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 have just stumbled in here, you will find that this podcast is kind of like a dive bar of personal finance and do-it-yourself investing. Expect the unexpected. It's a relatively small place. It's just me and Mary in here. And we only have a few mismatched bar stools and some easy chairs. We have no sponsors, we have no guests, and we have no expansion plans.

Mostly Voices [1:10]

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

Mostly Uncle Frank [1:14]

What we do have is a little free library of updated and unconflicted information for do-it-yourself investors.

Mostly Voices [1:23]

Now who's up for a trip to the library tomorrow?

Mostly Uncle Frank [1:27]

So please enjoy our mostly cold beer served in cans and our coffee served in old chipped and cracked mugs along with what our little free library has to offer.

Mostly Voices [1:51]

But now onward, Episode 339.

Mostly Uncle Frank [1:55]

Today on Risk Parity Radio, we're gonna get back to your emails, which seem to be stacking up here, and I will get to all of them eventually. It's not that I'm lazy, it's that I just don't care. But first, actually two interesting items from the news this past week. past week. First, there's an interesting article out by David Blanchett at the Think Advisor website. And it's entitled, Is the 4% Rule Too Safe? You can't handle the truth. And he argues fairly convincingly, even though it's a short article, that 5% ought to be the baseline for the average retiree, for financial advisors who are advising their clients. Watch out for that first step. It's in doozy. And he notes that 61% are still at 4% and a number more are even less than that. Now, this is pretty much what we've been saying here all along since the middle of 2020 when we started this podcast. Inconceivable. That it was possible to achieve a better safe withdrawal rate than the 4% rule would imply if you used a better portfolio and more reasonable assumptions and management techniques as far as inflation and withdrawals were concerned. Because based on a lot of poorly done research, there had been a lot of papers in the past 10 years that suggested that the four percent rule was dead and you had to go lower than that and dogs and cats were gonna live together.

Mostly Voices [3:41]

You can't handle the dogs and cats living together.

Mostly Uncle Frank [3:45]

But it seems like people are finally getting the memo. Did you get that memo? And here's how we know that things have changed. Eleven years ago, this same author, David Blanchett, along with Michael Finke and Wade Pfau wrote a paper that is entitled the 4% Rule is Not Safe in a Low-Yield World. Exactly the opposite headline from the one he just wrote last week. And I've criticized those analyses in the past. They're based on faulty assumptions. And now it appears that he's admitted that he was wrong and they were wrong and they have been wrong for a very long time.

Mostly Voices [4:32]

Wrong!

Mostly Uncle Frank [4:36]

So it's nice to see some people are coming around to the truth about this. Didn't you get that memo? With the real question being why did it take them a decade to get there when it seems pretty obvious from anybody who's actually analyzing portfolios that we can all hold? And I'll go ahead and make sure you get another copy of that memo, okay? Maybe they just thought it would be better for their AUM fees if their clients did not spend their money and it just kept growing.

Mostly Voices [5:12]

My straw reaches across the room and starts to drink your milkshake.

Mostly Uncle Frank [5:22]

'Cause the bigger the milkshake is, the sweeter the drinkin'.

Mostly Voices [5:30]

I drink your milkshake. I drink it up.

Mostly Uncle Frank [5:38]

Anyway, it's nice to see that a few prominent people are finally getting the memo. Yes. Corporate that's pambolina speaking. I have the memo. And let's hope that trend continues. I will link to the new article and the original paper in the show notes. The second newsworthy item came out just in the past couple days. It is an article about the financial independence movement by a journalist at the New York Times who had attended the Economy Conference. Now most of the article is very sensational and probably not worth reading because it's about Tech bros who had cashed out large sums from startup stuff in their 20s. Do you think anybody wants a roundhouse kick to the face while I'm wearing these bad boys? Forget about it. And are running around buying expensive cars and houses and flashing their wealth. Forget about it. So the headline and the opening part of the article and the end of the article are all Fairly sensational. Click baity. Like a garbage truck dropped off the Empire State Building. But the middle of the article does talk about normal people at the economy conference.

