Mary and Others [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.

Mary and Others [0:17]

A different drummer 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.

Mary and Others [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.

Mary and Others [1:26]

Top drawer, really top drawer.

Mostly Uncle Frank [1:31]

Along with a host named after a hot dog.

Mary and Others [1:34]

Lighten up Francis.

Mostly Uncle Frank [1:37]

But now onward, episode 379. Today on Risk Parity Radio, it's time for our weekly portfolio reviews of the eight sample portfolios you can find at wwwriskparityradiocom on the portfolios page. And yes, the markets managed to wipe out a significant amount of the gains last week that they made in the prior week. Human sacrifice, dogs and cats living together, mass hysteria. But when you have a week that's too good to be true, it is often followed by one that is throwing cold water on the whole thing. You can't handle the dogs and cats living together.

Mostly Uncle Frank [2:18]

But before we get started here, I'd like to tell you that I did appear on another podcast last week. It was the Earn and Invest podcast with Jordan Grumet and we talked about some of the basics of risk parity and how it fits into the overall framework of modern portfolio theory and its development over time. So it's kind of a condensed version of what you'll find in episodes one, three and five. But it was nice of him to invite me on his program and I will link to that in the show notes so you can all check that out. Now, moving to our next segment, I'm intrigued by this, how you say emails and First off. First off, we have an email from Jenny. Jenny, jenny, can I turn to you First off? We have an email from Jenny, and Jenny writes Hi Frank and Mary.

Mary and Others [3:15]

Thank goodness for your retirement hobby. Yeah, baby, yeah. What was once unknown to me, then oftentimes confusing, has become much more clear after listening to your podcast. You and Mary. Gallivanting across the country this summer and taking a hiatus from podcasting allowed me time to go back to many episodes and re-listen to them. The podcast feed search is very helpful to find topics that I need a refresher on. Thank you both so very much.

Mary and Others [3:43]

I'm setting up a risk parity portfolio for my mother-in-law. The money is currently in a brokerage account money market fund. We have recently rescued the money from the shackles of a bad annuity. She may need this money in the next five to eight years to help with her health care needs. She has secure income that takes care of her daily needs. Currently, I'm considering 25% large cap growth, 25% small cap value, 25% long-term treasuries, 15% managed futures and would like to add 10% gold GLDM. However, gold being at its all-time high, I'm not sure if there's a better alternative investment. I certainly don't want to crystal ball the future of gold, but I also don't know if it's wise to choose it at this time. My learning has been so focused on managed futures and gold as the alternative options, then maybe I'm missing other considerations. Maybe PDBC for commodities in place of gold. Maybe add a little bit of GLDM each month until the proper allocation is met, since we don't know which way it's headed next. Thank you for your insight, jenny.

Mostly Uncle Frank [4:57]

Well, thank you for the kind words, jenny. Perhaps Mary and I should go on hiatus more often. Well, you haven't got the knack of being idly rich, you see, you should do like me just snooze and dream, dream and snooze. The pleasures are unlimited. But Jenny gets to go to the front of the line because Jenny is one of our Patreon members and therefore gives to the charity that we support. As most of you know, we do not have any sponsors for this podcast, but we do have a charity that is called the Father McKenna Center and it supports hungry and homeless people in Washington DC. Full disclosure I am on the board and am currently the treasurer of the charity. Anyway, if you donate to the charity, you can go to the front of the email line. That's all I've got really to offer you there, that and a nickel. Get your hot cup, a jack squat. And you can do that either becoming a Patreon member from our support page or by donating to the Father McKenna Center directly. And in either case, if you inform me when you send your email in that you are a donor, I will move you to the front of the line. Yes, but now let's get to that email First. Good on you for rescuing that money from Ned Ryerson and his annuity and insurance sales. Tell me, have you ever heard of single premium life? Because I think that really could be the ticket for you, and I'm glad your mother-in-law also has some other secure income to work with.

Mostly Uncle Frank [6:30]

I think the markets may have solved your quandary about whether to invest in gold right away, simply because gold had its worst week in a year last week and was down about 4.6%. So perhaps that's enough of a dip to tell you just to go ahead and get in there. It still is up about 25% year to date, but I suppose you could implement both ideas if you really wanted. You could buy half of the 10% gold allocation right away and then dollar cost average in with the rest. I don't think it's going to matter that much, or at least in any predictable way. I would not substitute commodities in place of gold, because gold functions more like an alternative currency and commodities tend to just trace inflation and growth and economies tend to just trace inflation and growth and economies, and your allocation to managed futures actually covers the commodity sector, but in a better way than just buying and holding them.

