Welcome And Foundational Episodes

Voices [0:00]

A foolish consistency is the hubgoblin of a little mind. Adored by little statesmen and philosophers and divine. 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.

Mostly Uncle Frank [1:14]

Top men. And you can find those on the episode guide page at www.riskparty radio.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.

Voices [1:44]

I'll give you the moon, right? 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.

Mostly Queen Mary [2:04]

Really top drawer.

Mostly Uncle Frank [2:07]

Along with a host named after a hot dog.

Voices [2:10]

Light in the Francis.

Mostly Uncle Frank [2:13]

But now onward, episode 546. Today on Risk Party Radio. I'm still suffering from a cold, although it's getting better. And so without further ado.

Brokerage Bonuses And Dual Momentum Question

Voices [2:38]

Here I go once again with the email. And first off.

Mostly Uncle Frank [2:43]

First off of an email from multifamily investor.

Voices [2:48]

Oh no!

Mostly Uncle Frank [2:50]

And multifamily investor rights.

Mostly Queen Mary [2:53]

Dear Frank and Mary, thanks again for your earlier response. I wanted to share a quick update and ask a question. I took advantage of brokerage transfer bonuses. First, a 0.5% bonus from M1, held it there for a year, and then a 3% upfront bonus from Robinhood Vesting over five years. Someone stop me.

Voices [3:15]

No one can stop me.

Mostly Queen Mary [3:18]

For larger portfolios, brokerage turning can effectively add approximately 0.6% annually, which could meaningfully support the extravagance category in your spending framework. My question is about strategy comparison. Question! Before finding your podcast, I was deciding between risk parity and dual momentum, Gary Antonacci. After going deep into your work, I've been planning to use a risk parity portfolio in retirement. That said, dual momentum backtests show surprisingly similar drawdowns, sharp ratios, and withdrawal rates. Conceptually, I would expect managed futures funds by themselves, like DBMF or KMLM, to outperform simpler momentum strategies like dual momentum since they have broader universes and can go long, short, yet the results don't show that. Here's a cartoon explanation and a backtest. So I'm curious, have you explored dual momentum in depth? And were there any other strategies that came close to risk parity in terms of maximizing sustainable spending?

Voices [4:28]

Forget about it.

Mostly Queen Mary [4:29]

P.S. I've noticed more backtesting tools like testfolio optimizers moving behind paywalls lately. I get it, but part of me wishes more followed your model of keeping things accessible. Maybe Luke from Quebec can build an Uncle Frank backtester, or I'll have to take that on as a retirement project. Appreciate everything you do. Your financial goals and longevity framework have been incredibly useful in shaping my thinking. Best regards, multifamily investor.

Voices [4:59]

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 technology 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.

Mostly Uncle Frank [5:27]

Well, it's good to hear from you again. It's been a long time. I had to look back and remember when exactly I answered your first set of questions, and it was in 2025. It's in episode 417, if anybody's interested in taking a look at that. And I'm glad you're enjoying the podcast and making good use of it. You did provide a couple of links here that I will put in the show notes. One is the cartoon explanation of the dual momentum strategy that's a couple minutes long. And then you also have a back test that links to portfolio visualizer. Unfortunately, portfolio visualizer limits you to only 10 years of data, so it's only of limited use, but it does have a dual momentum strategy listed there. So the question is Have I looked into this? I looked into it a really long time ago, like a decade ago or more. We did talk about this way back in episodes 122 and 130. So you might go back and listen to that. When I looked at this, it falls into the category of strategies that require active trading and a lot of shifts in portfolios. And for that reason, I wouldn't use it because it is by nature tax inefficient. So trades in a taxable account, you're gonna end up incurring all kinds of short-term capital gains. When I looked at the back test you gave, it showed 42 trades over the past 10 years. And that's just way too much trading, especially when you're talking about changing the structure of the whole account all at once. And I think it's for that reason that these things have not become that popular. The other issue with it is who's going to manage this thing when I'm gone because it is of a relative sophistication that I wouldn't want to leave to anybody else. The best solution would be if somebody would just create an ETF that would follow this strategy and then you wouldn't have any tax problems with that. Unfortunately, such a thing does not exist. Antonacci uses SMAs for his practice, but nobody has put out an ETF that you could use to, in fact, model this. Which is disappointing because that's the way I would have liked to have tested it and would not cause you any tax problems due to all the trading. So I think in theory you could use something like this successfully, and I'm sure people are doing that. In practice, I'm not aware of anybody trying to use this in a retirement portfolio, probably for the tax reasons that I suggest.