Mostly Voices [7:00]

Yes.

Mostly Uncle Frank [7:03]

And in particular, the case study that I participated in that we did that Sunday morning. I will just read you what it says here, because it's my claim to fame this week. Shirley, you can't be serious.

Mostly Voices [7:15]

I am serious. And don't call me Shirley.

Mostly Uncle Frank [7:19]

And I quote, in one morning session, a brave volunteer named Krista put her life's balance sheet up on a big screen so that 500 strangers could critique it for blind spots. She is 35 with four kids, ages 16, 15, 9, and 7. and makes $32,000 working in a library in Wisconsin. Over the last seven years since discovering FIRE, she and her husband had slowly paid off $200,000 in credit card and home and auto loan debt. But she knew, she said, humbly dipping her head a bit, that she still had a long way to go, especially when compared with all the younger, already retired millionaires in the room. Young America, yes sir. Wait a second, Frank Vasquez, one of the conference speakers interrupted. No. Do you all see this? Crystal was a teenage mom who grew up in poverty. We are looking right now at a map of a hero's journey. And I meant every word I said there. The map, in fact, we were looking at is the one we talked about in episode 208, which is for beginning investors and getting from starting saving all the way to financial independence, along with the numbers she provided. Now, it would have been a much better article if they would have spent a lot more time on Krista's story and forgot about the tech bros and their Lamborghinis. No more flying solo. Because financial independence should not be just for Tech bros and chiefs and warriors and rich and powerful people. It should be for all the people.

Mostly Voices [9:04]

Only the eyes of a chief may see the E. P. M. This was not written for chiefs. Hear me. Hear this. Among my people, we carry many such words as this from many lands. Many worlds, many are equally good and are as well respected, but wherever we have gone, no words have said this thing of importance in quite this way. Look at these three words written larger than the rest with a special pride never written before, or sin's tall words proudly saying, we the people. That's what you call Eid Plebnista was not written for the chiefs or the kings or the warriors or the rich or the powerful, but for all the people. Anyway, I'll try to link to the article when I think it's behind a paywall and you can check it out.

Mostly Uncle Frank [10:06]

But now let's get to your emails.

Mostly Voices [10:10]

And so without further ado, here I go once again with the email and First off, first off, we have an email from Average Joe.

Mostly Mary [10:29]

Winner! Average Joe! And Average Joe writes, in the spirit of Spanish football announcers, I have a question about gold.

Mostly Voices [10:34]

Mary Mary, I need your hug.

Mostly Mary [10:43]

I am building a decumulation golden butterfly portfolio with a target accumulation of gold within one to four years from retirement. The Wall Street Journal reports that Chinese buyers purchase of gold bars and coins rose 26.77% to 106.32 tons. With China and Russia buying gold for diversification from international sanctions, Would I need to have the patience of Job to wait it out until gold stabilizes or falls, or dollar cost average into a new gold price floor to diversify with what gold is presently priced? I am concerned it may take a decade for the price to fall. Crystal Ball crashing. Sincerely, Average Joe from Arkansas. P.S. I placed a donation to the Father McKenna Center as your response is worth more than the weight of gold. Yeah, baby, yeah!

Mostly Voices [11:42]

Well, first, thank you for your donation, and we have moved you

Mostly Uncle Frank [11:46]

to the front of the line. As most of you know, we do not have any sponsors on this podcast, but we do support a charity called the Father McKenna Center that helps hungry and homeless people in Washington, D.C. And if you make a donation to the Father McKenna Center, you get to go to the front of the email line. And you can do that in a couple of different ways. You can go through our support page and donate through Patreon, and we're set up there for that. Or you can also go directly to the Father McKenna website, as Joe has done, and make your donation there directly.

Mostly Voices [12:23]

Money!

Mostly Uncle Frank [12:28]

Either way, if you've done it, please note that in your email so I can flag it. and move to the front of the line. And thank you for your support. Now getting to your question. Yes, it does seem that people are getting pretty excited about gold these days and buying it at Costco and evidently there are shops in Korea that are selling little bars. I saw another headline about that recently. I love gold. It does always worry me because usually It's when people start buying gold coins and little gold bars, it's when it's reaching another all-time high. But that kind of frenzy actually can go on for years, as it did in the 1970s. Buy low, sell high. Fear, that's the other guy's problem. And for a while in the early 2000s.