Mostly Uncle Frank [7:27]

So I think it's all going to be good whichever way you go with that, and just for those scoring at home, the portfolio that Jenny has selected is very similar to the golden ratio sample portfolio selected is very similar to the golden ratio sample portfolio, with the key difference being in the sample portfolio we've got six percent in cash to take distributions out of. Now, you can see, in this situation there is no need for a pile of cash since the cash is already taken care of by the secure income in another pot. So if you just take that 6% holding and add it to the stock holdings, in this case you'll get something that looks a lot like what Jenny's got here and, with a 50% stock allocation, is kind of squarely in the middle of retirement portfolio recommendations, whether they're of a risk parity style or some other style. But we're very glad you're enjoying the podcast and are getting some good information out of it that you can implement and use in your own financial life and the people around you. So thank you very much for your continued contributions to the Father McKenna Center. And thank you very much for your continued contributions to the Father McKenna Center and thank you for your email.

Mostly Uncle Frank [8:58]

Second off, we have an email from Arun. Surely you can't be serious. I am serious and don't call me Shirley. And Arun writes.

Mary and Others [9:08]

Dear Frank, thank you so much for your wonderful podcast and sharing your wisdom in the Choose a Five Facebook group. In a recent episode, you had mentioned about how you are guiding your adult children, especially how they can use a risk parity style portfolio for short term goals, like a house down payment. I have a 13 year old who willmarked for college and about $10,000 in 529, half invested in total US stocks and half in a total world stock fund. I anticipate about $150,000 for college, but could be lower if our son decides to college hack. We are contributing $6,000 a year into the 529s and keep buying $20,000 per year in I-bonds. While this will most likely get us to our goal, I would like to understand how a risk parity style portfolio might work better for this scenario. Thanks again for all you do. Warm regards Arun.

Mostly Uncle Frank [10:12]

Well, we are very glad that you are enjoying the podcast and Mary appreciates your email with nice clear, short paragraphs. But I think the answer is relatively easy in this case. In this case you are so close to getting to college, I probably would just leave things the way they are or move them more into short-term bonds and things like that. The time period is really just too short for making portfolio moves that would make any significant difference. Really, our 529s is move them all to short-term bonds when our kids got to high school, mostly so we could know exactly what we had for planning purposes. And if you want to take more risk in some other assets that you're holding outside of 529s and college funds, that would make a whole lot of sense. But I am assuming that you're going to spend this money on college and not hold any of it back for future children or expenses or conversion to a Roth IRA, which you can do now under the new SECURE Act law.

Mostly Uncle Frank [11:41]

You can use one of these risk parity style portfolios for intermediate kinds of accumulation to save for goals like a down payment for a house or just having a bunch of money around for a large expense sometime in the next three to ten years when you're not sure exactly when you're going to have the expense or incur the expense, which is what our children do. They have basically an emergency fund or cash in one fund. Then, separately, they have their retirement accounts, which are 100% in stocks, and then in the middle they have an intermediate needs kind of fund and that is set up as a risk parity style portfolio and you can use something like the golden butterfly or golden ratio style things for that. The reason this works well for that kind of intermediate fund is that these kinds of portfolios tend to have maximum drawdowns in length of only about three to five years, in length of only about three to five years, and so you are not taking the risk that you might be taking with an all-stock portfolio or just a simple stock and bond portfolio, which might have a drawdown of up to 10 years or more.

Mostly Uncle Frank [12:50]

So these kinds of portfolios are well-suited for these intermediate savings goals. However, I would describe your particular goal here as a very short-term savings goal, so I would probably just go with the cash and the bonds. I know that doesn't sound very sexy, but I think it probably makes the most sense here. Hopefully that helps and thank you for your email Last off. Last off, we have an email from Jeff.

