Cold Open And Welcome

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 Queen 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 [0:36]

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 the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Yes, it is still in my memory banks. We have also created an additional resource, a collection of additional foundational episodes and other popular episodes.

Voices [1:07]

We have top men working on it right now. Ooh.

Mostly Uncle Frank [1:14]

Top men. And you can find those on the episode guide page at www.riskpartyrador.com. Inconceivable! All thanks to our friend Luke, our volunteer in Quebec. Sacosh. We'd be helpless without him.

Voices [1:35]

I have always depended on the kindness of strangers.

Mostly Uncle Frank [1:41]

Because other than him, it's just me and Marion here. I'll give you the moon, Mary.

Voices [1:46]

I'll take it.

Mostly Uncle Frank [1:48]

We have no sponsors, we have no guests, and we have no expansion plans.

Voices [1:52]

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

Mostly Uncle Frank [1:55]

Over the years, our podcast has become very audienced focused, and I must say we do have the finest podcast audience available.

Voices [2:05]

Really top drawer.

Mostly Uncle Frank [2:07]

Along with a host named after a hot dog.

Voices [2:10]

Lighten up Francis.

Mostly Uncle Frank [2:13]

But now onward, episode 497. Today on Risk Party Radio, we're just gonna do what we do best here, which is attend to your emails. Got some long ones today.

Voices [2:26]

Worst day of my life, what do you think?

Mostly Uncle Frank [2:29]

But before we get to that, I think we need to have a little Queen Mary segment.

Voices [2:34]

They will keep on turning. They're rolling. Rolling Rollin on River.

Mostly Uncle Frank [2:54]

As most of you know, we are currently raising money for Mary's charity. It is Fairfax Casa, the Fairfax Court Appointed Special Advocates, of which Mary is one.

Voices [3:06]

I will kill you if you touch him. Do not come between the Nasgul and his prey. No man can kill me.

Mostly Uncle Frank [4:10]

And so to introduce Queen Mary.

Mostly Queen Mary [4:40]

Seven years ago, Sophia entered the child welfare system when she was nine years old with her older sister Maria, who was 13, due to allegations of physical abuse and neglect. The girls and their four siblings were initially placed under court protection, remaining in the home with their mother and stepfather. They were appointed a casa who spoke their language and understood their culture. A year into their case, their casa received a terrifying call from the girl's aunt. The girls had run away in the middle of the night. Maria had seen their stepfather abusing Sophia and knew she had to protect her sister. The girls managed to get to a relative's home outside of Virginia and reached out to their casa. The Casa learned that the stepfather had been abusing Sophia for many months. With the police involved and the Department of Family Services moving to remove all of the children and place them in foster care, their mother and stepfather fled the United States in the middle of the night with the four youngest children. The girls remained with their relative, but after a year the relative asked that the girls be removed from her home. The girls were placed in separate foster homes, and their casa made sure they had visits and maintained their connection. Maria turned 18 and opted to enter the fostering futures program and entered an independent living program. Sophia's foster home placement, though, was disrupted, so she was moved to another, and then another, and then another, and another, until in total Sophia experienced eight placement changes since coming under the court's protection. Sophia and Maria have had multiple judges oversee their cases, multiple guardians ad lightum, multiple social workers, multiple therapists, and several school changes. But there was one consistent person in their case, their casa. The casa was the person Sophia and Maria reached out to when they ran away from home. The casa has visited them in every placement and checked on them every month. The casa knows the girls better than anyone in their case, and she has worked tirelessly to make sure they have what they need. While Maria created a safe and secure life for herself as a young adult with the ongoing support of her casa, Sophia still struggled. She became withdrawn and sad, particularly in her sixth and seventh foster placements. She was despondent. Even visits with her casa couldn't cheer her up. Her seventh foster parents became frustrated with her, and it was decided that she would be moved again. In her eighth placement, she is thriving. In this home, she has many foster sisters. She is at ease and she loves being a part of the family and a part of their routines. The foster mother welcomes Maria into her home and facilitates visits between the sisters. With the help of her casa, Sophia has finally found a happy home.