Mostly Voices [13:20]

All my life I've been in love with its color, its brilliance, its divine heaviness. I welcome any enterprise that will increase my stock.

Mostly Uncle Frank [13:32]

So I don't think you can really use it to predict anything. And I think gold is one of the most unpredictable things to try to use a crystal ball on. A crystal ball can help you.

Mostly Voices [13:44]

It can guide you.

Mostly Uncle Frank [13:48]

It can trend one way for five or ten years, or it can go nowhere for five or ten years.

Mostly Voices [13:52]

it's kind of looking at the aura around the ball. See the movement of energy around the outside of the ball.

Mostly Uncle Frank [14:00]

So I think for most people, the easiest thing to do is just build out the position with new money that you're investing into your portfolio. Because there's no real way of saying that gold in the near term, I guess you're talking about one to four years, will be more or less valuable than it is today. They're just. Isn't a way to figure that out.

Mostly Voices [14:23]

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

Mostly Uncle Frank [14:27]

So no, I wouldn't be waiting around to buy gold now if you're looking to buy some gold now to fill out a portfolio. There has been a pullback, if that helps you at all, mentally. So I think you can just go ahead and dollar cost average into it over the next one to four years. Or not. But psychologically that might be more pleasant than trying to go whole hog either now or at some date in the future. Because I can tell you that once you buy it, mostly it's just gonna sit there.

Mostly Voices [15:01]

And that's the way -huh -huh, I like it. -huh -huh, I like it.

Mostly Uncle Frank [15:06]

Just please buy it in the form of ETFs like normal professionals do these days. And don't be running around like Grandma and Grandpa Clampett, shoving gold coins in bars and coffee cans and burying them in your basement. Well, he's new to me.

Mostly Voices [15:23]

I've heard of gold dollars, silver dollars, paper dollars, but he says he's gonna pay me in, what do you call 'em, granny? Million dollars.

Mostly Uncle Frank [15:31]

Just treat it like all of your other investable assets. Sorry my crystal ball was all fuzzy about this as usual. We don't know.

Mostly Voices [15:43]

What do we know? You don't know. I don't know. Nobody knows. But that's to be expected. Do you expect me to talk? And thank you for your email.

Mostly Uncle Frank [15:53]

No, Mr. Bond, I expect you to die. Second off. Second off, we have an email from Matt.

Mostly Voices [16:08]

I have officially amounted to jack you squats.

Mostly Mary [16:12]

And Matt writes：hi Frank and Mary, me again. Since I last messaged, I've been using portfolio charts in Portfolio Visualizer extensively and can't believe such great tools are available online at no charge. I have spent a lot of time looking at our current portfolio and am working to find the best long-term portfolio for long-term decumulation, 50 plus years. We are 43, me, and 52, my wife, and have been retired for two years now. Below are a few questions. One, after a lot of research on both websites, I believe the below portfolio is the best option for us based on our current holdings, trying to not sell and incur taxes just to change portfolio, while also taking full advantage of a portfolio similar to the golden butterfly ratio. This portfolio will require nearly zero sales in our brokerage account and based on the metrics on the below chart, I feel it is well positioned to allow us a four to five percent withdrawal rate for the next 50 plus years. Thoughts? Current portfolio here and planned portfolio here. Two, managed futures. One allocation that I would still like to incorporate into the above plan portfolio based on your feedback is managed futures. Since it is so difficult to look at these on portfolio charts or portfolio visualizer, how much would you recommend allocating to either DBMF or MLM or what would you take it away from? Gold. Also, does it matter which type of account this goes in? Brokerage, IRA or Roth? Three, gold. We have zero in gold at the moment and need to purchase a decent amount. With gold at all-time highs, would you consider waiting for a pullback or just invest in the asset up to the allocation amount now and move on? Four, brokerage account taxes. We are still trying to manage our taxable income for ACA purposes, and the investments we have are throwing off a decent amount of dividends. A good problem to have, I know. With that said, are there recommendations you would have to lower this and then just sell as part of our annual rebalance to refill our bank account each year? The benefit being we have complete control over how much income versus having little to no control over what is given off by these funds in our brokerage account. Five, any other thoughts or suggestions? If there are any additional charts or information that would be helpful to better answer the above questions, please let me know and I will send over. Thank you again for all that you both do. Love listening to the podcast every week and always appreciate the laughs from the clips. You mean let me understand this because I don't know, maybe it's me, I'm funny how, I mean funny like I'm a clown, I amuse you.

