Not Uncle Frank [0:01]

A foolish consistency, is the hobgoblin of little minds, adored by little statesmen and philosophers and divines.

Mostly Uncle Frank [0:10]

If a man does not keep pace with his companions, perhaps it is because he hears a different drummer, a different drummer.

Mostly Aunt 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 [0:37]

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.

Not Uncle Frank [0:50]

Yeah, baby, yeah.

Mostly Uncle Frank [0:52]

And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Some of our listeners, including Karen and Chris, have identified additional episodes that you may consider foundational, and those are episodes 12, 14, 16, 19, 21, 56, 82, and 184. Whoa, and you probably should check those out too, because we have the finest podcast audience available.

Not Uncle Frank [1:26]

Top drawer, really top drawer.

Mostly Uncle Frank [1:31]

Along with a host named after a hot dog.

Not Uncle Frank [1:34]

Lighten up Francis.

Mostly Uncle Frank [1:38]

But now onward, episode 360. I always love numbers like 360. 360. I always love numbers like 360. 360 is what is known as a superior, highly composite number, which means it has a lot of factors, I think 24 divisors. But I digress, I'm beginning to sound like the Numberphile podcast, which I do listen to.

Not Uncle Frank [2:03]

I am a scientist, not a philosopher.

Mostly Uncle Frank [2:07]

It's largely English mathematicians talking about golden ratios and Mandelbrot sets and things.

Mostly Aunt Mary [2:14]

And it's through the candle that you will see the images into the crystal.

Mostly Uncle Frank [2:22]

But we will dispense with the numerology for the moment. Try to do what we do best here, which is answer your emails. We have a trifecta of emails today that all went to the front of the line due to their donations to the Father McKenna Center. As most of you know, we do not have any sponsors for this podcast, but we do support a charity called the Father McKenna Center. It supports hungry and homeless people in Washington DC. Full disclosure I'm on the board of the charity and I'm the current treasurer. We are running a two-for-one promotion right now.

Not Uncle Frank [2:58]

Double your pleasure, double your fun.

Mostly Uncle Frank [3:02]

I was on the Financial Quarterback podcast recently and they offered to match donations for up to $10,000. And all three of these people did so and they all went to the front of the line, which is the prize you get for donating to the Father McKenna Center, whether we're in a matching period or not, I believe by the end of this week we will have achieved our $10,000 goal for this round. If you will, and I'm very grateful for everyone that's donated, but if you still want to get in on it, there's still time Give us that extra added push.

Not Uncle Frank [3:40]

What we do is if we need that extra push over the cliff. You know what we do. Put it up to 11.

Mostly Uncle Frank [3:45]

11, exactly, and you too can go to 11. And in order to do that, please go to the donation page, which I will link to in the show notes, but without further ado.

Not Uncle Frank [3:58]

Here I go once again with the email.

Mostly Uncle Frank [4:01]

And First off. First off, we have an email from Ned.

Not Uncle Frank [4:07]

Hell, get out the Crayolas and color me tickled pink.

Mostly Aunt Mary [4:12]

And Ned writes Hi Frank, I just listened to episode 359 where you had a question from a visually impaired fan. I am actually a legally blind individual and can possibly help with some of his difficulties. I'm a blind investor, but I don't invest blindly.

Not Uncle Frank [4:29]

Not going to do it Wouldn't be prudent at this juncture.

Mostly Aunt Mary [4:32]

To view your website and most others with charts or plots, I use magnification software such as Windows Magnifier or a subscription software called Fusion put out by Freedom Scientific. Subscription software called Fusion put out by Freedom Scientific. It includes an extensive magnification software as well as a text-to-speech component known as JAWS Job Access with Speech. There is also a freeware text-to-speech software called NVDA, same as NVIDIA Ticker Symbol. I use these accessibility tools to navigate most investing websites with graphics that I cannot see With a mobile device such as an iPad or iPhone.