Voices [8:09]

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

Mostly Uncle Frank [8:13]

But I know I have at least a few listeners, or did have a few listeners that were into this sort of thing, which led to episodes 122 and 130. If you are interested in more kind of tactical trading strategies like this, there is a new YouTube channel called Best Folio that I ran across, which has a whole bunch of different kinds of portfolios, both kind of the static rebalancing kind of portfolio that we use, which we would call naive diversification, where you just set up things with percentages and then rebalance it periodically. So it's got the golden butterfly and other things like that that it's tested, but it also does have tests of these tactical kinds of strategies where you are implementing a rule that causes you to trade and turn over the portfolio in various ways. So if you're interested in that sort of thing, that's where I would probably look for that. I don't think these are really related that much to managed future strategies like DBMF or KMLM, because you're talking about different kinds of markets and a completely different timescale that managed future strategies typically trade more often, but we have ETFs for that now, which takes away all of this trading problem that you would have if you were running the thing yourself. That's why if we really want to have a dual momentum strategy that we can use tax-wise, we need an ETF for that or multiple ETFs for that. But I would not compare those things other than very superficially.

Voices [9:43]

That's not how it works. That's not how any of this works.

Mostly Uncle Frank [9:47]

One thing I did notice, I don't know if you looked at this when you ran this back test, is that the dual momentum strategy on an annual basis outperformed the S P 500 in that back test, but if you change it to a monthly basis, it greatly underperforms. And I don't know what's going on there, and I didn't try to check that out. But again, that suggests that it is sensitive to the time period that you are implementing this strategy on. It's usually implemented on a month-to-month basis, but it could be implemented on any kind of basis, I suppose. Anyway, sorry I can't be more informative, but do check out episodes 122 and 130 in the Best Folio YouTube channel and whatever website they've got. And thank you for your email.

Equity Glide Paths Through Risk Parity

Mostly Uncle Frank [10:53]

Second off, an email from Nathan. And Nathan Wrights.

Mostly Queen Mary [11:02]

Hi, Frank. I wanted to reach out and say that your podcast has genuinely shifted the way I think about fire and decumulation portfolios. Fire, fire, fire, fire. Before discovering Risk Parity Radio, I had never heard of managed futures, and now I consider them an essential component of any post-accumulation portfolio. So thank you for that. Groovy baby! Lately, I've been going deep on the concept of equity glide paths, the idea of adjusting your stock bond allocation dynamically during retirement to reduce sequence of returns risks. One of the more thorough treatments I've come across is the early retirement now post. The math and analysis there are solid and worth a read, but I found it somewhat limited. The entire framework is built around only traditional stock and bond portfolios, with no consideration of less correlated alternatives like managed futures, trend following funds, and other risk parity style assets. That gap got me thinking: the benefits of a rising equity glide path in early retirement seem like they could be meaningfully enhanced, or at least stress tested differently, when you introduce assets that have low or negative correlation to equities during drawdowns. But I haven't been able to find much written or discussed on combining these two concepts, and I'd love to know your take. Have you explored equity glide paths through a risk parity lens? Have you covered this on the show, or is it something you've written about elsewhere?

Voices [12:36]

You need somebody watching your back at all times.

