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 [0:37]

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.

Mostly Voices [1:32]

Yes!

Mostly Uncle Frank [1:35]

And don't forget that the host of this program is named after a hot dog.

Mostly Mary [1:39]

That's not an improvement.

Mostly Voices [1:42]

Lighten up, Francis.

Mostly Uncle Frank [1:47]

But now onward to episode 191. Today on Risk Parity Radio, we're just going to do what we seem to do best here.

Mostly Voices [1:55]

So without further ado, here I go once again with the email.

Mostly Uncle Frank [2:04]

And first off, first off, we have an email from Anderson. And Anderson writes, I'll go, Frank.

Mostly Mary [2:13]

I listened to the portfolio reviews And I know you have the All Seasons as a reference portfolio for risk parity, but I think it would be really helpful to also track and report a traditional retirement portfolio, maybe the standard 60/40 portfolio. When listening to the Change each Week, year to date, et cetera, I am always wondering how it's comparing to the 60/40, as if it were starting July 2020, like most others. Thoughts about adding it in? Hopefully I don't get an office space sound bite in response. Thanks again.

Mostly Uncle Frank [2:45]

Office space? Think I'm gonna have to go full Rex on you.

Mostly Voices [2:53]

Do you think anybody wants a roundhouse kick to the face while I'm wearing these bad boys? Forget about it.

Mostly Uncle Frank [2:57]

Maybe throw in a little Dalton.

Mostly Voices [3:01]

Never underestimate your opponent. Expect the unexpected.

Mostly Uncle Frank [3:05]

But getting to your emails, the reason that I use all seasons as a reference point portfolio is because that is what a lot of people think is, quote, the risk parity portfolio, unquote, due to that book, Money Master the Game by Tony Robbins, where he interviewed Ray Dalio and came up with it. But it's really just one simplistic version of that idea. But I thought I would include it because I knew people would be looking for it.

Mostly Voices [3:35]

Will Laddie frickin' die?

Mostly Uncle Frank [3:40]

Now, as to adding more portfolios to the sample portfolios.

Mostly Voices [3:48]

Let me understand this, because I don't know, maybe it's me, I make you laugh, I'm here to amuse you. Forget about it.

Mostly Uncle Frank [3:58]

And so, yeah, I don't really think I need to be tracking traditional portfolios as a sample portfolio in that manner. Not gonna do it.

Mostly Voices [4:05]

Wouldn't be prudent at this juncture.

Mostly Uncle Frank [4:09]

But although I won't give you that fish, I will teach you how to fish. You step right up here. I'll show you how you can do this yourself. If you're interested. And you can do this kind of comparison over at Portfolio Visualizer. and so I've set up a comparison and we'll link to it in the show notes, and it shows the Golden Butterfly Portfolio and the Golden Ratio Portfolio, and then the Comparison Portfolio is built into that calculator, that back tester, and one of the choices is a 60/40, the Vanguard Balanced Portfolio. So then to make the Comparison closer to the real time comparison or the real time Activity you see in the sample portfolios and we talk about in this podcast youd change the dates. So we started the date back in July of 2020, which is the closest monthly date you can get. Make sure you change the Period to monthly instead of yearly, which is at the top of it, and then we set it for a 5% annualized withdrawal done monthly. So I think that works out to 0.4167% per month. Multiply that times 12 and you'll get 5%. And so this simulation runs with those parameters in it with the three portfolios from July until the present. It's actually not quite the present because Portfolio Visualizer will only go to the last month in the free version. and requires you to pay if you are going to get the most current data out of their source there. But anyway, you can see that there and tweak it if you like. But what it shows is what these portfolios have looked like historically, which is that in times when the stock market is doing really well, the 60/40 portfolio is going to outperform these kinds of portfolios like the Golden Butterfly or the Golden Ratio simply because it has more stocks in it. And then in times when the stock market is performing poorly, that's when the risk parity portfolios tend to do better than the 60/40 portfolio. And so since we're in a bad time, if you look at the last three months or the last year to date or the last entire year, which are all reflected on that analysis, you'll see that the two risk parity portfolios are performing better than the 60/40. and right now over the course of the entire performance period, the Golden Butterfly looks the best in terms of risk reward, then the 60/40, then the Golden Ratio. But it's only been two years and we have not been through a complete economic cycle yet, which is when you really want to do your comparisons over a complete economic cycle for most portfolio comparisons. As always, the more data you have, the better off you are in terms of learning something. That is the straight stuff, O Funkmaster.