Mostly Aunt Mary [5:10]

I simply use the voiceover function to read text, but usually get little to no information on charts. Technology has not quite gotten there with AI yet to adequately describe a chart or plot as of yet, but hopefully these large language models will improve on that in the coming years. On the plot as of yet, but hopefully these large language models will improve on that in the coming years. On the investing side of things, I am late starting in the investing game and I'm still in the accumulation phase of things. I am primarily a single company stock investor, as I do enjoy researching companies and investing my money with those I believe will give strong returns in the long term. In looking at my portfolio, I do notice that I have mostly large and mid-cap stocks mostly tilted to the growth factor. I have heard you talk about using a large cap growth small cap value combination for accumulation and I'm convinced that I need to add small cap value exposure to my portfolio.

Not Uncle Frank [6:03]

I'm telling you, fellas, you're going to want that cowbell.

Mostly Aunt Mary [6:07]

I am starting to DCA into Advantis US small cap value ETF, avuv, to accomplish this. However, I am older than most in their accumulation phase and wonder if I should begin allocating some to long-term treasuries and alternatives, such as gold and managed futures, by beginning to DCA to a small 10% allocation to each. My thoughts are that this could begin dampening the volatility a bit, but also give me something to sell if a bear market were to give me a good buying opportunity for some of my favorite companies. Thank you for all you do for us in the DIY investing world, ned the blind investor.

Not Uncle Frank [6:47]

Ned Needle nose, ned Ned the head. Come on, buddy case western high. I did the whistling belly button trick at the high school talent show Bing.

Mostly Uncle Frank [6:57]

Well, I have a great fondness for the name Ned because I have a brother named Ned and a son named Ned, and I find people named Ned to be highly reliable.

Not Uncle Frank [7:08]

Am I right or am I right, or am I right, right, right, right.

Mostly Uncle Frank [7:13]

And you certainly did not disappoint us. Now Ned's email refers back to our last episode, episode 359, where we were answering an email from Michael, where we were answering an email from Michael who noted that our website was less than desirable in terms of its appearance and readability. It's crap, which is true it's crap. So I greatly appreciate your suggestions here, since I was kind of at a loss to really answer Michael's question, and you mentioned Windows Magnifier or a software called Fusion, a speech component known as JAWS and software called NVDA. All of those sound quite useful. I'm not personally familiar with them, but I trust that you are and that you have found them helpful in deciphering our website. Let's come up, and so thank you for making these suggestions.

Not Uncle Frank [8:11]

Bing again.

Mostly Uncle Frank [8:14]

Now getting to your question, yeah, I think your idea is a sound one, that at some point it makes sense to transition into a more diversified portfolio, and one way to do that easily is to just start adding the things that you're missing and leave the things that you have already alone, which is a very tax-efficient way of approaching this, because then you don't have to sell anything and incur any taxes, which might not matter if it's in a retirement account, but might matter a whole lot if if it's in a retirement account, but might matter a whole lot if it is not in a retirement account. Now there are a few considerations here which have to do with just the overall concept of transitions, because, as William Bernstein has said and others have copied, once you have won the game, you should probably take some of your chips off the table and stop playing, or stop playing so hard. But then the question always becomes well, when have you won the game, or won it to the extent that you can start taking your chips off the table? And the short answer to that is when you have accumulated enough to support your withdrawals in retirement assuming you are going to retire and once you've gotten to that level, you can certainly transition your portfolio in any way that seems convenient either right away or over a period of time, to something that is less aggressive and kind of ready to go, so that, when you get to your retirement, everything is all lined up and has been lined up for at least a couple of years before you pull the plug on whatever income sources that you have.