Mostly Queen Mary [12:40]

Thanks again for everything you do. The show has been a genuinely eye-opening resource. Thanks, Nathan.

Voices [12:47]

Get your hot dogs! Hot dogs!

Mostly Uncle Frank [12:51]

Well, Nathan, I'm glad you're enjoying the podcast too and are getting something out of it.

Voices [12:56]

No more flying solo.

Mostly Uncle Frank [12:58]

But your post is mostly about equity glide paths, and we have talked about this periodically, and you'll find that in episodes 73, 371, 416, 469, and 528. We are actually now implementing an equity glide path in the sample Golden Butterfly Portfolio starting this year, and we talked about that in episode 528 and as to how we're doing that. So you will find in those episodes in the show notes a lot of articles to Michael Kitzis, who's kind of the guru that's written the most about glide paths of various shapes and sizes, along with Wade Fow and a couple others. I should remind everyone that if you're looking for something like this, the easiest way to find it is to go to the podcast page at www.riskpartyreader.com, where our friend Luke has set it all up so you can search it not only on titles and show notes, but also on transcripts. So if you put in the word glide path here, which is a relatively rare word, it'll come up with all the episodes right then and there.

Voices [14:10]

In other words, right on the mark. Bullseye, awesome, c'est sacosh.

Mostly Uncle Frank [14:16]

So the most recent writing on glide paths in particular I found is actually from Bill Bangin, his most recent book in chapter 8, section 8.9. He talks about these glide paths specifically and concludes that yes, if you have a reasonable glide path, it will raise the safe withdrawal rate. Will it raise it that much? Probably not that much, but on the other hand, it's not that difficult to do. You would raise the question as to whether it would be different for a simple stock portfolio versus a more diversified risk parity style or other kind of portfolio. And the answer is it's not clear, but I don't think it's going to be that much different. And the reason for that is because you're talking about equities or not equities. And this really is focused on the equity glide path and how many equities you have in the portfolio. And we know from Bill Bangin's work and from our work that that equity percentage for a high safe withdrawal rate seems to be somewhere between 40 something and 70 something. And that seems to be invariant whether the non-equity component is just bonds or a mix of other things. That makes sense to me because when you're looking at these portfolios, it is the equity component that has the highest potential return, but also the highest volatility and the most subject to bad crashes. So distinguishing between those two things makes a lot of sense, just equities and non-equities on a macroallocation basis. As you can imagine, this is rather difficult to test, and I'm not sure you can do it at test folio yet. I wouldn't be surprised if it's somewhere in there, but you probably have to pay for it. But I suspect it's just going to be about the same in terms of impact, whether you're using an equity bond portfolio or an equity and assorted other asset portfolio. One way to get a kind of estimate is look at the two ends of what you're proposing to do. What would the starting portfolio look like and what would the ending portfolio look like? What some of Bengen's more recent research post book has shown is that as you increase the equities in a portfolio, assuming you're keeping them in that kind of sweet spot between the 40s and the 70s in percentages, you get essentially higher average safe withdrawal rates with more equities. What I mean by average is you're not looking at the worst case scenario, but you're looking at average case scenarios. And in average case scenarios, having more equities is advantageous. So if you think about a retirement where you're really worried mostly about the first 10 years, it makes sense that you would be willing to take more risk in equities as time goes on, because the time period you need to have is shorter, and hopefully by that time, the first 10-year period, you're most likely going to have more money than you started with anyway, in most circumstances, because you don't get the worst-case scenarios very often. So what Bengen found in his research, and I'll just read this to you, he says, in scenarios where the equity returns are bad early on, rising equity glide paths are crucial. And in scenarios where equity returns are good early on, the retiree is so far ahead it doesn't matter relative to the original goal. Woohoo! He was reporting on what Wade Fow and Michael Kitses had found and agrees with their conclusions. In my own mind, I'm thinking the best solution here, at least for a practical portfolio, maybe not to implement some kind of hard changing the asset allocation every year in some kind of lockstep manner, although that's what we're doing with that golden butterfly portfolio, but simply to let the portfolio drift to a higher equity allocation if it happens to do that. So for instance, you might start out with something that has a 45% equity allocation, but be willing to let that drift as far as 55% or even 60% without rebalancing it. Because that is what's actually going to happen over time in most circumstances, because in most circumstances the equities will outperform the other assets over time. The advantage of using a system like that would be you have to do less rebalancing and fewer transactions. And fewer transactions is always more desirable for tax and other reasons. So where I am with this is I agree it's a useful concept, but I'm not sure exactly the best way to implement it yet. And I'm not aware of definitive research for particular portfolios that would say this particular glide path method is better than some other particular glide path method. Anyway, do check out those earlier episodes where we've talked about this, and do check out that chapter in the new Bill Bangin book, which I will link to in the show notes. And hopefully that helps. And thank you for your email.