Dave Retires And Shares Portfolio

Mostly Uncle Frank [7:32]

So as you can hear from that, this is very important work that Mary and the other Casas are doing for these children. And if you'd like to donate to Fairfax Casa, we'll put that link in the show notes to the podcast. And it's also on the support page at www.riskper.com. And if you do give to Fairfax Casa, you get to go to the front of our email line. But just make sure you mention it in your email so we can duly move you to the front of the line. You'll also get moved to the front of the line if you give to my charity, the Father McKenna Center, even though we're not actively promoting it at this moment in time. But make sure you mention that too if you are a donor to the Father McKenna Center, which serves hungry and homeless people in Washington, DC. And now speaking of emails, it's that time again.

Voices [8:20]

Here I go once again with the email.

Mostly Uncle Frank [8:23]

And first off, I have an email from Dave. And Dave writes.

Mostly Queen Mary [8:38]

Greetings, Uncle Frank and Queen Mary. Please find evidence of my donations below to both the Fairfax Casa and Father McKenna Center. They are both great organizations, worthy of time and attention. Incidentally, I just found out that my current company has a donation matching program and I'm filling out the paperwork with my fingers crossed. First off, I deeply enjoy Risk Parity Radio and want to thank you both for the wonderful information and more importantly, inspiration you are putting out into the world. Your confidence, joy, and lighthearted approach is the best.

Voices [9:16]

The best, Jerry.

Mostly Queen Mary [9:17]

The best. I heard about your podcast from Bigger Pockets last year, and every new episode is pushed to the front of my very long queue. Of course, I've also gone back through the most important episodes and selected many others of interest. I've learned a lot and even enduring the densest material, find myself smiling uncontrollably. Sweet. Sorry for the long email, Mary, but you're a pro and I didn't have time to shorten it up, so please bear with me. I can almost hear your voice in my head as I write this.

Voices [9:50]

Mary Mary, why you bugging?

Mostly Queen Mary [9:59]

Second off, I have been a DIY investor for years, mostly following the likes of Choose of I, Bigger Pockets, and JL Collins. Our strategy was about 85% securities, 10% safety, and 5% gambling. You have a gambling problem. About five years ago, I had realized that we reached Coast Phi, so it wasn't a bad mix, and my wife went down to 20 hours a week, and I decided to plan for an early retirement.

Voices [10:28]

That's what I'm talking about.

Mostly Queen Mary [10:51]

With his help, I'm excited to say we have hit our mark, and I'm retiring in July 2026 at 62, and my wife will retire in a few years or so. Lucky. Unfortunately, our FPA is retiring this year. So I've decided with the help of Bolden and the financial independence community contributors such as Risk Parity Radio to go it alone. Since listening to Risk Parity Radio, I've been unsuccessfully trying to grasp the differences between our FPA suggested retirement portfolios and the risk parity examples. For our last meeting, he ran a golden ratio illustration against our plan. While the results landed very close, the golden ratio finished slightly ahead. This brings me peace of mind in either case. However, I'm having trouble internalizing the differences and can use some help. Since we've divided our investments into two institutions, our planner suggested putting all of our longer-term Roth investments into VTI and the following for each set of early retirement funding accounts. Fidelity IRAs, FZROX, 30%, Fidelity Zero Total Market Index Fund, VYM, 20%, Vanguard High Dividend Yield Index Fund ETF, VZILX, 20%, Fidelity Zero International Index Fund, SPHY, 15%, SPDR Portfolio High Yield Bond ETF, VCIT 15%, Vanguard Intermediate Term Bond, IDX Fund ETF, Vanguard IRA, VTI 30%, VYM 20%, VXUS 20%, SPHY 15%, VCIT 15%. It may be interesting to mention that we also have a taxable account that I recently moved out of a popular RoboAdvisor in kind to avoid paying capital gains. And that account now has over 250 securities and is quite a mess. My next project will be figuring out the best way to transition this into something that makes more sense. Any ideas would be great. Anyway, I'd really appreciate any comments or concerns you may have, for entertainment purposes only.

Voices [13:32]

Yes!

Mostly Queen Mary [13:32]

And maybe guidance making sense of portfolio visualizer and backtest on this mix as it relates to decumulation. Last off, and since you asked, I'm a software developer of over 40 years and currently very busy working in the life sciences, which provides a satisfying sense of doing something important.

Voices [13:55]

Alive, it's alive! It's alive.