Mary and Others [13:39]

This guy's been stoned since the third grade and Jeff writes Frank, I have listened to the first 10 episodes of your podcast and I'm really enjoying it. I especially like that you go over the real-time performance of the portfolios you created or modeled. I am a mid-40s Gen Xer still in the accumulation phase or modeled. I am a mid-40s Gen Xer still in the accumulation phase. Most of our investments, of which we still have plenty of time to mature, are in retirement accounts. We have only in the last 18 months begun to save into taxable accounts, which create a lot more freedom of choice.

Mary and Others [14:13]

I'm an avid do-it-yourself-on-everything person. I believe that the only way I'll pay for something is if I am unable physically or intellectually to do it. I will be rolling over our 401k to a personal Roth, likely in the next few months, if the recession button is pushed. I have a question I'm hoping you can answer. Have you ever attempted to use a risk parity approach to the accumulation phase of investing? I think I may attempt it, but I am looking for any risks on whether this is appropriate or not. I am very aware that I cannot predict the future of anything and we just happen to do well since 2009 in just one S&P 500 fund. I know that it is just as likely continue as not with just one fund. I'd rather be asset diversified and reap similar returns in a variety of environments. Drawdown is not an issue because we have the asset of time still. Thanks, jeff ardent enthusiast.

Mostly Uncle Frank [15:13]

Well, welcome to our strange little world here, Jeff.

Mary and Others [15:17]

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

Mostly Uncle Frank [15:22]

I'm glad you're enjoying it so far and hope you can tolerate my sense of humor. I don't like your attitude. I often have to laugh because all of my reviews tend to be either one star or five stars, because people either really love this or they really hate it. This is pretty much the worst video ever made, but it does act as kind of a filter and ensures I have a very engaged audience that I greatly appreciate.

Mary and Others [15:50]

The best, Jerry the best.

Mostly Uncle Frank [15:52]

And no, I have no plans to change it, because this is a retirement hobby for me and I'm not trying to build some kind of commercial podcast empire or anything that would turn into another job. I don't think I'd like another job, so it's not fun for me. I just won't do it. Forget about it. About it Getting to your question, this is a really interesting question because, in fact, a lot of people do use a risk parity style portfolio, both in their accumulation and for their drawdown phase, and that makes sense for people who are naturally conservative, want to sleep at night and aren't in any big hurry to get to their financial independence number, because these portfolios will grow over time, just like any other portfolios.

Mostly Uncle Frank [16:43]

They just aren't likely to grow as fast as something that is 80 to 100% in equities. So who does this? Well, I can tell you that Tyler at Portfolio Charts does that. He just uses the golden butterfly both as his accumulation portfolio and as his retirement portfolio. Another person who does this is the value stock geek and he uses what is called the weird portfolio, which is also featured at Portfolio Charts, and what he does is two things and Jimmy Two Times. Who got?

Mary and Others [17:16]

that nickname because he said everything twice like.

Mostly Uncle Frank [17:19]

I'm going to go get the papers. Get the papers. He is a value stock picker, so a good portion of his investments are devoted to active stock picking and analyzing companies. But he's also got this weird portfolio, a risk parity style portfolio, as his reserve or growth portfolio, just in case the stock picking doesn't work out. This is essentially what is popularized as a barbell strategy, where you have two kinds of investments conservative ones and more aggressive ones and you just keep them separate from each other, and it is also a kind of tried and true approach.

Mostly Uncle Frank [17:59]

Now, another person who uses a risk parity style portfolio in accumulation is somebody who writes a lot of newsletters and appears on prognostication shows about the general economy and where things are going, and his name is Jared Dillian. I will link to a video in the show notes where he describes his investing philosophy, but anyway, he uses something he calls the awesome portfolio, which is basically a variation of the golden butterfly, if you ask me. I wish he would have credited Tyler and others who have done more work on this than he has, but he did write a book recently. He did include this as the one portfolio to rule them all and what he holds personally. Now, in his case, his kind of barbell-like strategy is that he's got this business writing these newsletters as his aggressive or risky venture and then he uses this awesome portfolio as the conservative end of his barbell. But I'll link to a video in the show notes and you can check that out.

Mostly Uncle Frank [19:05]

In the end, I do think this has a variety of applications. I mean, you could imagine somebody who's got some kind of active real estate empire investing going on in one part of their portfolio and then has a risk parity style portfolio sitting off on the side as their backstop. So if you are looking for something to move to that's less aggressive mostly for psychological reasons and you don't feel a great need to be focused as much on accumulation now, yes, you can go ahead and follow these examples of what these others have done and convert your portfolio to a risk parity style portfolio. Right now it can't work, and particularly if you're not planning on retiring anytime soon and you've already accumulated enough.

