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 96 of Risk Parity Radio. Today on Risk Parity Radio, it is time for our weekly portfolio reviews of the six sample portfolios that you can find at www.riskparityradio.com and I seem to hear some theme music in the background associated with that.

Mostly Voices [1:15]

But before that, first off, I'm intrigued by this, how you say, emails.

Mostly Uncle Frank [1:25]

And our first email is from Aaron, and Aaron writes, Message：Bonds during accumulation phase. Hello Frank, I've listened to your bond podcast and understand the use of long-term treasuries in your retirement risk parity portfolios. We are somewhere between four and seven years away from dramatically reducing our income in our 40s. I have been keeping a small percentage of our portfolio in short-term corporate bond ETF with a 0.14 correlation to VTI. I know this is essentially a cash like drag on the portfolio. I keep it to reduce volatility. I also have an allocation to a preferred shares ETF that will be liquidated in a year to help purchase a home, correlation of 0.7 to VTI. These are really the only assets in our portfolio with any reduced correlation. If you include the preferred shares into the income portion of our portfolio, we are at about an 80/20 portfolio that is diversified internationally and has a small cap value tilt. After we liquidate the preferreds to buy a home, it will be closer to like a 90/10. We have never owned real estate before and live in a very high cost of living location. It's a lifestyle decision now that we have our kids. Do you have any suggestions for us? Specifically, do you think we should be owning bonds with less correlation like long-term treasuries? When still in an accumulation phase and looking to just provide a bit of volatility reduction should I allocate the 10 to 20% of the portfolio to more risk parity style assets? Would you suggest using just long-term treasuries or do you think that a mix closer to one of your portfolios would be better, i.e. gold as well? Thank you very much for your time. I have greatly enjoyed the podcast and your many sound bites. that date both of us. I am in Canada, but I've tried to write this to be useful to all of your listeners, just in case you want to see it. Here are the correlations, and there's a correlation matrix that I will link to in the show notes. I also highly recommend watching the show Schitt's Creek. The first season is a bit dull, but it gets better. And it's Canadian. All the best, Aaron.

Mostly Voices [3:49]

Canadian TV shows eh? Good day, how's it going? I'm Bob McKenzie, it's my brother Doug. How's it going? A-Team. We got two topics today, back bacon and long underwear.

Mostly Uncle Frank [3:57]

I hope you recognize that blast from the past that the connection to Schitt's Creek is that Catherine O'Hara and Eugene Levy both made their starts on SCTV. in the 1980s, and that's where that comes from. Beauty, eh? This in hose head, take off. All right, as to your question, yes, you could make a sort of miniature move towards a risk parity style portfolio with that 20% if that's what you wanted to hold. If you go and look at the Golden Butterfly or Golden Ratio portfolios, you'll see that What they tend to have in there, if you combine the bonds and the gold, it's about 40% of those portfolios. So you could come up with a solution that's about halfway there. And so say you wanted to use 20% as this, part of your portfolio to reduce the volatility, you could make that 12% long-term treasuries and 8% gold or 10 and 10 or something like that. And that would be a perfectly fine way to essentially have a risk parity style 80/20 portfolio while you're still accumulating there since you want to reduce the volatility a little bit. If you don't mind the reduction in the projected compound annual growth rates. That is a good way to go. And thank you for that email from Canada. All right, next email is from Eric S. Frank, this is Eric S. I've talked to you a couple times on the Choose FI Facebook group. I'm actually trying out the pinwheel. as my model portfolio. I think I have four to six years before reaching FI based on my savings rate. So I realize based on your podcast episode that I should, even in my accumulation phase, preservation of capital is more important to me than the aggressive growth given my timeline. Should be interesting to see how it does. Just subscribe to your podcast too and listening to it now. Hope all is well. Well, thank you for that message, Eric. Very nice to know this is useful to you. As for what the pinwheel portfolio is, that is a sample portfolio you can find over at portfoliocharts.com, and I will link to it in the show notes. But it does follow kind of risk parity style aspects to it. It's just a little more complicated than, say, the golden butterfly. But I will link to that.

Mostly Voices [6:45]

A really big one here, which is huge.