Mostly Queen Mary [14:03]

Admittedly, leaving that behind scares me a bunch. How do I stay relevant? Dead is dead. Well, Uncle Frank to the rescue. Recently hearing you on the Bigger Pockets podcast, it dawned on me. I've gotten so much from the Fi community and that giving back would be a great way to make a difference. So that's what I'm going to do. While working out our decumulation, I've struggled with how to take money from all of our various accounts. And I cannot lie, studying some of the more complicated risk parity portfolios bumps up against the angst just a bit. So, to help with that, I've been working on a portfolio rebalancing application. Because I haven't retired yet, it's still a work in progress, but it's in pretty good condition. Currently, the users can build their own portfolios or choose from a global list of templates. Rebalancing can be applied to the current balance or against a deposit or withdrawal. For fun, I included the eight risk parity radio test portfolios along with my current allocations. I'm not a public person, and sharing this feels a bit out of my lane, but your show inspired me to stop lurking and start contributing.

Voices [15:18]

What's going on? Why are people doing this? Why are they why are these people, many of whom are technically sophisticated, highly skilled people who have jobs? Okay? They have jobs. They're working at jobs for pay, doing challenging, doing sophisticated technological work. And yet, during their limited discretionary time, they do equally, if not more, technically sophisticated work, not for their employer, but for someone else for free. And then what they create, they give it away rather than sell it. It's going to be huge.

Mostly Queen Mary [15:54]

If the tool helps even one person feel less angst about their drawdowns, it's worth the icky feeling of self-promotion. If you're interested, I'd appreciate it and be honored if you could take a look and let me know if this is something you think will be useful for the community. Feel free to share the link with your listeners as I made sure to put up warnings that it is a work in progress and will be free to use forever, and I welcome all feedback.

Voices [16:22]

It cuts. Then, as of this moment, they're on double secret probation. Double secret probation, sir.

Mostly Uncle Frank [17:05]

And I'm very glad you're enjoying the podcast and getting so much out of it. But looking at last things first here, I did take a look at your little link. I haven't quite figured out how to use the tool yet.

Voices [17:17]

Are you stupid or something?

Correlations Reveal Fake Diversification

Mostly Uncle Frank [17:19]

But I will link to it in the show notes so other people can check it out. In terms of what we actually do for rebalancing in real life, it does turn out to be kind of a tax optimization problem depending on how many accounts you have, what kind of accounts they are, and which assets are in which accounts. And if you're treating your portfolio as one big portfolio, the actual calculation generally isn't that difficult because you know what your asset allocations are, but then you do have to take that allocation and apply it to the various assets in the accounts, because you don't want to hold the same thing in each account. You want to tax locate your assets. So for instance, you have all of your bonds and ordinary income payers in a traditional retirement account, so they're not throwing off a bunch of taxes in a taxable account. But hopefully your tool can help with that. But now let's get to your main questions about this portfolio and your discussion with this financial advisor. I'm afraid I have to tell you that your financial advisor is some combination of lazy and incompetent.

Voices [18:21]

I award you no points, and may God have mercy on your soul.

Mostly Uncle Frank [18:27]

Because there is no way that this portfolio is comparable to a golden ratio portfolio if you actually stress tested it over the important periods such as the early 2000s or the 1970s. And that's really what you want to do for retirement. You can't just be looking at some short time frame, for instance, how long these particular funds have existed. You have to go back and look at the worst time frames, do Monte Carlo's, or just even historical back test, stress test, which we're gonna do here, and you'll see that this portfolio is not really designed for retirement, and it's kind of a mediocre construction, actually.

Voices [19:05]

Wouldn't be prudent at this juncture.

Mostly Uncle Frank [19:08]