Mostly Uncle Frank [19:58]

As William Bernstein says, once you've won the game, you can take your chips off the table and stop playing, and so I'm really glad to see that you're thinking about this this way, because I'm not here to give you some dogma to follow, that you must accumulate in this portfolio and then you must move to this other portfolio at a particular time. No more flying solo. You need somebody watching your back at all times. I'd rather have you, bruce Lee, the whole thing and take what is useful, discard what is useless and add something that is uniquely your own. What the so? Hopefully that helps. Welcome to our program and thank you for your email.

Mary and Others [20:42]

Why don't you get a job, Mr Coley? What for you? Need money.

Mostly Uncle Frank [20:48]

All I need are some tasty waves, cool buzz and I'm fine.

Mary and Others [20:56]

And now for something completely different. What is that? What is that? What is it?

Mostly Uncle Frank [21:03]

Oh no, not the bees, not the bees.

Mary and Others [21:06]

AHHHHHHHHH.

Mostly Uncle Frank [21:08]

I don't have my eyes. Well, it does seem like the bees have descended upon us.

Mary and Others [21:15]

EYES, ahhhhhhhhh, ahhhhhhhhh, have descended upon us. Ah, ah, ah, ah.

Mostly Uncle Frank [21:24]

And whatever election euphoria there was following and whatever euphoria in the markets there was following the election has now gone away, and gone away relatively quickly, I'm afraid. So last week was a rare week when everything was up and now we have a rare week when everything was down, but they do tend to go together like that oftentimes. Just looking at these markets last week the S&P 500 was down 2.08% for the week. The NASDAQ was also down. It was down 3.15% for the week. Small cap value was down. Our representative fund VIOV was down 2.93% for the week.

Mostly Uncle Frank [22:04]

As I mentioned before, gold was actually the big loser last week. Gold was down 4.66% for the week. Long-term treasury bonds, represented by the fund VGLT, were down 2.24% for the week. Reits were down. Representative fund REET was down 1.74% for the week. Commodities also took a big hit. Representative fund PDBC was down 3.19% for the week. Commodities also took a big hit. Representative Fund PDBC was down 3.19% for the week. Preferred shares were down. Our representative fund PFF was down 2.13% for the week and Managed Futures managed to have the best performance last week of all of these asset classes. Our representative fund DBMF was down, but it was only down 0.99% for the week.

Mostly Uncle Frank [22:48]

What did really strengthen last week was the US dollar against just about everything, which means that now that the election is over, people are finding new things to worry about. What Guy in a suit? No, it's a tax collector. Hide us, spongebob, at least for the moment, if you're keeping score at home and like to keep track of statistical anomalies. It is true that, generally, post-election to the end of the year is an up period in almost every election year, with the only two exceptions being the year 2000 and the year 2008. But there was already a recession going on in both of those circumstances. But let's put that little crystal ball away, entertaining as it might be.

Mary and Others [23:34]

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

Mostly Uncle Frank [23:38]

Moving to these sample portfolios and yes, they were all down, starting with the all-seasons portfolio. This one is a reference portfolio. That's only 30% in stocks. It's got 55% in intermediate and long-term treasury bonds and the remaining 15% in gold and commodities. It was down 2.21% for the week. It's up 7.18% year-to-date and up 8.81% since inception in July 2020.

Mostly Uncle Frank [24:04]

And moving to these bread-and bread and butter kind of portfolios that Sony might actually use in retirement or for accumulation in some cases, as we've just talked about. First one's, golden Butterfly. This one's 40% in stocks divided into a total stock market fund and a small cap value fund, 40% in treasury bonds divided into long and short and 20 percent in gold. It was down 2.44 percent for the week. It's up 11.36 percent year-to-date to 34.22 percent since inception in July 2020. Next one's the golden ratio, and this sample version of that is 42 percent in stocks in three funds A large cap growth fund, a small cap value fund and a low volatility fund.