Mostly Uncle Frank [6:49]

All right, the next email is from Matt H. Matt H writes, Thanks again for the great podcast. I'm learning so much from you. I have another question which I think brings me up to five. I suggested a portfolio of UPRO, TMF, VIOLV, and VTI, 25% each. You commented that VTI and UPRO are highly correlated. My thought was to limit the overall risk and leverage. I was thinking that half of the portfolio would be in typical funds and half in leveraged funds. My question then is how do you recommend thinking about multiple different goals? For example, a safe risk parity portfolio covering expenses once the game is won, a more aggressive portfolio for long term growth, a speculative experimental portfolio using leveraged funds, or one for short term savings. Should one think of them as separate portfolios? as one large portfolio or as a hybrid. Thanks. Geez.

Mostly Voices [7:47]

Guy wouldn't know majesty if it came up and bit him in the face.

Mostly Uncle Frank [7:50]

All right, first regarding that portfolio you constructed. Yeah, my observation was simply that you had two things that were the same. So maybe it only needs to be one thing. And then it would just be a matter of re-proportioning the whole portfolio to match the allocations that you ultimately wanted to have. So in that case, it would just be adding a smaller portion of extra UPRO to go with the TMF and VIoV. I would probably throw some gold in that portfolio just to make it a little more smooth in terms of the ride is concerned. But you can have a look at that or think about that. As to your larger question about how many of these portfolios do you need, I think In the big picture, you need to think about your non-financial goals and have those dictate how you organize your finances and not the other way around. And what I mean by that is you don't need to have all these different portfolios just to have them that your finances should be organized around the purposes inherent in your life. So most of us are trying to become financially independent. And so what those two things tell you is, I need to have this accumulation portfolio for some period of time. And then when I get to my FI number, then I need to shift that to a more conservative risk parity or retirement style portfolio. Now, all of these other portfolios you're talking about would serve particular purposes, whether you want to have some kind of speculative or experimental portfolio. That's really a matter of curiosity and preference. for instance, some people want to invest in real estate and some people do not find that attractive. Some people want to have experimental portfolios and other people are not going to find that attractive. That's kind of like an add-on of something that you could have your Fortress of Solitude risk parity portfolio that covers your expenses and then your other Investments could be partially in one of these experimental portfolios, if that was something that you found interesting. And then you might also have a risk parity style portfolio for intermediate term build up of savings to purchase a house or some other large purchase or just to have there as an intermediate fund accessible for other things. Obviously, your short-term fund is probably just going to be cash and savings and that sort of thing. So in terms of thinking about this, you would think about things that are long term, things that are short term and things that are intermediate term, what the ultimate purpose of them, and then select the portfolios that you think you need to cover those sorts of things. And if you didn't have these other purposes or needs, sort of that basic idea for long term of having the accumulation portfolio and then shifting that to the risk parity or retirement style portfolio. That's basically something everybody needs to have in addition to their short term emergency funds. After that, then it's just a matter of what else you need in terms of your personal goals. I would say also though that this sort of collapses when you do get to that drawdown phase and what I mean by collapses is the intermediate portfolio that you might have had for intermediate term savings doesn't no longer needs to be in existence and can be merged into your big retirement portfolio that you're drawing down on anyway, because that one is also going to have cash in it. So you don't need as much of really an emergency fund. So the only other need you might have is if you had some long-term thing that you wanted to build an inheritance for and you were never going to touch it, you could put that back in some kind of experimental or accumulation style portfolio and leave it to somebody else or a foundation or whatever you wanted to do with it for that purpose. That and your curiosity about experiments.

Mostly Voices [12:00]

Ain't nothing wrong with that.

Mostly Uncle Frank [12:04]

Alright, the next email is from Davis J and Davis J writes, Hi, Uncle Frank. I hope you I can call you that. I apologize in advance for the barrage of questions here. I am a millennial hoping to buy a house one day, but my fiance and I are still five years away or longer from saving the down payment since we are in a high cost of living area. We'd like to use risk parity principles to save in a taxable account while also being considerate of tax consequences. Would you advise decreasing or eliminating entirely our allocation to gold REITs and preferred shares? funds because of their tax considerations, what would good alternatives be? I'm also considering, in honor of the simplicity principle, combining the stock and bond portions of my portfolio into the single fund NTSX, which I've researched and seems to be quite tax efficient. Then I could diversify around that fund, but I'm not sure into what maybe tips. Another thought I had was combining my factor investments into a single Multi-factor fund like AVUS, DFAU, or LRGF? Am I overcomplicating things for the sake of simplicity? I appreciate your thoughts. Davis. Alright Davis, you certainly can call me Uncle Frank. I don't think I miss what you think I miss.