Mostly Voices [19:02]

I make you laugh, I'm here to muse you. What do you mean funny? Funny how? How am I funny? Well, we've got a lot to chew on here with five questions.

Mostly Uncle Frank [19:13]

Going to your first one, I did pull up these portfolios. I'll try to link to them in the show notes. You have to do a little gymnastics to make them come up in portfolio charts. And I'm gonna be looking at the planned portfolio. 'Cause otherwise this is gonna get too confusing. So what your plan portfolio looks like is on a macro allocation basis is 62% in stocks, and that includes 2% in REITs, 23% in treasury bonds, of which 10% are short term and in T-bills, and then you've got 15% in gold. All in all, that looks like a pretty good portfolio to me. And as David Blanchett says, we should start with a 5% safe withdrawal rate now, although I see you're going for a 50-year time frame. But between 4% and 5% should be easily achievable. I am wondering whether you've got a little too much on the cash side here. 10% is okay, but then if you're going to have that much in cash, I'd probably move some of the intermediate treasury bonds over to the long-term treasury bonds because that will give you a little bit better protection in a recession. But I think this portfolio is well within good parameters. I'm not sure you really need that 2% in REITs. It's probably not doing much of anything. So that could just be folded into your other stock allocations if you wanted to. But I have no objection to you keeping them. It's just a management issue. Make sure if you do have REITs, you're putting them in an IRA. because they do throw off ordinary income. Question number two, managed futures, considering allocation to those and wondering where you should take it from and whether you should go with DBMF or KMLM or something else. Well, let's answer that question first. I think DBMF is the closest thing to an index fund in that category, so I would probably use that one. In general, the recommendation for alternatives is between about 15 and 25%. You already have 15% in golds, so I would not add any more than 10% in a managed futures fund. And that, incidentally, is similar to what we actually hold in our personal accounts. About 15% in gold and about 10% in a Managed Futures Fund. Now where should it come from? Well I think I would probably use the 2% in wreaths for this purpose and then just take a little bit out of each other thing. I probably would raid the short-term bonds and then move a little bit of the intermediate term bonds over to the long-term side. But you could also think about something that is 10% gold and 10% DBMF as the total allocation to alternatives, which might work pretty well with this portfolio. And if you did that, you could take the 5% from gold, 2% from the REITs, and 3% from the short-term bonds or T-bills. Or you could go over and take some of the other stock allocation, because you still have 60% going on in the stocks even after you move the REITs over. In terms of which kind of account it goes in, I would favor putting it into a retirement account because it does throw off some distributions. They are actually pretty good about not making them too nasty, but there will be some unpredictable distributions, particularly at the end of the year out of that fund, particularly if it has a good year. I don't think you would think it'd be a maximum growth kind of thing, so I don't think you would put it in the Roth. Question three, Gold, you're wondering when to make the investment. This was what we just went over in the last question from Average Joe.

Mostly Voices [23:18]

Hey, Rocky, watch me pull a rabbit out of my hat. Again! And the answer is, I still don't know the answer. Now, the crystal ball has been used since ancient times. It's used for scrying, healing, and meditation.