Because it looks like it was constructed out of using some kind of formula or just fun-picking cheap funds and a kind of shopping cart approach, especially to these bond funds, because they're not well paired up with the rest of the portfolio. So I have to believe that the process for choosing these portfolios was not very well thought out. It looks like something that somebody just pulled off a shelf. So just to review for the audience, what you've got here is essentially a portfolio with 70% stocks in it. 30% of it is in a total US stock market fund, so that's large cap weighted. 20% is in a total international fund, which is also large cap weighted. Then you've got this high dividend fund, which is really a large cap value fund. That's how you should think of it. And then you've got two bond funds that are both corporate bond funds. One is an intermediate corporate bond fund and one is a high yield corporate bond fund, and neither one of them has any treasury bonds in it. So let's go through a good process for constructing a retirement portfolio and then show why this portfolio violates basic principles here. So we are constructing a retirement portfolio. Now, one thing that isn't clear from your email is how much of this do you plan on spending? You didn't mention that or how much of this you plan on spending a year. Because the truth is if it's low, if it's like 3% or something like that or less than that, yeah, you can hold something like this, but you could hold anything. And this doesn't do anything in particular for that setup either. So I'm assuming that what you really want to do with a retirement portfolio is to be able to spend the most money out of it, even if you're not actually going to, you want to have the possibility of spending like 5% out of it, at least 4%. And so that is the goal I'm talking about. If you have a different goal, then this might not apply. But the first thing you need to think about when constructing a retirement portfolio is what is the actual goal in terms of how much you're going to spend or leave behind or whatever else you're doing with it. Then we're going to be looking at the macroallocation principle and the holy grail principle, which talk about macroallocations and diversification. So your macroallocations here are 70% in stocks and 30% in bonds. That's a very average kind of middle-of-the-road portfolio, similar to a 6040. It's not really designed for accumulation, it's not really designed for decumulation. One thing that is obviously lacking in it from a diversification perspective is you only have stocks and bonds. You don't have any alternatives in this portfolio. And if you don't have any alternatives in this portfolio, you are likely to have a lower safe withdrawal rate. You actually do need something like gold or managed futures if you want to have the highest safe withdrawal rate. And you want an allocation. In that of somewhere between 10 and 25%. So we know from lots of research that portfolios with the highest safe withdrawal rates tend to have between 40 something percent and 70 something percent in stocks. You do have that. So it's in the sweet spot as far as the amount of stocks in the portfolio. But now let's talk about the diversification or the lack thereof in this case. This is an application of the Holy Grail principle. And diversification is not picking things that sound different or you think are might be different. This is a very technical thing that your advisor should have done and apparently did not do. It's very easy, it's very obvious, and you can do it right now. In fact, I've done it for you. Put these funds in the fund analyzer over at test folio. Click on where it says correlations. What will you see there? You'll see that these are all highly correlated funds. Even the bond funds are correlated with the stock funds. This is a big problem. This is bad diversification.

Voices [23:00]

If everything you're doing is bad, I want you to know this.

Mostly Uncle Frank [23:05]

And that's why I'm saying your advisor was either incompetent or lazy, because they probably didn't even look at this.

Voices [23:12]

Am I right or am I right or am I right?

Mostly Uncle Frank [23:16]

You often see this where people have this erroneous idea that all bond funds are the same as far as diversification from stocks. In fact, that high-yield bond fund you have is like 70% correlated with your stocks. That's not diversified at all. I don't know what that thing's doing in this portfolio. I don't know what that thing would be doing in any retirement portfolio. It doesn't belong.

Voices [23:37]

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

Mostly Uncle Frank [23:44]

The intermediate term bond fund is better. It's still positively correlated with stocks because it's corporate bonds. If you want something that is negatively correlated or at least has a zero correlation with stocks over time, you need it to be picking treasury bonds. You don't have any treasury bonds, so your bonds are not well chosen for being the bonds in a mostly stock portfolio. You need treasury bonds if you really want diversification. This is not a diversified holding in terms of bonds from the stocks.

Voices [24:16]

Am I right or am I right? Or am I right? Am I right?

Mostly Uncle Frank [24:20]

And that's very obvious from doing a simple correlation analysis that can be done in five minutes, and your advisor did not do, did not tell you about, and should be fired. They don't know what they're doing.

Voices [24:34]

That's the fact, Jack.

Mostly Uncle Frank [24:36]

They may be a very nice person, but they don't know what they're doing. Probably just following some formula the company gave them to follow.

Voices [24:44]

Did you see the memo about that?