Voices [19:28]

Last off.

Managed Futures Proxies And SDMF Update

Mostly Uncle Frank [19:30]

Last off, we have an email from John. Here's Johnny. John from Charlottesville. What are you serious?

Voices [19:40]

Hey, John, hey, let's go to the John! Huh, John? Let's go!

Mostly Uncle Frank [19:45]

And John writes.

Mostly Queen Mary [19:47]

Hello, Mary and Frank. I recently went to see the movie movie Project Hail Mary in the movie theater. I was expecting to see a heroic former FBI agent, codenamed Mary, coming out of retirement to save children through the Underground Casa Organization.

Voices [20:02]

Women of this country learned long ago. Skills I have acquired over a very long career. Skills that make me a nightmare for people like you.

Mostly Queen Mary [20:24]

But it turned out to be a sci-fi flick starring one of the Ryan's.142 correlation. And GSG SIM and KMLM even have a slight negative correlation over that time period. Do you or your listeners have other suggestions for a good alternative for a fallback? Do we need an online risk parody forum to crowdsource this kind of question? Maybe within choose if I? My sense is that there are enough of us out here to justify it. I'm happy to help get it going. In other managed futures news, I saw that there's a brand new ETF from Simplify ticker symbol SDMF that looks interesting. It appears to be another partnership with DBI and their CTA Managed Futures Index. From the Simplify website, SDMF will seek to replicate the index using total return swaps, which are derivative instruments that are linked to the performance of the index. Total return swaps can provide an efficient way to gain exposure to the index as well as potentially improving tax efficiency. So, it appears to be trying to be a copy of DBMF, but with a lower expense ratio.85%. Cool. Best wishes, John.

Voices [22:30]

Wendy, I'm home.

Mostly Uncle Frank [22:33]

Well, John, it's good to hear from you again.

Voices [22:36]

Wow, we're very nice.

Mostly Uncle Frank [22:39]

John is one of our most amusing listeners and emailers. He did a complete history of Risk Parity Radio up to around 2025. You'll find that in episode 445 of this podcast if you want to go back and listen to it. I may have to go back and listen to it just to get amused again.

Voices [22:59]

Ha ha.

Mostly Uncle Frank [23:01]

But I'm afraid I'm going to disappoint you this time because no, I don't have a better answer to what to use as a managed futures proxy before 1986, which is how far Testfolio takes back KMLM SIM, which is the ticker there. The reason people typically use commodities or a commodities fund after that is simply because managed futures funds traditionally would trade commodities as one of their key components. That's actually changed over time. So something like DBMF has a commodity exposure in it, but just as important is the interest rate exposure, the equity index exposure, and the currency exposures. And all of those seem to make those strategies more robust and more useful from a diversification perspective. So I am afraid that GSG SIM is probably the best we've got in terms of looking for a managed futures proxy before 1986. Sorry about that. I don't think you really need a forum to explore that topic. You could really explore that in any of your favorite AI chatbots now, which is a very good place to be asking what's the oldest fund that trades in any given thing. That is actually how I went to find out that there were no dual momentum ETFs. There are a number of Risk Party radio listeners who populate the Choose FI board on Facebook as well as the Catching Up DeFi board on Facebook. I will never be setting up a forum. It is definitely a job that I do not want to have because the problem with setting up a forum is you also have to deal with spammers and trolls and police the thing. And it's just a lot of work.