Mostly Uncle Frank [9:53]

Now, you mentioned you are an individual stock investor, which is a great pastime if you enjoy reading all of those financials from companies, but if you follow people like the Value Stock Geek or Brian Feraldi and you want to put in the time to do that and you enjoy that, that can be a good approach. It does make sense, though. What you're doing is to ultimately balance out your overall stock portfolio particularly if you're getting to a retirement portfolio into, essentially, half growth and half value, and there are many ways to do that. The simplest way we talk about here is well, if you have a large cap growth fund or an S&P 500 fund and you pair that with a small cap value fund, that is a simple way of achieving that goal of half growth and half value. Now, if you have individual stocks, then you need to categorize what those are, as you have done, and add the appropriate fund or balance that out on the other side. But that's the general idea and I think what you're doing makes a whole lot of sense.

Not Uncle Frank [11:01]

That is the straight stuff. Oh funk master.

Mostly Uncle Frank [11:04]

And is a good example of how you can modify the approaches we talk about here. That do not need to be the absolute simplest thing, because, although that is one of our principles, I always view that as the third principle, if you will, because it's certainly a lot less important than the Holy Grail principle about diversification and the macroallocation principle about macroallocations to varied asset classes. So if you are getting close to having enough money, or if you already have enough money to retire, yeah, you could transition slowly or transition quickly, but transitioning to a more diversified and less volatile portfolio probably makes a lot of sense at this point. So when you say you do not invest blindly, I heartily concur.

Not Uncle Frank [11:52]

Yes.

Mostly Uncle Frank [11:54]

And thank you for your suggestions for Michael and thank you for your email.

Not Uncle Frank [12:00]

Ned, we meant well and everyone here tried their best. Well, my family and I can't live in good intentions, marge. Oh, your family is out of control, but we can't blame you because you have good intentions. Hey, back off man. Oh, okay, dude, I wouldn't want you to have a cow man. Here's a catchphrase you better learn for your adult years. Hey, buddy got a quarter.

Mostly Uncle Frank [12:27]

Second off. Second off we have an email from Kyle Kyle, and Kyle writes Dear Frank and Mary, you rock Still the best podcast going.

Not Uncle Frank [12:41]

Yeah, baby, yeah.

Mostly Aunt Mary [12:43]

I would like your thoughts. After comparing the price of BTC with the price of the BTC spot ETF from BlackRock, I noticed that from January 23rd to March 13th, IBIT saw a 48.7% increase. In the same time, BTC underwent a 47% rise. Additionally, from March 13th to the bottom on August 5th. March 13th to the bottom on August 5th, IBIT and BTC both went down 42.5%. I found a couple other minor tracking errors, but maybe it was just that it is hard to compare candles on an asset which is tracked 24-7 versus something that trades eight hours per day. Would you expect a one-to-one track with a product by someone like BlackRock? If anyone has a solid product, I would think it would be them or one of the other very large players or is it too early to tell? Could there be risks in ETFs beyond the risk of the underlying asset, even in a large and well-established firm? Best regards, Kyle. This is the end, Kyle, it's you and me.

Not Uncle Frank [13:46]

This is the end, Kyle. It's you and me.

Mostly Uncle Frank [13:49]

Well, truth be known, kyle, I have not investigated Bitcoin ETFs very much. The next time I feel like buying Bitcoin, I will probably use an ETF, so I suppose it's probably something I should know something about, even though I've been selling Bitcoin mostly in the past eight months to a year. I think you probably hit on the issue, though, in that the ETFs are only traded when the US stock exchanges are open, whereas Bitcoin itself is traded 24 hours, and I would also imagine that there is some settling down, if you will, as these things kind of ramped up in terms of people putting lots of money in to begin with, which I think made adjusting them a bit more challenging, but as they all kind of mature and the money flows are not as drastic in or out, it's probably going to be easier to manage. So I doubt there's a particular problem with this ETF, but I do not know because I have not investigated.

Mostly Uncle Frank [14:52]

I think one good way to compare ETFs is to use the ETF database, and I don't know whether they've got all the crypto ones all in one place yet, but it's usually easy to search on there and bring up all of one kind of ETF, and then it's an easy way to just compare them to see how their performances have been, and you can see the difference when one is charging a much higher fee than other ones or any other discrepancies that would cause one to underperform other ones. So I think that's going to be the best approach going forward, because none of these things are more than about six months old now. So of your suggested answers I would go with too early to tell. I guess that's door number two.