Mostly Uncle Frank [23:31]

or at least can't tell you what would be the best answer. So if it's the most comfortable, just dollar cost average it over there over a little period of time. But you could put it all in at once if that was more convenient for you. We have actually had a pullback, so if that's important, go ahead and use that as a reason to go ahead and make the investment now. All right, next question, brokerage account taxes. You're wondering how to control those. And I think basically what you want in your brokerage account is mostly your stocks and if you have things that pay dividends, you want the ones that pay qualified dividends. And I don't know whether that would include whatever international fund you are using that may need to go in the IRA. I also don't know what the proportions are of each of these accounts. but I would not be holding excessive short-term bonds or T-bills or anything outside of retirement accounts. You really only want to hold what you think you're going to be using in the next year, and maybe not even that, because those will be generating a lot of ordinary income right now. And if you are using standard kind of index funds for your stock holdings, I would not expect those dividends to change a whole lot year to year. They'll probably be pretty consistent and they'll probably be around 2% if you're just talking about a basic index fund. All right, question five. Any other thoughts or suggestions? Well, I would suggest that you also take these plans and go and model them over at Portfolio Visualizer using the Monte Carlo simulator there in particular. to see how things would pan out. And I'd also probably download the toolbox from early retirement now and run a portfolio like this in there. You won't be able to run your exact portfolio in that, but they do have stocks and Fama-French factors and treasury bonds and gold there. So you can construct a portfolio of all those things and see how it performed. over the past hundred years or so, and that might be valuable too. Make sure you also check out the other calculators at Portfolio Charts, including the safe withdrawal rate one in particular. But you're definitely on the right track here, and I hope you can come up with something that works for you, and I think what you've got there should work pretty well. The best, Jerry, the best. Just one note on your last comment you wrote. Love listening to the podcast every week and always appreciate the laughs from the clips.

Mostly Voices [26:22]

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

Mostly Uncle Frank [26:27]

This is always the most controversial thing about this podcast and I will read you my latest one star review for your amusement as well.

Mostly Voices [26:35]

That's not an improvement.

Mostly Uncle Frank [26:38]

And it says, the content of this podcast seems okay, perhaps even helpful, But the sound bites are immensely distracting. If you're looking to be entertained like a 10-year-old child with ADHD would enjoy, this podcast may be for you.

Mostly Voices [26:55]

All hayed now enters his holiness, Takamada, the Grand Inquisitor of the Spanish Inquisition.

Mostly Uncle Frank [27:08]

What can I say? I resemble that remark.

Mostly Voices [27:11]

Takimada, do not employ him for compassion.

Mostly Uncle Frank [27:16]

Good thing this is a hobby and I'm not dependent on sponsorships.

Mostly Voices [27:20]

Takimada, do not beg him for forgiveness.

Mostly Uncle Frank [27:25]

But it does kind of weed out the riff-raff, I must say.

Mostly Voices [27:29]

Takimada, do not ask him for mercy.

Mostly Uncle Frank [27:33]

Anyway, hopefully that helps and thank you for your email.

Mostly Voices [27:37]

Let's face it, you can't talk them out of anything.

Mostly Uncle Frank [27:43]

Next off, we have an email from Kimbrough from Alaska. And this is actually the last part of an email that Kimbrough already sent us. but got garbled, so we didn't get the last part of it last time. So we're just reading that part of it. And Kimbro writes, hello, Frank and Mary. Hello again, and thank you for all you do. Wow, how lucky we are that you are on this planet genuinely and peacefully sharing your wisdom.

Mostly Voices [28:26]

Oh, no, my young Jedi, you will find that it is you who are mistaken about a great many things. PFF is also down at a low now.

Mostly Mary [28:41]

I need these pieces of the whole diversification picture. Maybe buying in now at a low is no problem. I'm just shy. Thank you, thank you, and thank you again, Kim Bro and Anchorage, Alaska.

Mostly Uncle Frank [28:53]

All right, I'm not sure you would want to use PFF at all. It's kind of a specialty thing. And PFF is a preferred shares fund. And really what it's most useful and who it's most useful for are people that are in high income tax brackets, but they want to hold some kind of bond-like thing in their taxable account for whatever reason they need to do that. And if you're in that situation, something like PFF is helpful. because it pays qualified dividends and therefore you're not paying ordinary income tax rates on that for its dividends. There's another fund called PFFV, which I also find pretty useful and it's paying a higher dividend than PFF is right now as well as having a lower expense fee.