Mostly Uncle Frank [24:47]

It's got 26% in long-term treasury bonds, 16% in gold, 10% in a rate fund and the remaining 6% in cash in a money market fund. It's down 2.66% for the week. It's up 11.84% year-to-date and up 30.90% since inception in July 2020. Next one's the risk parity ultimate kind of our kitchen sink, with a little bit of everything in it. I'm not going to go through all 15 of these funds, but I'll tell you that the worst performers seem to have been the international fund that's in here, called KBA, which is typical when there is a stronger US dollar, but, on the other hand, it's also got some cryptocurrency in it, which was one of the best performers last week. All in all, though, this portfolio is down 2.7% for the week. It's up 14.39% year-to-date and up 22.16% since inception in July 2020. Now, moving to these experimental portfolios involving levered funds. Don't try this at home, even though I know some of you do. You have a gambling problem and, yes, they were quite hideous last week.

Mary and Others [25:58]

Look away, I'm hideous.

Mostly Uncle Frank [26:01]

First one's the Accelerated Permanent Portfolio. This one's 27.5% in a levered bond fund TMF, 25% in a levered stock fund UPRO, 25% in PFF, a preferred shares fund, and 22.5% in gold GLDM. It was down 5.24% for the week. It's up 12.76% year-to-date and up 3.34% since inception in July 2020. Next one's the aggressive 50-50, which is our most levered and least diversified of these portfolios. It's just stocks and bonds. It's one-third in a levered stock fund UPRO, one-third in a levered bond fund TMF, and the remaining third divided into PFF, a preferred shares fund, and an intermediate treasury bond fund as ballast. It was down 5.22% for the week. It's up 10.72% year-to-date and down 9.2% since inception in July 2020. We did trigger a rebalancing, though, on Friday. So these experimental portfolios, or at least most of them, are on rebalancing bans Portfolios, or at least most of them, are on rebalancing bans, and so we look at them every 15th of every month to see whether the allocations have gone far enough out of whack, if you will, to justify rebalancing them back to their original specifications. And the rule for this one is if an allocation is at least 7.5% positive or negative from its original allocation, then we rebalance the entire portfolio. And that happened on Friday, the 15th, because the stock fund UPRO has reached over 41% of the portfolio, so we will be rebalancing it on Monday and recording that in the description on the portfolios page at the website. We'll also be changing the preferred stock selection from the fund PFF to the fund PFFV, which is cheaper and performs just as well or better, but I don't expect that to change the overall performance of this portfolio, or lack thereof, as the case may be. It is the worst performer of all these, but that's what leverage and a lack of diversification will do for you. Well, you have a gambling problem. Moving on to the next one, the levered golden ratio. This one is 35% in a composite fund called ratio. This one is 35% in a composite fund called NTSX, that is, the S&P 500 and Treasury bonds levered up 1.5 to 1. 25% in gold, 15% in a REIT O, 10% each in a levered bond fund, tmf, and a levered small cap fund, tna, and the remaining 5% in a managed futures fund, kmlm. It was down 4.36% for the week. It's up 12.66% year-to-date and down 2.5% since inception in July 2021. It has a start date that's a year later than the first six.

Mostly Uncle Frank [28:59]

And now moving to our last one and our newest one, the Optra portfolio. One portfolio to rule them all. Yes, that's a joke. My precious Get to me. I love you. This one is 16% in a levered S&P 500 fund, upro, 24% in a worldwide value-tilted fund called AVGV from Avantis, 24% in a treasury strips fund, govz, and the remaining 36% divided into gold and managed futures. It was down 3.53% for the week. It's up 4.06% year-to-date and since inception in July 2024. It's only a few months old and that concludes our portfolio reviews for the week ending November 15th 2024. Hopefully things will calm down a little bit next week after two weeks of roller coaster rides.

Mary and Others [30:02]

That's not an improvement.

Mostly Uncle Frank [30:05]

But now I see our signal is beginning to fade. If you have comments or questions for me, please send them to frank at riskparityradarcom. That email is frank at riskparityradarcom. Or you can go to the website wwwriskparityradarcom. Put your message into the contact form and I'll get it all that way. If you haven't had any chance to do it, please go to your favorite podcast provider and like subscribe. Give me some stars, a follow, a review. That would be great.

Mostly Uncle Frank [30:33]

Okay, thank you once again for tuning in. This is Frank Vasquez with Risk Parity Radio signing off.

Mary and Others [31:20]

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.