Mostly Voices [7:23]

So check out the link and hopefully that helps because you

Mostly Uncle Frank [7:27]

can use it in the future and just update the time in terms of the most recent date. And thank you for that email.

Mostly Voices [7:35]

Bow to your sensei. Bow to your sensei.

Mostly Mary [7:48]

Second off, we have an email from Aaron, and Aaron writes：hi Frank, have you checked the results of backtests from the portfolio charts and portfolio visualizer against the Bloomberg terminal, for example? I've tried a couple sample portfolios, and the results are oftentimes quite different for the same portfolio. Some other users on Reddit also reported that issue, mainly on portfolio charts. I just thought it would be important to alert you and your audience since you trust and recommend those tools all the time. I'm just concerned that these tools, although incredibly helpful, might need some auditing to make sure we can really trust the data. Thanks, Aaron.

Mostly Uncle Frank [8:27]

Well, no, Aaron, I do not have a Bloomberg terminal and I do not operate a data police.

Mostly Voices [8:36]

I don't think I'd like another job.

Mostly Uncle Frank [8:39]

There are many reasons you might see differences. One is that you may not be looking at the same time periods, whether it's intraday, daily, weekly, monthly, or annual data. That could be a difference. Another difference, particularly with Bloomberg, is that Bloomberg has its own proprietary indexes. and that is going to affect your factor funds. It may affect your sector funds, and it's certainly going to affect any commodities data because the commodities data is all over the map, particularly as you go back in time to look at different indexes. Bloomberg actually does not have the most popular commodities index. As for the data at Portfolio Visualizer and Portfolio Charts, they both have data pages I will link to them in the show notes and you are invited to send emails to them directly about their data and to look at what they've got there. They both rely a lot on what you call the Fama-French data, which is what the academics use for analyzing the stock market in particular. But I'm sure they would be happy to correct any errors in their data sets and have no interest in Using data that's not accurate. Danger, Will Robinson, danger.

Mostly Voices [10:00]

And what's the point of that? No, Will Robinson, danger.

Mostly Uncle Frank [10:04]

So you're going to be best off emailing them directly and pointing out specifically what data you are talking about, whether it's a particular security or a type of index where you see the discrepancies. I am certainly not concerned about this data based on what somebody says on Reddit.

Mostly Voices [10:26]

It's not that I'm lazy, it's that I just don't care. But thank you for that email. I have people skills. I am good at dealing with people. Can't you understand it?

Mostly Uncle Frank [10:38]

Next off, we have an email from Anna.

Mostly Mary [10:42]

And Anna writes, hi Frank, I really need to call for a rant on Vanguard. I know, I know. I'll probably be beaten by the investing community that has Vanguard as a holy grail.

Mostly Voices [11:03]

Go and tell your master that we have been charged by God with a sacred quest.

Mostly Mary [11:07]

I've had so many bad experiences with their customer services that I really cannot defend them anymore.

Mostly Voices [11:16]

I want you to be nice until it's time to not be nice.

Mostly Mary [11:20]

The Bogle days are over at Vanguard. Their broker interface is laughable compared with Fidelity and TD Ameritrade. I want to know if there are more people out there having the same issues. I'm done with Vanguard. I just moved to Fidelity and Fidelity Funds. What are your thoughts about Vanguard, you know, other than the obvious ones since everyone seems to love them but me. Thanks, Anna. Well, yeah, Anna, I have heard a lot of complaints about Vanguard in the past.

