Virginia and the surrounding jurisdictions. As for the rest of the approach in hiring a financial advisor, I think the first thing you want to do is invert the question. Who should I not hire as my financial advisor? Do the Charlie Munger thing. Invert the question. Who you should not hire are people that work for banks. Excellent. Everything is going as planned. People that work for insurance companies. Phil? Hey, Phil? Phil? Phil Connors? Phil Connors, I thought that was you. And people that work for the large retail financial services outfits that might advertise on TV during sporting events. It's a trap. All of those people have intrinsic conflicts between who they are, the way they run their business, what they sell, so on and so forth. And it's really not worth your time or effort to try and sift through people like that because there are other independent people out there that you can hire and not have to worry about potential conflicts of interest either now or sometime down the road. That's not an improvement. So if I were looking for somebody, I would look for somebody that does not have a conflict of interest or only a potentially minimal conflict of interest. which also excludes just about all commission-based models and a lot of AUM models. A my straw reaches a crude

Mostly Voices [11:03]

and starts to drink your milkshake.

Mostly Uncle Frank [11:07]

Because the conflict of interest inherent in AUM models is they want to manage all of your money. That's how they get paid. And so they are not likely to recommend anything that would relinquish control of your money or anything that would reduce your money because their best client is one who accumulates and then never spends anything. They don't really want you, from their own perspective, to be maximizing your withdrawals.

Mostly Voices [11:40]

They want you to sit on as much money as possible because their AUM then goes up. I drink your milkshake. Now they may say, of course we're not doing that.

Mostly Uncle Frank [11:48]

We're doing things in your best interest. But that is the natural intrinsic motivation that they have. And you have to recognize that when you're dealing with that kind of model. Now you will find that there are not that many outfits that do not have those kind of models. One of them that does that I would be interested in interviewing if I were interested in getting services like this in the Northern Virginia area is Andrew Miller of Olio Financial. O-L-I-O is how that's spelled. He was featured on the Michael Kitces podcast number 261, which I will also link to in the show notes. And they have developed a business model where you essentially pay by the hour for only the services that you need. And to me, that is a vastly superior kind of business model from the consumer's perspective of these services, because it really avoids all of the conflicts of interest present and inherent in commission based and AUM kinds of models.

Mostly Voices [12:51]

That is the straight stuff, O'Funkmaster.

Mostly Uncle Frank [12:56]

But I'll link to that site in the show notes and you can check them out. I have not spoken to them. I do not know exactly what they do, but they offer a complete line of financial planning and services over there. But there are a lot of financial service providers in this area. And in fact, I'm within a 15 or 20 minute walk from one of the most recognized ones in this area, which is McLean Asset Management, which is Wade Fouse Shop. And they are very prolific and have won all sorts of awards. Although I don't think the podcast that they put out recently is going to help them drive business. So they clearly know what they're doing and have a lot of satisfied customers. On the other hand, somebody like me is naturally suspicious of what they do. And in particular, they have now a whole setup called RISA, R-I-S-A, which is kind of like this Myers-Briggs test they give you to determine what your personal profile is as far as investing is concerned. Now, I actually was one of the guinea pigs when they were developing that test, but they gave me so many hundreds of questions to answer, and it took too many hours of my time, so I ditched it after a while. I don't think I'd like another job.

Mostly Voices [14:17]

But now they have rolled it out and are advertising it as kind of the

Mostly Uncle Frank [14:20]

greatest thing since sliced bread in financial services. To me, I'm not sure that I'd really like that. I would not really like that kind of steering. Don't make me angry.

Mostly Voices [14:34]

You wouldn't like me when I'm angry.

Mostly Uncle Frank [14:37]

Because I think the shorthand version of this is we'll give you this test. If you seem to be a safety oriented person, then we're going to sell you an annuity. To me, this kind of reminds me of a cattle chute where you have somebody separating a herd as it comes down this chute and then deciding what's good for them based on that determination. But if you want the best of the best in the area in terms of reputation, then you probably should go and talk to them about what they do, how much it costs, and so on and so forth. I find their website kind of peculiar because it does not state right up front that they are fiduciaries acting in your own best interest, which is what most Independent financial advisors put right on the front of their websites. So I would be curious to ask them whether any of their practice is commission based. But hopefully all of that or some of that is helpful to you. And thank you for that email. I still think you better call Bridget though.

Mostly Voices [15:44]

Someday, and that day may never come, I'll call upon you to do a service. But until that day, accept this justice as a gift on my daughter's wedding day. Second off. Second off, we have an email from Ron.

Mostly Mary [16:03]

And Ron writes, I love what you are doing here. I know it is a lot of work. Why does Rice play Texas?

Mostly Voices [16:11]

We choose to go to the moon. We choose to go to the moon in this decade and do the other thing, not because they are easy, but because they are hard. It is very interesting for me to see how these portfolios all work in the real world.

Mostly Mary [16:31]

This year, and possibly next year, will be excellent real world tests for each of these portfolios.

Mostly Uncle Frank [16:37]

Well, thank you for your interest and support, Ron. You are correct, sir, yes. Yeah, I am interested to see how these sample portfolios will perform through a complete economic cycle, which will take a few years. When you think about it, the first six of them started in a post-recovery era. We recovered very quickly from the recession in March 2020. and these were started in July, so they didn't get all of that recovery but got part of that recovery. And then the seventh portfolio didn't start until last year, so it caught the last of an upturn and now this big downturn. But what we really need to see them go through now is this period then a recessionary period into another recovery. And I'm not sure how many years that will take, but it usually takes between three and five. But until then, I think the jury is out, except for the backtests and other analyses that we have previously done and presented on this program.