Mostly Uncle Frank [24:47]

Alright, now let's talk about these funds. These funds are a little bit diversified in terms of you have two that are blend funds and one that is a value tilted fund. Now, that value tilted fund is going to help you some with respect to this allocation, but what you really would want would be funds that are much more diversified in terms of growth versus value, because a total stock market fund, a total international stock market fund, those are neither growth nor value, although the US one tends to lean towards growth most of the time, at least when the stock market is going up. The VYM fund, it's labeled high dividend, but what you want to do with all of these funds is go over to Morningstar, look and see what it is. It comes out as a large cap value fund. So that's how you would categorize this. It's similar to something like VTV. The dividends are pretty irrelevant to anything you're doing here. But that was probably another stupid thing your advisor's doing, coming up with things that generate income. Like we're living in 1986 or something like that. That's another idiotic thing that advisors do because they're not updated in what they're talking about. We live in the 2020s, you don't want income flowing out of your funds. We have no fee trading, we have fractional shares, you just sell something when you want money from it, and therefore you're not required to take the income or pay the taxes. Now I know these are in an IRA, so that doesn't matter. But the point is there's no purpose to that. So what's really missing here is you don't have anything that is small cap at all. You don't have anything that is really seriously value tilted. That's what you would want to have. If you really want to have a good portfolio for retirement, it's going to at least have a mix of growth and value 50% each way. If you're doing international, that also needs to be tilted growth versus value. Because international versus domestic is not very good diversification. That's like one of the last things you would look at because that mostly has to do with the value of the US dollar versus foreign currencies. That is what typically governs whether international is outperforming domestic or not. You can see that last year the dollar was weak, international outperformed domestic. This year, while the war's been on, if you look and see what's been going on with international, it has been doing terribly, even worse than the domestic funds because the dollar's been strong. So what you want to be looking at is to go over to Paul Merriman's best in class ETFs and choose funds out of there. Because that's the way you really should be choosing these funds, is not by funds themselves, but by asset classes first, then fund choices. And if you did that, you'd have a much more diversified portfolio. All right, now how do we know this is not a very good portfolio? We don't guess.

Voices [27:41]

A crystal ball can help you, it can guide you.

Mostly Uncle Frank [27:46]

We don't use small data sets, we don't use only the data sets that are provided by the tickers themselves. You need to test asset classes, you need to do it over a long period of time and do it at a place like Testfolio. This is free, it's not very hard, I did it for you. So the way you would do this, and I did this, is you start with your own tickers, but you need to know what asset class that is, so that as you go back in time and these tickers don't exist, you still want to go back, hopefully, to the 1970s. The test I'm giving you goes back to 1969, using all of these asset classes that these funds belong to. And I compare that to a golden ratio portfolio since your advisor seemed to think these were similar portfolios that had would have similar outcomes.

Voices [28:36]

Are you crazy? Or just plain stupid.

Mostly Uncle Frank [28:41]

So you'll see how I constructed this. For instance, I took F Z R O X and then I put in the symbols to show that when it runs out of data for that, then it picks up VTI and continues that back. Likewise, for your high dividend fund, it picks up a large cap value fund as it goes back international, stays international. The high yield bond fund picks up an older high yield bond fund and then eventually goes back to treasury bonds because that's the only data we have when you go back that far. And similarly, the corporate bond fund picks up an older corporate bond fund and goes back. And I did the same thing for the golden ratio portfolio as far as the managed futures were concerned. So we get tests that go back to 1969 for both of these portfolios. I subjected them to a 4% withdrawal rate adjusted for inflation. And you'll see from the analysis that you don't want to hold this portfolio.

Voices [29:37]

Forget about it.

Mostly Uncle Frank [29:39]

This portfolio has drawdowns of over 40% and up to 50%, three times over the course of this history going back to 1969, and it was underwater for as long as about a decade. Meanwhile, the golden ratio portfolio is never down more than about 20%. And when you look at the overall outcome, starting with $10,000, subjected to a 4% withdrawal rate since 1969, your portfolio ends up with a inflation adjusted value today of only about 22,000. Meanwhile, the golden ratio portfolio has an inflation adjusted value of 147,000. So about seven times as good as your portfolio. You can see the difference. I would not say that those are comparable.

Voices [30:21]

Are you stupid or something?

Mostly Uncle Frank [30:24]

I would take this back to your advisor, shove it in their face, and say, How could you dare? How dare you say these are comparable?

Voices [30:30]

It's all one big crapshoot, anywho.

Mostly Uncle Frank [30:33]

Get your money back.

Voices [30:35]

Because only one thing counts in this life. Get them to sign on the line which is dotted.

Mostly Uncle Frank [30:42]

So that's testing using a start date of 1969, which is one of the worst dates you can use. You can also use January 1, 2000 as the start date. If you put that in, you'll see even worse results for your portfolio. That it hasn't recovered from the first decade at a 4% withdrawal rate. And if you subjected it to a 5% withdrawal rate, you would have run out of money. Meanwhile, the golden ratio portfolio is fine during that period.