Not Uncle Frank [15:39]

We don't know. What do we know? You don't know, I don't know, nobody knows.

Mostly Uncle Frank [15:46]

But after these things have been around for about a year, we'll probably know a lot more about any tracking errors they might have due to the volatility, the underlying instrument and the fact that the instrument is trading 24 hours a day and the etfs are not, although they should reset essentially every day by the end of the day it's I think most of them are using Coinbase to custody them, so it's like all this Bitcoin is essentially sitting in the same place, even though it's designated into different ETFs. It does show you the kind of the power and the convenience of the ETF structure that people would rather trade this in ETF form for the most part than actually deal with the underlying instrument, even though it's a digital one. But that's simply because it's easier to be able to do all of your trading on a ordinary brokerage trading platform like Fidelity or Schwab than it is to be fiddling around with different platforms for different assets. It's an economy of scale.

Not Uncle Frank [16:51]

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

Mostly Uncle Frank [16:54]

Sorry I couldn't be of more assistance, but I probably do need to get this figured out by at least next July, because we will transition the sample portfolio that holds a little bit of Bitcoin from what it's in right now to the ETF forms, so we'll need to pick a good ETF for that purpose, two good ETFs one for Bitcoin and one for Ether. Anyway, sorry I couldn't be of more help and thank you for your email.

Not Uncle Frank [17:24]

I want to hold you every morning and love you every night, Cal. I promise you nothing but love and happiness. Last off.

Mostly Uncle Frank [17:34]

Last off, looks like we have a long email. Mary, mary, mary, why you bugging? And that email is from Willie.

Not Uncle Frank [17:51]

They've even got groundskeeper Willie teaching French. Bonjour you, cheese-eating surrender monkeys.

Mostly Aunt Mary [18:18]

And Willie writes the importance of autonomy, mastery and purpose. I'd like your perspective on my desire to move from full-time employment and into Coast FI in 6 to 12 months. I also have a related question regarding how to categorize vacant rural recreational land as a diversifying asset. I have accumulated equities in hot and cold streaks over the past 25 years and have amassed a decent nest egg across my brokerage account 401k, ira, roth and HSA. These asset locations all use Vanguard funds or ETFs and currently sit at 20% small cap, viov, 75% total US market, 2% international and I recently added 3% weight in bonds when VTI was at an all-time peak. I am accumulating in high gear these days with a 40% of income contribution rate, adding more weight to international VXUS and US treasuries, split between VGSH and VGLT, split between VGSH and VGLT. This January I'll be able to take advantage of the Rule of 55 and plan to roll the IRA into my 401k, making 90% of my total stock and bond assets available without penalty prior to age 59 and a half. Given my equities and bonds portfolio mix, the dividend and bond yields will cast off cash amounting to about 2.5% of portfolio value.

Mostly Aunt Mary [19:47]

My thought is to work part-time 5-10 years in Coastify and consume up to 2.5% of the portfolio to cover expenses plus some minor luxury wants. If I were to quit work altogether next year, my desired consumption level would require about 7% of my portfolio and I'm not comfortable doing that. I'd like my portfolio to grow and appreciate while I work part-time in Coastify, but I do not want to cannibalize the growth potential if the 2.5% withdrawal rate annually is too big of a drag. Once Social security kicks in in about 10 years, the mortgage will be paid and I'd need only about 4.5% of my current day portfolio to live comfortably. To throw another monkey wrench into this analysis, I also inherited a few nice parcels of rural recreational vacant land that I enjoy and would like to keep, but could sell in part or whole. The parcels are currently worth an equivalent of about half my liquid portfolio. That is to say that if I'd sell the parcels, the proceeds would grow my current liquid portfolio value by 50%. Such a sale would relieve the uncertainty that was evident in my prior paragraph. Coastify could then be full FI, whether my choice of part-time work was paid or not. But maybe I'm already at full FI and it's only a matter of perspective.