Mostly Voices [17:49]

Yeah, baby, yeah!

Mostly Uncle Frank [17:53]

The proof, as they say, will be in the pudding.

Mostly Voices [17:57]

You can't handle the truth! you! can't handle the roast!

Mostly Uncle Frank [18:01]

And thank you for that email. Next off, we have an email from Brian.

Mostly Mary [18:08]

And Brian writes, I am enjoying your investing series. Please keep going with it.

Mostly Uncle Frank [18:15]

Well, I am glad you are enjoying it, Brian, and I will certainly take your suggestion. Everything is proceeding as I have foreseen. Best one I heard all day. And thank you for that email.

Mostly Voices [18:36]

Last off. Last off, we have an email from Paul. Right, Paul. Hey, Paul, where's Peter and Mary? What? Peter, Paul and Mary. Hey, Paul, play me a folk song and then I'll beat the crap out of you.

Mostly Uncle Frank [18:54]

Well, at this point, I just Settle for anything. And Paul writes. Hi, Frank.

Mostly Mary [18:58]

I've been working with Portfolio Visualizer to create a portfolio which seems to perform better than the sample portfolios in our current inflationary economic climate. I understand that fitting a portfolio to the historical data can give skewed results, but it does give results for different combinations of variables which may occur again. The funds I've put together only go back to 2014, but I've also test substitute funds going back to 1998, which all seem to do okay too. However, this portfolio as structured doesn't seem to follow some of your risk parity principles, and I'd like to know why it seems to work or why it wouldn't work in real life beyond the modeling. The portfolio is 10% USMV, 10% GLD, 10% PSA, 10% VPU, 10% XLV, 10% XLP, 10% VE GI, 10% KBWP, 5% VGSH, 5% EDV, 10% FMF. My goals in creating this were shorter drawdown periods, higher Sortino and Sharpe ratios, and lower market correlation while not sacrificing total return too much. A minor second question is that I've been using 10% FMF managed futures for modeling since it started in 2013, but DBMF looks slightly better over the last three years it's been around, and I thought about splitting FMF and DBMF 5% each. What do you think? Thanks for all your help making investing fun, interesting, and a minor obsession.

Mostly Voices [20:48]

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

Mostly Mary [20:55]

My wife begs to differ with the adjective, Paul.

Mostly Uncle Frank [20:59]

Well, that's an interesting portfolio you constructed there. I had to look up some of these funds. Veggie, V-E-G-I, is an interesting fund as it invests in companies in the agricultural sector. So it's about 20% invested in John Deere tractors. Rub up your engines! And a lot of the rest of it in businesses like Archer Daniels Midland, all of which are very familiar to somebody who grew up in Iowa. Iowa, Iowa, save them all the land, joy on every hand, from Iowa, But I digress. So what I did with your portfolio for comparison purposes, first put it into Portfolio Visualizer. But then I looked at your funds and they all are some variation of value for the most part. So I took the six funds USMV, VPU, XLV, XLP, VEGI, and KBWP, and swap those out for just a plain old Vanguard Value Fund, VTV. And if you do that, you'll see that the modified portfolio and your portfolio have very similar performances. Yours is a little bit better. But what that tells you is really what you've got there is a lot of value, most of it large and mid cap, but some small cap too. So you would expect a portfolio like this to perform better than a growth-based portfolio. In times like this, where we've got some inflation and some reflation when we came out of March of 2020, it also works much better than a growth portfolio in periods like we had in the 1970s going into the 1980s. and it also works well in environments like the internet bust and downturn in the early 2000s. But in other times it's going to underperform. It would have underperformed for most of the 1980s and all the 1990s. It would have underperformed the rest of the market. And I'm talking about just the stock portion of this in the 2010s, the 2010s. But it's certainly a viable portfolio selection overall, so long as you're willing to continue holding it even in times when the stock portion of this is underperforming the overall market, which it will for significant amounts of time.

Mostly Voices [23:48]

But I'm really pleased that you're able to take the principles that you've been listening to here and come up with something like this, because that's what I'm hoping people will be able to do with it. Have you ever heard of Plato? Aristotle, Socrates, yes, morons.

Mostly Uncle Frank [23:58]

Now, as for these managed futures funds, I do think that DBMF is a big improvement over the kinds of managed futures funds that I've seen in the past. Now, still, that's only a few years of data, but it does seem to be performing better than other managed futures funds that I've seen. And for more on that, you can check out episodes 57 and 55, I should say 55 and 57, where we did a 10 question analysis of that fund, DBMF. But I'm glad you are enjoying your obsession. I do suggest you buy your wife some nice gifts to tolerate it, starting with some wine or her favorite beverage.

Mostly Voices [24:39]

Top drawer, really top drawer.

Mostly Uncle Frank [24:43]

And thank you for that email. Now, maybe we should invite Bridget and her family over for some wine, since we haven't seen them at least in a couple of months now.

Mostly Voices [24:54]

I can't remember the last time that you invited me to your house for a cup of coffee, even though my wife is godmother to your only child. But let's be frank, yeah. But now I see our signal is beginning to fade.

Mostly Uncle Frank [25:11]

We'll pick up again this weekend with our weekly portfolio reviews of the seven sample portfolios you can find at www.riskparityradio.com on the portfolios page. And we'll probably answer some more emails. 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 into the contact form, and I'll get it that way eventually. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars, a review. That would be great. M'kay? Thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio. Signing off.

Mostly Mary [26:12]

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.