Mostly Voices [0:00]

A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. A different drummer.

Mostly Mary [0:18]

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 episode 60 of Risk Parity Radio. Today on Risk Parity Radio, it is time for our weekly portfolio review and also our end of the month review and distributions for March. We'll be looking at those. But just before that, I got a message in my mail from Paolo in Italy, and he wants to know whether there are transcripts for these episodes. Right now there are not transcripts for these episodes. I will look into seeing where I might get a transcriber off the internet, hopefully a free one, so if anybody is aware of any such service, I can easily connect transcripts to the episodes if I have them done up by sending the files through the transcriber. I am looking at free, hopefully here. If not, I will look into how much it would cost. Maybe we can do that. It is nice to know that I'm getting play not only in the US but also in other places and other countries. But this works everywhere. So let's take a look at what happened in the markets last week before we get to our portfolio reviews. And these are the sample portfolios you'll find at www.riskparadioradio.com on the portfolios page. But for reference, the markets last week were kind of ugly for the most part. The S&P 500 was down 2.45%. The NASDAQ was down 4.92%. Gold was down 2.81%. Treasury bonds represented by the ETF TLT were also down a little bit. They were down 0.4%. REITs represented by the Global REIT Fund, R E E T, were actually up. They were up 0.08%, so almost flat. And the big winner last week again was commodities represented by the ETF PDBC in our portfolios and they were up 2. 39% and then preferred shares represented by the ETF PFF were down 0.96%. And so that translated into all of the sample portfolios being down for the week with most of the components being down for the week. but you'll see how they played out and how the main risk parity portfolios were very muted in their declines, whereas the experimental ones were a little bit wilder. But let's just go take a look at these. We'll start with the All Seasons portfolio, and this is the one that is 30% stocks represented by VTI, the Total Stock Market Index Fund. And then it's got 55% in Treasury bonds, which is divided into 40% long term and 15% intermediate term, with TLT and VGIT being the ETFs there. And then the remainder is divided into gold and commodities, 7.5% each. And this one was down 1.21% for the week. It is up 2. 33% since inception last July. So it's barely hanging in there, but it's hanging in there. It usually doesn't move very much. The bonds are weighing on it these days, but that's the way bonds go. They go up and down over time. So we are looking at a distribution at a rate of 4% annually for this fund or for this portfolio, and so that translates into us Removing $34 from it for March since it still has over $10,000 in it. And we will take that out of the PD&BC, the Commodities Fund this month because that one's doing the best. And so since inception last July, we'll have removed $274 in total coming from various parts of this portfolio as it's gone up and down. So we've taken out, we'll be have taken out $35 from the Gold Fund, GLDM, $33 from the Intermediate Treasury Bond Fund, VGIT, $103 from VTI, the Stock Index Fund, now $34 from PBDC, the Commodities Fund, and $69 out of cash that had accumulated over time. And so that's a good example of how these risk parity style portfolios have different portions of them performing differently even over the course of eight months that these things have been running in here. And now moving to our three main risk parity style portfolios, since that last one is just really more of a reference portfolio for us. We think it's a little bit too conservative. The next one is the Golden Butterfly. This one is 40% in stocks divided into a total stock market fund VTI and a total or a small cap value fund VIOV. And then it's got 40% in treasury bonds divided into a short-term bond fund SHY and a long-term bond fund TLT. And then the remaining 20% is in gold GLDM. so this one was, was down 0. 75% last week, so it barely moved, particularly when you compare it to all the components. I think the small cap value fund is still holding up quite well these days. It is up 13.61% since inception last July in eight months. So it's doing quite well, actually, considering how low the volatility is. And then For the month of March, we will be removing $46 and that will come out of the small cap value fund, VIoV, which is still up 62% since last July. Outstanding performance for that fund. Surprising, but outstanding. So we will have removed $353 total from this portfolio. We are taking out of it at a rate of 5% annualized. divided over 12 months. And the money came out of over time $43 from GLDM, the Gold Fund, $88 from cash that had accumulated, and $222 from that small cap value fund, the VIoV, which has been the big performer for this since inception last July over that eight month period. Now moving to our next Fund. It is the Golden Ratio Portfolio. I keep saying fund when I mean portfolio. This one is comprised of 42% in stocks divided into a large cap growth fund, a small cap value fund, and a low volatility fund. That's VUG, the iShares Core S&P 500 ETF, and USMV, the iShares Edge MSCI Minimum Volatility ETF. And it's got 26% in long-term treasuries. represented by TLT, 16% in gold represented by GLDM, 10% in global REITs represented by the fund R-E-E-T, and then 6% in cash. And this one was down 1.13% for the week. So you can see that it also has a very muted volatility, which is nice to see when you see the NASDAQ going down almost 5% in one week that if you hold a portfolio like this, you're only down 1.13% and that's what you want to see. So it's up 10. 49% since inception last July over eight months and we will be taking $45 out of cash, which we always do for this portfolio. It's designed with that cash buffer in it so we don't really need to sell anything else until we rebalance annually. And so for the entire eight months it's been going, we've been taking distributions, we've taken out $350 from cash since inception, and that is at a 5% annualized rate divided into 12 months. Moving to our next risk parity style portfolio, sample portfolio. This is the risk parity ultimate. This is the most complicated one where we've thrown kind of everything in the kitchen sink in there, but it's essentially 40% in stock funds, 25% in long-term treasury funds and related funds, and then it's got 10% in REITs, 10% in gold, and 12.5% in PFF, a preferred shares fund. And then the remaining 2. 