Mostly Uncle Frank [11:52]

year or two in particular, and they seem to be going through some kind of identity crisis.

Mostly Voices [11:56]

Secondary latent personality displacement. Oh, great one. Yes, sir.

Mostly Uncle Frank [12:03]

Having problems with target date funds and the interface and running off and trying to do some private equity stuff. But the fact of the matter is, in order to stay competitive all of these brokerages need to keep up with the times, and some of them do it better than others, at least at particular times. And it's interesting to think about where these brokerages came from, what their original business was. For Charles Schwab, going back to the 1970s, it was being a discount broker, and that came up right after they changed the rules, because it used to be a set fee that was charged by all of the brokerages and you couldn't change it. And so they always cut their teeth on people that wanted to trade stocks in particular at a discount. They weren't a fund company at all. You look at somebody like Fidelity, they were the fund company. In fact, their big calling in their first iteration was to run managed mutual funds. And so they were all the rage in the 1980s and 1990s in particular. Now, Vanguard's pedigree comes from a different direction. They were founded as the low-cost mutual fund provider. And first mutual funds like the Vanguard Wellington were the main focus, and then index funds became the main focus, and that's what they became known for. And they kind of rode that wave to the top of the heap. What's thrown them all for a loop has been the recent introduction of no fee trading and then fractional share trading. They were all kind of headed that way. But when places like Robinhood came out that kind of forced their hands into that area. What that does essentially is make the mutual fund form of fund obsolete. Real wrath of God type stuff. Because if you can trade ETFs, which are more efficient, without any fees and buying fractional shares of them. There's no reason anybody needs to buy a mutual fund anymore. And so what we've seen is that all of the new funds are being created in ETF form. Hardly anybody's creating any mutual funds anymore, and the mutual funds are likely to go away over the course of the next decade. Vanguard has realized that, and now they have ETF versions of virtually all of their popular funds and some ETF versions of things they do not have in mutual fund form. For instance, the small cap value fund, VIOV, does not exist in a mutual fund form at Vanguard. Nor does the extended duration treasury bond fund called EDV. That is not in a mutual fund form at Vanguard either. It's only in an ETF. Now, the other thing all the savvy companies have done is gone to phone applications. Fidelity's phone application works quite well. Interactive Brokers has two phone applications, one that is specifically targeted at ESG investors. Schwab has a decent one. E-Trade has a decent one. I don't think Vanguard does have a decent phone app, and that is a large impediment to a lot of people. So my thoughts are is that they are behind in the discount brokerage wars, and if they want to keep up, they're going to need to reform what they're doing, particularly on the customer service end. And I hope they do that because they've been a great company, they've been a leader in the do-it-yourself investing world, and there's no reason they can't get back up there again. They're just not there right now. I award you no points and may God have mercy on your soul. I suppose what might irk me the most actually is that they're not very friendly to the smallest investors. You can't handle the truth. A really small investor who maybe only has a thousand dollars or maybe not even a thousand dollars and wants to open a Roth or something else is gonna have a hard time dealing with Vanguard with something like that. Whereas they go to Fidelity, they can just put their money there and buy no fee ETFs and fractional shares of them and they're off to the races. Am I right or am I right or am I right? Right, right, right. But I wish Vanguard well and I hope they do catch up because the more competition we have for do-it-yourself investors, the better off we're all gonna be in terms of fees, choices and everything else. Yes! And thank you for that email. Last off.

Mostly Mary [16:57]

Last off, we have an email from Travis and Travis writes, Hey Frank, my young daughter, six years old, recently was able to claim some earned income and we opened her up a Roth IRA. Knowing her long time horizon, what would you invest in? VTI, QQQ, something leveraged? Love to hear your thoughts. Best podcast for personal finance out there. The best, Jerry, the best.

Mostly Uncle Frank [17:21]

Well, congratulations, Travis. That's most excellent news.

Mostly Voices [17:32]

I trust there were no violations of any child labor laws? Joey, have you ever been in a Turkish prison?