Voices [24:56]

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

Mostly Uncle Frank [24:59]

I also just tend to limit my social media time to a couple of these groups on Facebook just because I've been there forever, and that's where I see a lot of family pictures as well as Instagram, even though I never post to Instagram.

Voices [25:13]

It's not that I'm lazy. It's that I just don't care.

Mostly Uncle Frank [25:17]

But I don't use things like Twitter, I don't use things like Reddit. There's just too much of stuff out there to be occupying too much of my time. So I'm not going to be much help there. Forget about it! Feel free to set up whatever fora you like. Just make sure that you do police it. I believe there already are Reddit forums or sub forums dedicated to this, but I haven't gone searching for them recently.

Voices [25:53]

I just stare at my desk, but it looks like I'm working.

Mostly Uncle Frank [25:58]

Moving to your last topic, SDMF. Yes, Simplify Funds did release this fund, SDMF, last spring. I did buy a little bit of it in one of our accounts to see how it would perform and see how it compared with DBMF. What it's really designed to be is a more tax-efficient version of DBMF, because it's supposed to be following the same index and seems to be having about the same returns, but it is not based on actually replicating the index with actual futures contracts. What it is based on is a swaps contract with banks, which can be more tax efficient. Although, since I haven't held it through an entire tax season, I can't even tell you whether it's more tax efficient. I can say that it is not nearly as liquid, it doesn't trade as much. So DBMF is still the preferred vehicle, at least in retirement accounts. We did talk about SDMF in episodes 503 and 509, although I can't remember what I said off the top of my head. And although its expense ratio on its face is less than DBMF, I can tell you that I think structurally, the way the swaps contract is built, the fees end up being about the same overall because there are fees associated with a swaps contract like the one that SDMF is using. I should also mention in passing that that other managed futures fund that Simplify has CTMA, which is ticker symbol CTA, has recently changed its formulation and it is not based on a particular index. So I would be careful investing in that unless you really understand what you're getting into. I can't say whether it's going to be better or worse than any other of these funds. I do note that Fidelities is doing quite well this year in addition to DBMF. I think Fidelities is up 18 or 19%, although iShare's managed futures fund is only up about 10%. But I can't tell you why that is either, because I haven't analyzed those in detail. I still do prefer DBMF. It has become the largest one of these funds with I think $4 billion in assets, because people realize that tracking an index like the way it does is very advantageous. That's true. I will be comparing the tax consequences of holding DBMF versus SDMF at some point in the future, sometime next year, when the tax year is all over and we can see what kind of distributions they've had and what kind of taxes are appropriate for each one. But that is something for the future. Thank you for being one of our most enthusiastic loyal listeners. With a great sense of humor. And thank you for your email. It's a lot of nonsense. But

Wrap Up And How To Reach Us

Mostly Uncle Frank [29:01]

now I see our signal is beginning to fade. Hopefully, my voice will have fully recovered by this weekend, but we'll see.

Voices [29:10]

In your ear to the wisdom post. In your eye to the line. Never let the weeds get higher than the garden. Always keep a sapphire in your mind. Always keep a diamond in your mind. You got to keep out of view. Gotta give it a mute.

Mostly Uncle Frank [29:38]

In the meantime, if you have comments or questions for me, please send them to Frank at RiskPardyRadio.com. That email is Frank at RiskPardyRadio.com. Or you can go to the website www.riskperdyRadio.com. 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 me some stars, a 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.