5%, it goes to a little bit of insurance, a volatility fund called VXX, which usually doesn't perform well, although has been performing a bit better recently with the stock market going down. But anyway, this one was down 1.3% last week, which isn't bad either. It's probably got the lowest volatility of the main three. Risk Parity Style Portfolios that we talk about here, which were this and the previous two. It is up 9.13% since inception last July, and we are removing or distributing out of this portfolio at a rate of 6% annualized. So we're taking out a bit more than the other two, and that translates into $53 coming out of it. for March, and we'll be taking that out of the small cap value fund that's in here that's also performing just as well as the same fund in the other portfolio. VIoV is that. And so we will have after that distribution removed $417 from this portfolio. $52 came from gold, $211 came from the small cap value fund VIoV. $51 came from the Large Cap Growth Fund, VUG, and $103 came out of cash that had accumulated over time. And now we're going to our two experimental portfolios and we can see why these are experimental because they are much more volatile and are struggling these days with all that volatility in them. So the first one is the Accelerated Permanent Portfolio and this one has a leveraged Stock fund, Upro, that is 25% of it, 27.5% of it is in TMF a leveraged bond fund. Then it's got 17% in gold and 17% in the preferred shares fund, PFF. This one was down 3.2% for the week, so you can see what that leverage does to it. It makes it go up and down much more steeply. It was down about 3% the prior week too. And so it is up 4. 29% since inception last July. It is still holding there, but we would hope it would be doing a little bit better. We'll see how it goes. That's why it's an experiment. And we are taking distributions out of this at the gaudy rate of 8% annualized, just to put it through its paces. We're actually hoping to see whether one of these breaks down given what we're doing to it. It's more interesting to be aggressive with these things than it would be to simply take out 4%. So we will be taking $66 out of this for March. We'll take it out of the stock fund UPRO, which has been performing the best. So we will have removed $555 out of this total since last July. 71 of it came out of the long-term leveraged treasury fund, TMF, $276 will come out of the leveraged stock fund, UPRO. We've also taken $65 from the preferred shares fund, PFF, and $143 that had accumulated in cash over that time. And now we'll go to our last portfolio, another experimental one using leveraged funds. And this one is comprised of 33% in UPRO that leveraged stock fund, 33% in TMF that leveraged bond fund, and then the remainder of 17% PFF and 17% VGIT. I think I misspoke on the last fund about how much gold and PFF were in that. Going back to that, sorry about that, in the accelerated permanent portfolio, there's 22.5% in gold and 25% in PFF if I didn't get that right the first time. But anyway, now going back to the aggressive 50/50 and all of this information is also at the website, so you can just check it out at your leisure. So this one was down 3.58% last week and is up 5.26% since inception last July. It is the most volatile of these portfolios we are also taking out of this at a gaudy rate of 8% annualized to see how it will hold up. And so that means we are taking $67 from it for the March distribution. We'll take that out of UPRO, the leveraged stock fund that's been performing the best. And that will result in attributing $553 total over the past eight months. $70 of that came out of TMF, the leveraged bond fund. $275 would have come out of UPRO, that leveraged stock fund, $63 from PFF, the preferred shares fund, and $45, or rather $145, it came out of cash that had accumulated. This one, if it keeps going the way it is, we had already rebalanced it once in November, but it's getting close to another, hitting another rebalancing bands looking at the TMF and UPRO right now, that TMF, that leveraged bond fund is down to 25% of the portfolio when it starts at 33 and the leveraged stock fund is up to over 40% of the portfolio. If that holds true at the middle of March when we look at these for rebalancing purposes, this will result in another rebalancing of this portfolio. And it's interesting, I mean the main thing that's been going on in the markets over the past couple of months are that the interest rates have been rising and so the bond funds have been falling in value. And while it looks steep or much different, if you look at it from a longer term perspective, they really haven't moved that much. These bond funds are basically in the same place they were pre-COVID, so at the end of 2019. So if you take this COVID episode as one big episode, you saw the bonds increase in value substantially and now have gone back to where they were before that. And my experience with these bond funds is that they do tend to just fluctuate a lot and end up going up for six or eight months and then turning around and going down for six or eight months at a time. And so the range for TLT that I've seen over the course of many years has been down to close to $100 per share and up to $170 per share. And having a move of 20% in a year is not all that uncommon. But it's not bad because it's generally moving the opposite way from the stock market. and that's why these risk parity style portfolios end up having lower volatility overall, even though their components themselves are highly volatile. That's what negative correlation does for you. So looking at these group of portfolios overall, we see that we have taken out $2,502 from them since inception last July, and they started with just over $60,000 in them total. And so that translates into an annualized rate of 6.23% that is being taken out of these portfolios. And they have performances ranging from 4.29% all the way up to about 14% And so they are actually diversified amongst themselves in a funny way, although you would never want to probably have six different portfolios that you're trying to monitor. It'd probably be too much to manage, especially when they're all overlapping like these are in some respects. But now I see our signal is beginning to fade, and I think that's enough. for today, we will be picking up with our analysis, part two of our analysis of that leveraged balanced fund, NTSX, later this week, midweek, for that episode. And I've gotten some more emails about that, which are interesting. I'll take a look at those when we get to there. But in the meantime, if you have Questions, comments, or know of a transcription service that you would recommend, please send them to my email which is frank@riskparadioradio.com that's frank@riskparadioradio.com or you can go to the website www.riskparadioradio.com and put your comment in there in the comment form and I'll get your message that way. Thank you for tuning in.

Mostly Mary [19:26]

This is Frank Vasquez with Risk Parity Radio. Signing off. The Risk Parity Radio Show is hosted by Frank Vasquez. The content provided is for entertainment and informational purposes only and does not constitute financial, investment, tax, or legal advice. Please consult with your own advisors before taking any actions based on any information you have heard here, making sure to take into account your own personal circumstances.