Voices [31:08]

That is the straight stuff, oh funkmaster.

Mostly Uncle Frank [31:12]

So this portfolio is only going to work in periods where you don't have a bad decade. So if you start like 1980, yeah, it'll work great. Every portfolio works great if you start in 1980. If you start in 2010, it'll work great. Every portfolio is going to work great if you start in 2010. And I bet that's what your financial advisor was doing starting sometime post the financial crisis. That's why he thinks that your portfolio or this one he designed for you is a good portfolio.

Voices [31:39]

You know, whenever I see an opportunity now, I charge it like a bull. Ned the bull, that's me now.

Mostly Uncle Frank [31:45]

It's very common, but it's very sad that people are paying for this kind of nonsense.

Voices [31:50]

Ned Ryerson, I did the whistling belly button trick at the high school talent show. Bing!

Fixing A Robo-Advisor Portfolio Mess

Mostly Uncle Frank [31:56]

But I think I've gone on long enough about this. This is an obvious mistake. You should be changing this portfolio to a better portfolio that you can actually support good spending in retirement with confidence. The only way this works is if your spending rate is just low to begin with. If your spending rate is 3% or less, yeah, you can use this. It's fine. In fact, you can run that analysis and you should run that analysis with however much you are planning on spending out of the portfolio using that test folio link I gave you. But enough on that, going to this issue with the RoboAdvisor and the 250 securities that you've got there. Yes, that is quite a mess. Basically sell as much as possible, but then you're gonna need to spread out the selling over time to minimize taxes, obviously. But if you can at least sell parts of it and get that over into appropriate index funds, that's really what you want to do with this. When I see things like this, my reaction is that you've been engaging what I call level two thinking that we talked about last in, I think, episode 491. And that's where you have this idea in your head that these financial advisors either have magic buttons or shiny objects that they can use to make your money work better for you. This robo advisor and the 250 securities, that's a shiny object kind of a thing, as is a lot of buffered funds and dividend paying things or income strategies generated out of options. That's another popular shiny object these days.

Voices [33:54]

Tell me, have you ever heard of single premium life? Because I think that really could be the ticket for you.

Mostly Uncle Frank [34:00]

But you see what happens when you follow these shiny objects, you don't really get anywhere. You just end up with something complicated. And you'd be better off getting back to square one and working with someone that is actually working from principles and not coming up with magic buttons, formulas, or shiny objects to sell to you.

Voices [34:17]

Do you have life insurance, Phil? Because if you do, you could always use a little more, right? I mean, who couldn't?

Mostly Uncle Frank [34:25]

So in the meantime, assuming that is just a kind of regular diversified portfolio, you would treat that allocation as if it were an SP 500 fund or a total market fund for the purpose of using that as one of your allocations and whatever this overall portfolio you have is going to be. And you do really need to be treating all of your assets together as one big portfolio so that you can properly do tax location to minimize your tax burden. So I'm sorry to bring you the bad news as to what you're doing, but it's good to get the bad news now because I would hate to be in your shoes and experience a 40% drawdown in the next couple of decades, which is highly likely with a portfolio like this, because it's happened in the past a number of times, and there's no reason you wouldn't expect it to have the same experience in the future when we go through our next bad recession.

Voices [35:17]

And it's gone. Poof.

Mostly Uncle Frank [35:20]

Especially that high yield bond fund, those things really went into the tank in 2008. That's why you need to have treasury bonds and not these goofy, shiny high-yield objects. But I also do think you need to find another financial advisor because this one's really not doing their job. Unless you told them you weren't planning on spending much money and you didn't care about volatility. But in that case, you should probably have more stocks. Because that's a die with the most money possible strategy. Anyway, thank you very much for being a donor to both Fairfax Casa and the Father McKenna Center. We do really appreciate it. I hope you continue to enjoy the podcast, and thank you for your email.

Voices [36:38]

Second off.

Mostly Uncle Frank [36:39]

Second off, I have an email from Marcus. Marcus Vindictus.

Voices [36:46]

All hail the commander of his majesty's Roman legions, the brave and noble Marcus Vindictus, who returns to Rome after winning a great victory over the greetings at Sparta.

Mostly Uncle Frank [37:00]

And Marcus writes.