Mostly Uncle Frank [17:37]

And this is the perfect example of the kind of investor that would be frustrated by opening a very small Roth account. at a place like Vanguard with all of their difficulties and limits on amounts to be invested. Are you stupid or something? I'm as stupid as a stupid does. She's gonna be much better off at a place like Fidelity, where things are just a whole lot easier for the smallest investor.

Mostly Voices [18:12]

As to what she should invest in, Think big, think positive, never show any sign of weakness. Always go for the throat. Buy low, sell high. Fear, that's the other guy's problem. Perhaps we should bring in Sonia and consult the crystal ball. My name's Sonia. I'm going to be showing you the crystal ball and how to use it or how I use it. It's kind of looking at the aura around the ball. See the movement of energy around the outside of the ball. I would place it over a candle and it's through the candle that you will see the images into the crystal.

Mostly Uncle Frank [18:51]

And the crystal ball says, we don't know.

Mostly Voices [18:55]

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

Mostly Uncle Frank [19:00]

Why does it always say that? Well, what I really think is any low-cost, broad-based index fund is going to be just fine. VTI is nice psychologically because then when you sit down with her later to understand what she owns, you can explain to her that it's all the companies and that she's not going to do any worse or better than anyone else, but a rising tide floats all boats.

Mostly Voices [19:30]

But if you love technology, I suppose there's that QQQ. Yes, I love technology, but not as much as you, you see, but I still love technology.

Mostly Uncle Frank [19:44]

And I know Vanguard has some information technology funds that are similar. Always and forever, always and forever, always and forever. now forever. But once you've got most of it in one of those sorts of broad-based index funds, if you have a child that is interested in investing in a particular thing, there's nothing wrong with taking 50 or 100 bucks and letting them invest in that toy company or video game company or whatever else they are interested in just so they can track it and watch it, and then they can compare it to the index fund over time. Because these accounts can really be used to spur education and curiosity of younger people about investing, how to do it, and getting comfortable with it. Just the fact that you have a child that has an account that has investments, that puts them way ahead of most adults in the United States who still think this is weird or hard or expensive. But I trust that nobody listening to this podcast has those inclinations at all, although I'm sure you all know people like that. You are correct, sir! Yes! I don't think I'd mess around with any leveraged funds for anyone just starting out. There's too much Lobby in such an idea. You have a gambling problem. But it might be something fun to add on in a few years. Well, you have a gambling problem. When you can say, well, you've got that one that's chugging along quite well. Why don't we buy this little race car over here and see whether it flies off the road or not? And again, it's more for education and curiosity than as a mainstay.

Mostly Voices [21:47]

Down the quarter mile of death in their 7,000 horsepower nitro burning suicide machines as they shake hands with the devil when they scream through the burning gates of hell. But it's always nice to see people getting going early on their journeys to financial independence. We can put that check in a money market mutual fund, then we'll reinvest the earnings into foreign currency accounts with compounding interest and it's gone. Uh, what? It's gone. It's all gone. What's all gone? The money in your account. It didn't do too well. It's gone. And thank you very much for that email.

Mostly Uncle Frank [22:25]

But now I see our signal is beginning to fade. We will pick up this weekend, which what I think will be the last episode of season two of Risk Parity Radio. And we'll be talking about the sample portfolios and also the rebalancings we're doing in four of the sample portfolios, which will occur on Friday. We probably will not have any emails this weekend. But if you would like to send me one, you can send an email to frank@riskparityradio.com that email address 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. 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 Voices [23:33]

And it's only a dollar, step right up, it's only a dollar, step right up, because it forges your signature, not completely satisfied, mail back, unused portion of product for complete refund of price of purchase, step right up, please allow 30 days for delivery, don't be fooled by cheap imitations, you can live in it, living it, loving it, swimming it, sleeping it, living it, swimming it, loving it, remove the parasites, ancient conduit sheets. That's right. And it entertains visiting relatives.

Mostly Mary [24:20]

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.