Mostly Aunt Mary [21:10]

Does the vacant land act as an uncorrelated asset that I've mentally excluded from my portfolio due to its lack of liquidity. I know I can't live off of it unless I sell it or rent it, or sell timber, etc. And it's hellish to consider annual rebalancing of the land portion within my portfolio. The land does not yield or provide cash flow like a dividend or bond, but not all assets do. Given that this is a risk parity discussion the dog not barking here is named Goldie Does vacant land correlate with gold? In many respects, my land seems to have increased in value a lot when interest rates were low in 2019-2020 and has still gained some value even as interest rates rose in the past three years. It seems to be in an inflation hedge. What say you? So, uncle Frank? Should I simply keep some of my most beloved land, sell some of it off to juice my portfolio and buy some gold ETFs? I do admire the golden butterfly. Thanks for all you do. Best regards, willie.

Not Uncle Frank [22:15]

Bargy Willie, you complete me, saints be, praised, oh closer. I've always dreamed of this moment.

Mostly Uncle Frank [22:27]

Well, willie, you got a lot going on here. First, let's define a couple terms for the audience. Willie is referring to Coast Fi, and that generally refers to a situation where someone has accumulated enough now that if they would just let that amount grow for a period of time, they would be able to retire later on it without having to add any more money to it. So, for example, if Willie had accumulated, say, half a million dollars at age 55, and he planned to retire at age 65, and he thought that he needed to have a million dollars at that point, it is highly likely that that $500,000 would double in the next 10 years if invested appropriately, and so you could say he was coast-fi at that point in time.

Mostly Uncle Frank [23:24]

I think the big picture here for you is that it is just a matter of time, and I agree that taking 7% out of a portfolio is probably not advisable, and you'd have to be at least a little bit lucky in order for that to be sustainable Although you wouldn't have to be super lucky, just a little bit lucky. You could ask yourself a question Do I feel lucky? Well, do you punk Example if you had retired 10 years ago, around 2013,. There's a lot of different portfolios. You could have held and taken 7% out of them and still be fine today. That's because there was not a big drawdown of any kind until 2020, and then it was very short-lived, and the only big issue that we've had is what happened in 2022, which also seems to have been short-lived, in 2022, which also seems to have been short-lived.

Not Uncle Frank [24:28]

So 7% is not completely insane, but on the other hand it's not exactly safe. You can't handle the crystal ball.

Mostly Uncle Frank [24:32]

The solution you've proposed, though, is an interesting one. If you were to simply take a smaller amount out of your portfolio 2.5% the portfolio certainly would continue to grow. If you did that, and then if you could cover your other expenses with some kind of part-time work or other activity, that certainly would work. One thing I would caution you, though, on is not tying that to the dividend or bond yields or any kind of income in the portfolio, because it doesn't really matter whether that money would come from actual income or it was just assets being sold, and, in fact, I would ignore any relationship between how much you think you need to take out and dividend and bond yields, and simply set a percentage, whether it's 2% or 2.5% and then just plan to take it out of the portfolio. If it had accumulated in cash, you would take the cash first. If it hadn't, you would sell something, because only fixating on dividend and bond yields will do two things First, it will distort your portfolio and may distort your portfolio choices, and then it's just inefficient, because you don't want to be making your asset allocation selections based on yields at all. Really, what you care about is total returns as far as the assets are concerned. I think the other proposed solution, though, is actually better, and you might even combine it with working part-time, because, taking some of the vacant land and selling it, it's probably going to grow more if you do convert it into actual investments, because vacant land is a speculation, and it certainly is going to be more liquid, and that is the real issue here.

Mostly Uncle Frank [26:25]

You asked the question does vacant land correlate with gold in many respects? I would say it could in some respects. If you're talking about long-term inflation, they might perform similarly. The problem is, gold is going to have a worldwide value, whereas the vacant land has a very localized and speculative value, and so the volatility of the value of the vacant land is going to be much greater, even though you wouldn't see it day to day, because it's not priced day to day. It's kind of an illusion, but the real issue is the liquidity, because illiquid assets are the least desirable thing to have in retirement.