Mostly Queen Mary [37:02]

Dear Brother Frank and Sister Mary, I'm not writing with any questions, just with a note of thanks for your work both on the podcast and your causes, and to let you know that I've set up a recurring donation through our donor advice fund to both the Father McKenna Center and Fairfax Casa.

Voices [37:19]

Great success.

Mostly Queen Mary [37:21]

We are two recently retired and childless physicians who are lucky enough to find ourselves living in the Bay Area of California. We moved from an accumulation portfolio to a risk parity tilted portfolio a few years ago in the run-up to our retirement. 65% equities with a healthy distribution across factors, 20% intermediate and long treasuries, 10% gold, and 5% managed futures. No faux anxiety about whether we will have enough to get by, and not looking for any pats on the head for our diligence in saving and cleverness in investing. We have much more than we could ever need, and some of the fun that I've had in retirement has been in trying to optimize our portfolio and tax strategy both to maximize our giving while we are alive and to direct our legacy as much as possible toward organizations that will make a positive impact on the lives of our fellow beings. We're helping my father and my spouse's aunt with assisted living expenses and a niece and nephew with college tuition, and we're able to help out friends who find themselves in tight spots for a few months.

Voices [38:29]

And that's the way uh uh I like it, K She and the Shun Shine Band.

Mostly Queen Mary [38:34]

We both do several volunteer days a month in clinic to keep our connection with our professions, our colleagues, and our patients. The icing on the cake is that every year we get to travel to see some amazing location that impressed itself on our imaginations through the time life science books that arrived in both in our homes every month while we were children. Most memorably Madagascar, most recently Botswana, and coming up this fall, Costa Rica.

Voices [39:01]

I was in the Air Force, stationed in Drambuy off the Barbary Coast. We used to hang out at the Magombo Bar. It was a rough place, fastidious dive on the wharf, populated with every reject and cutthroat from Bombay to Calcutta. It's worse than Detroit.

Mostly Queen Mary [39:16]

Being able to spend our retirement in this way has been more fulfilling than I could have imagined. Money may not be able to buy happiness if you scroll it away under a mattress, but it truly can if you can give it away in a thoughtful manner to those who need it. Not looking for any on-air time, just want to extend my thanks for all you do, Marcus Vindictus.

Voices [39:49]

Make that the Spartan that free. Remember thou art mortal.

Mostly Uncle Frank [40:06]

Well, Marcus, you may not want to have airtime, but we certainly do want you to have airtime if you're gonna write emails to us like this.

Voices [40:17]

So shine's a good deed in a weary world.

Mostly Uncle Frank [40:23]

Thank you so much for everything you're doing for us and our charities. I'm very proud, pleased, and grateful that we have so many listeners that are so generous and are making generosity a part of their retirement. And it's interesting, I feel like the listeners we have here are are much more into this than most of the public figures I see. If you listen to a lot of podcasts like I do, you see that most of the people that make podcasts are really these kind of entrepreneur, work-forever type people, who are essentially going to die with the most money possible, even if that wasn't their stated intent. Meanwhile, our listeners seem to be living much more interesting lives, both in terms of travel, volunteering, and other activities. Mary and I are actually having lunch with another of our listeners who sound similar to you, and they happen to be coming through the DC area to see the cherry blossoms and other things. And they also seem to be trying to use money to live their best lives, as opposed to using their lives to accumulate the most money.

Voices [41:33]

What can I put you down for? Nothing. You wish to be anonymous. I wish to be left alone. Since you ask me what I wish, sir, that is my answer. I help to support the establishments I have mentioned. Those who are badly off must go there. Many can't go there, and some would rather die. If they would rather die, they'd better do it and decrease the surplus population. Isn't it, sir? No. It is enough for a man to understand his own business without interfering with other people's. Mine occupies me constantly. Good afternoon, gentlemen.

Mostly Uncle Frank [42:09]

If you do come to the DC area, it would be nice to see you sometime. And I say that generally to all of our listeners, at least as long as we don't have millions of listeners and we only have a few thousand. But if you send me emails like this, I'm certainly going to read them on air.

Voices [42:27]

Oh boy, is this great!

Mostly Uncle Frank [42:31]

So thank you for everything you do, both for us and for the other people you serve. And thank you for your email.