Mostly Voices [13:20]

I enjoy interacting with people that are 20 or 30 years younger than

Mostly Uncle Frank [13:24]

me and it is gratifying when people call me Uncle Frank. Thank you for that.

Mostly Voices [13:31]

Yeah, baby, yeah. Now, going to the first question.

Mostly Uncle Frank [13:36]

I mean, the first principle here is don't let the tax tail wave the wag the investment dog. And I think you're overly concerned about taxes here, because what's going to happen if you build up a risk parity style portfolio for a down payment on a house? So we're talking, you know, five to seven years. The only reason you'd have a lot of taxes in a taxable account is if you were doing a lot of transactions in terms of selling things. If you're going to accumulate like this, you're never going to be selling until you actually sell the whole thing to buy the house or whatever. Because as you build up, you'll simply add to the allocations that are low in terms of balancing out your macro allocations in there. So if your gold goes down in value, you would buy more gold the next time you put money in there. And that way you're really never having to rebalance, so you're never really having to sell something in there. The taxes that you'll pay on the income there are not going to be that significant. If you have, say, $50,000 in there, the income off of that is probably going to be between $1,000 and $1,500 a year. And so a good portion of that is going to be qualified dividends, long-term capital gains rate. So you're talking about paying a few hundred dollars in taxes a year on that kind of income. That is not significant and is not any reason to change the way you would build out this kind of portfolio, because remember, the purpose of using a risk parity style portfolio for intermediate term goals is that you are counting on the fact that if it has a drawdown, if there is a market crash, this portfolio is likely only to go down a maximum of about 20% and then recover within three, a three year period maximum. And that is why it's appropriate for these intermediate term goals. If you start monkeying with it and taking out the diversification out of it, then you could end up with something that could be subjected to a much more severe drawdown and a much longer drawdown, which would defeat the purpose of using it for an intermediate term goal. So if you're going to use a risk parity style portfolio for the intermediate term goal, make sure you are actually using it and not monkeying with it to make it essentially an accumulation style portfolio and not monkeying with it based on tax considerations. Don't be saucy with me Bernaise. Because those really are not going to be significant if you're not selling this until the end, when you sell at the end, you're just gonna have a lot of long-term capital gains and that's at your 0 or 15% rate for most people. All right, the next question. Could you use NTSX? Yeah, you could. Listen to episodes 59 and 61. where we talk about NTSX as an investment in a risk parity style portfolio in particular. And there are a couple of sample portfolios given there. And then go listen to episode 94. And there are more sample portfolios using NTSX. NTSX, when you break it down as the example I think I gave there, if you had $10,000 in an NTSX fund that would be like having nine thousand dollars in an S P fund and then having two thousand dollars in each of long-term treasuries, intermediate-term treasuries and short-term treasuries. And that's the way you should think about it. And then you can add things to balance that out. And you'll see that in particular in episode 94, where I had a couple portfolios that were essentially taking NTSX and using it to create a golden ratio kind of portfolio with about 20% leverage in it coming through the NTSX.

Mostly Voices [17:50]

We had the tools, we had the talent.

Mostly Uncle Frank [17:54]

All right, and then the next question is another thought I had was combining the factor investments into multi-factor funds like AVUS. I think you could do that, but I think then you're probably stuck with that as your sole Stock fund, and it's not going to be as flexible as if you had, say you had a large cap growth fund and a small cap value fund that you could then rebalance. If you have everything in one fund, obviously the rebalance, any rebalancing is going on inside that fund and you don't really have any control over that. It would be difficult also to use one of those funds with NTSX because what you really need to add to NTSX on the stock side are some small cap value style funds, and none of those are going to really fit that bill. So you may end up with some puzzle pieces that just don't fit together. And that's the disadvantage of using kind of some kind of all-in-one fund like that. Am I right or am I right or am I right? I hope that answers your questions. Thank you for that email. My young Padawan learner.

Mostly Voices [19:06]

Everything is proceeding as I have foreseen.