Mostly Uncle Frank [27:05]

In terms of trying to use a portfolio, I think this is very underappreciated by most amateurs, who overvalue things like land collectibles, tangible objects, and undervalue brokerage accounts, and I think part of that is just well, you can't see it or handle it, or put your hands on it or in it. But the problem with illiquid assets is that you cannot rebalance them against your liquid assets and you have to basically turn the corner or change the whole equation by selling part of the land in order to get the value out of it, to be able to use it in a retirement scenario. And it's even more problematic if it's not income producing, because if you're looking at the types of assets that are the easiest to manage, the easiest to manage is anything that's liquid, because it can be sold regardless of whether it's producing income or not, and all you care about is the total return of it. If you're looking at an illiquid, because it can be sold regardless of whether it's producing income or not, and all you care about is the total return of it, if you're looking at a illiquid asset, you generally want ones that are producing income, like, say, rental real estate, because that way at least you're knowing that it's adding to the positive cash flow situation and offsetting expenses on an ongoing basis.

Mostly Uncle Frank [28:23]

The least desirable thing to have is what you have, which is something that is illiquid and non-income producing, and I'm assuming it's non-income producing for the purpose of this discussion. Of course, if it was income producing, then it would get into that better category. And maybe some of it is and some of it isn't, in which case you might consider just selling the non-income producing stuff and keeping the income producers. But the other thing about land generally is that it's a carrying cost in the form of property taxes. Now, those might not be significant depending on where this land is, but it is a cost. There also might be liability insurance or some other insurance that you need to have, or some other costs associated with the maintenance of the property, but all of those detract from its value essentially.

Mostly Uncle Frank [29:14]

Now, in your case, it does sound like you have some personal value in the land that is actually greater than the fair market value of the land, which would argue for keeping it, or keeping at least some of it, and that's probably what I would be considering selling part and keeping part, and if part of it was potentially income producing in the future, that is probably the part I'd be looking to keep, because it's also likely to be more valuable in the future anyway. So where do we come out on all this? Your ending question is should I simply keep some of my most beloved land to sell some off to juice up my portfolio and buy some gold ETFs? I would say the answer to that is that does seem like a good solution to me, although it's not the only solution here, of course, and there are other variations on these themes you might consider.

Mostly Uncle Frank [30:07]

For instance, you could sell some of the land that is equal to the mortgage and I assume you're not paying the mortgage off now because it's at a very low interest rate but the sale from the land could potentially be used to just fund something that will pay off the mortgage, and the reason that makes sense for that expense is that expense is expiring in a finite amount of time and therefore it may make sense to match assets and liabilities in that case. Where that asset liability matching does not make sense is usually the way it's used when people are putting it against expenses that are never going to expire, in which case I think you're better off just constructing a portfolio that you could just take money out of. Anyway, you have lots of good options to consider. I'll be curious to know which one you go with eventually.

Not Uncle Frank [31:05]

You're gonna end up eating a steady diet of government cheese and living in a van down by the river.

Mostly Uncle Frank [31:13]

Hopefully you enjoy that land as long as you have it and thank you for your email.

Not Uncle Frank [31:19]

Okay, Skinner, that's the last time you'll slap your willy around.

Mostly Uncle Frank [31:24]

I quit go to the website wwwriskparityradiocom. 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, a follow that would be great, okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Parody Radio.

Not Uncle Frank [32:06]

Signing off. Oh, you're gonna break like matchsticks, I promise you that. Hey, I made some nice crispy squares for our hungry deprogramerinos. Oh man, you ruined the atmosphere, you daft punsy. Well, this is my rumpus room. Oh, you don't call it that.

Mostly Aunt Mary [32:26]

The Risk Parody 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.