Voices [42:40]

Now let's start by getting one thing straight. I'm not a do-gooder. If you're a bum, if you can't break off with a booze or whatever it is that makes you a bad risk, then get out. Now, I don't pretend to tell you how to find happiness in love when every day is just a struggle to survive. But I do insist that you do survive. Because the days and the years ahead are worth living for. One day soon, man is going to be able to harness incredible energies, maybe even the atom, energies that could ultimately hurl us to where the world in some sort of spaceship. And the men that reach out into space will be able to find ways to feed the hungry millions of the world and to cure their diseases. They will be able to find a way to give each man hope and a common future. And those are the days worth living for. Mama, I'm coming home.

Mostly Uncle Frank [44:06]

And Sharon, right?

Mostly Queen Mary [44:08]

I just heard about your podcast and think it is the best out there, having listened to several.

Voices [44:13]

Well, let's start the insanity.

Mostly Queen Mary [44:16]

I was assisting my grandson with selecting funds for his 401k and was appalled at the limited selections and did end up going with a Vanguard TDF 2065, given the others had very high expense ratios. The Vanguard Wellington fund was the only other appropriate option, but the expense ratio was higher than the TDF. However, after just listening to your TDF podcast, I'm wondering if the Wellington Fund would be better. Any thoughts would be appreciated. Lastly, do you have any insight into why companies 401k and 403B fund options are so terrible and limited? Thank you.

How To Email And Support

Mostly Uncle Frank [45:17]

It's interesting, my friends Bill and Jackie just made a podcast over at Catching Up to Fi that I'll link to in the show notes about this very issue of trying to deal with all of these confusing funds in these 401ks. Now, one thing they did recommend that makes a lot of sense to me these days is to take the list and put it into your favorite AI, whether it's Gemini from Google or ChatGPT or Grocker or whomever else. Because then you can just ask the AI what's in these funds or which one is the closest to an S P 500 fund and which one is the cheapest and any other questions you might want to ask it. Because that's actually what you're looking for. And usually if you're in a 401k that has Vanguard funds generally in it, there's going to be something like a Vanguard Institutional Total Market F or something like that, V I I N X or V I N I X often, and that's the same thing as VTSAX. Or there might be VFAIX, which is the S P 500. But that's really what you're looking for. And I'd be surprised if there wasn't one in there that wasn't an S P 500 fund or a total market fund. Because that can be the base fund for accumulation. You certainly don't want to be using the target date fund, and the Wellington fund really isn't appropriate for accumulation. That's really a retiree kind of fund. It's a 6535 fund that invests mostly in large cap value stocks in addition to the 35% in bonds. You might also look for a small cap value fund, although I doubt you're going to find it in one of these 401ks. But really, if he just starts with the total market fund or the S P 500 fund, that's good enough. And that can be changed at some point in the future. That's basically what I tell our kids to do when they don't have as many options. He can always put other things in a IRA that he sets up himself. Now, as for why these 401ks and 403B fund options are so terrible and limited, it's really because they're a cost to the employer. And so it's something that employers actually compete on. You'll find that in the same industry, all the employers have similar funds or programs. As I mentioned in a recent episode, 403Bs are actually usually a lot worse than 401ks. But since this is a cost center for employers, there is not much incentive to provide the widest dispersion of funds. And to comply with ERISA and the Department of Labor rules, they know they have to offer target date funds. That's how they get around that. And then they'll throw a smattering of other funds in the um plan to go with that. As I also mentioned in that other recent podcast, the best option is if you have a self-directed option inside your 401k, which some employers do have now. They let you set up this like separate account that's kind of like its own little IRA inside the 401k, and you can buy anything you want in one of those. That would be the ideal situation unless they're charging you a bunch of money for it. But my best advice here does remain to use artificial intelligences because this is exactly the kind of thing they are very good at. Give them a list of stuff and then ask them questions about it. So hopefully that helps. And thank you for your email. If you have comments or questions for me, please send them to Frank at RiskPartyRaver.com. Then email us frank at riskpartyrader.com. Or you can go to the website www.riskpartyradio.com or 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 and be some stars of follow a review. That would be great. Okay. Thank you once again for tuning in. This is Frank Vasquez with Risk Party Radio. Signing off.

Voices [50:04]

Are we alive? I don't want to be a Mickup. Don't find with my be the wine though. Don't play with the loving of the Mickups.

Mostly Queen Mary [51:06]

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.