Mostly Voices [29:56]

But unless you fall into that category and would otherwise be buying some kind of corporate bonds or something, You probably don't need to have PFF in your portfolio, so I'd probably just let it go. And thank you for the rest of your email. Anchor down in anchor ridge. Anchor down in anchor ridge. Last off.

Mostly Uncle Frank [30:24]

Last off, I have an email from John.

Mostly Voices [30:27]

Well, how about John? That's nice and simple. What, are you serious? Well, yeah. John, you want to do that to the kid? Do what?

Mostly Mary [30:37]

And John writes, hi, Frank, and thanks, Mary. Well, I picked an asset allocation, and now I just need to let it be. What? It's gone.

Mostly Voices [30:48]

It's all gone. What's all gone? The money in your account. It didn't do too well. It's gone.

Mostly Mary [30:56]

Given my psychological makeup, I think I need to step away, stop engaging with these topics for a while, stop looking at my accounts so frequently, and ideally become appropriately detached but attentive. Do you have any tips for striking that balance over the long run? Is there a minimum level of attentiveness to your long-term investments that you would recommend before detachment becomes negligence? Or can it be okay, or maybe even for the best, to disengage completely? Thanks as always, John. Hey, John. Hey, let's go to the John. Huh, John?

Mostly Voices [31:30]

Let's go. Well, wouldn't he outgrow those jokes? Look, kids are mean. Look, I just want him to have a happy childhood too, but long John Silver? I mean, I don't know what to say.

Mostly Uncle Frank [31:41]

All right, this is a follow-up to John's emails that we talked about in episodes 329 and 330 about his various portfolio machinations and use of the portfolio matrix at portfolio charts.

Mostly Voices [31:57]

Groovy, baby.

Mostly Uncle Frank [32:01]

But getting to your question, I don't really know your exact temperament, but in general, people who are not looking at their portfolio or fiddling with it often or thinking about it often tend to do better than the ones that are looking at it and fiddling in with it pretty often. So you may want to take the app off your phone if that's what you use to look at it with. On the other hand, I don't have any trouble looking at my portfolio fairly often, and I have to for the purpose of this podcast anyway. So I think it helps if you just have a very long perspective on what has happened in the past and all of the different things that could happen. And you see that everything is generally just some kind of variation of something that happened before. Even 2022 was kind of like what happened in the 1970s towards the end of it and back in 1937. So there's always some kind of analog that you might want to look at or could look at. I think if you don't have that kind of historical perspective, that's what makes people really nervous. And it's problematic because they tend to think that this never happened before, something like this never happened before. And the truth is always, well, this exact thing didn't happen before, but something like it or something that had a similar effect did happen before. You're just not aware of it. You keep using the word. I don't think it means what you think it means. Now, how often do you really need to look at it? Well, probably not very often. You just need to look at it for the purpose of rebalancing or withdrawals or something like that. And obviously when you do your taxes, you have to deal with it then. So if you just wanted to look at it every quarter or every year or every month, that would be fine.

Mostly Voices [33:49]

You need somebody watching your back at all times.

Mostly Uncle Frank [33:53]

I do think you can disengage Pretty completely, if that is what you'd like to do as well. So maybe give that a spin for a while and see how you feel about it. It could work. As long as you're not actually playing around with it and trying to market time, you can look at it as often as you like. Sorry, that wasn't a very definitive answer. But it is what it is and it does depend largely on your personality. Hopefully it helps a little bit and thank you for your email.

Mostly Voices [34:32]

Bow to your sensei. Bow to your sensei.

Mostly Uncle Frank [34:36]

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.riskparriaradio.com, put your message into the contact form and I'll get it that way. We are about three weeks to a month behind on these emails, but we will be getting to them, even though we have some more hiatus periods coming up, because we got graduations and weddings and rowing competitions and all sorts of things going on. If you haven't had a chance to do it, please go to your favorite podcast provider and like, subscribe, give me some stars, hopefully more than one, and follow. 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 [35:52]

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.