Mostly Uncle Frank [19:13]

All right, our next email is from Brian E. And Brian E. Writes, Frank, I've been playing around with a formula to determine the weighting between two assets in a portfolio to minimize the average drawdown the portfolio experiences opposed to holding them in equal weights. And then, and I won't read all of this, but he describes the formula with the standard deviations and everything he's got there. And then he writes, There's an obvious takeaway when looking at the data that smoothing the drawdowns can be very costly if you use the second asset with a low return. In one example, I used a stock with 10% return, 12% standard deviation, a bond with 5% return, and 3% standard deviation close to zero correlation. The formula resulted in a 68% bond versus 32% stock holding and the bonds did effectively cancel out the average stock drawdowns. But a 6% return overall was nothing to write home about. The compounding difference between the 10% return of an all stock portfolio versus the smooth 6% was quite a price to pay for the minimal drawdown. I'd be willing to bet a better uncorrelated asset could be found though. and the same approach could be applied to much better results. In any event, acknowledging my inexperience in the space and welcome feedback, you have either on this waiting formula or another one that you use, all the best, Brian. All right, what you were talking about there in that last thing is the problem with using assets like cash or short-term bonds or tips or things that do not have very high returns themselves because even if they're uncorrelated, they just tend to drag a portfolio down. That's why using something like long-term treasuries is more interesting because you want something that has potentially higher returns and more volatility, but the volatility is going in a different direction. And that's what really makes one of these portfolios maintain a relatively high level of returns while lowering the standard deviation. And that's why when you compare a risk parity style portfolio to a total stock market portfolio, you're only giving up 1 to 2% of returns and you're getting half of the volatility. Now, you could do that by just putting cash in the portfolio, but then you would be getting half the returns and half the volatility. If you put those low yielding things in your portfolio, yes, your volatility will go down, but your returns are going to sink just as fast. So that's not a real good solution for anyone. And that's why these ideas of keeping large piles of cash or short-term bonds in a portfolio, yes, that will reduce your volatility, but it's going to severely reduce your returns to the point where you're not really getting any bang for your buck. You're not really using diversification in a way that makes the most sense. And that's what your formula, what your calculation showed. Now, in terms of what formulas to use, I would not try to reinvent the wheel here overall. The formulas you're talking about go to correlations and they also go to something called the efficient frontier calculation. If you go to the tools at Portfolio Visualizer, there is an FAQ tab on there and it has the methodology for all of the various kind of calculators and things that they have there. and I would look through that to sort of select the kind of thing that you're interested in analyzing because all of this stuff kind of has standard formulations and you don't want to have to go reinvent that wheel yourself because it would be a lot of work. And the best you can do is getting to the same place that other people have already gotten to. All right, the next email is from UK and UK writes, hi Frank, thank you for your podcast and information on diversification. I would appreciate if you could compare FNBGX to TLT. It's the only option available in my 401k. It shows a difference of $850 over 10 years and I'm not able to figure out why. UK. Well, here's the reason. FNBGX, which is a fidelity long-term bond fund based on the same index as TLT has only been around since late 2017. So obviously it has not had a 10-year history. And I would think that that would be the difference there. Other than that, if you look at it over the course that it's actually existed, it pretty much performs like TLT. So yes, you could use that and you'd be fine. That would be great. Okay. All right, next email is from Peter L. Peter L. writes, Thanks for the great podcast that provides a unique perspective on an important topic. Apologies for the number of questions. This is a shortened list. Thanks again for everything you're doing. It's really helpful. Peter L. from New York.

Mostly Voices [24:44]

I'm funny how? I mean funny like I'm a clown. I amuse you. I make you laugh.

Mostly Uncle Frank [24:47]

All right, and then he's got one, two, three, four, five, six bullet points. See if we can go through these one at a time. First off, is monthly drawdown optimal or more of an arbitrary choice? And do you draw down the highest performer for the past month or the highest overall with largest percentage of balance above target? It is an arbitrary choice. We are using monthly drawdowns for these sample portfolios because it's more interesting for a podcast. You could use quarterly drawdowns or even annual drawdowns. which might be more efficient in the long term, but I think it's more interesting to see how this all works out since I don't think it matters that much in the great scheme of things, whether it's monthly, quarterly, or annually. As far as the highest performer, which one we draw down from, it's really since the last time it was rebalanced is what we're looking at. So it's a combination of how well it's been performing recently and how much it's been drawn down on before and how much it's performing overall. It's not an exact science. You just eyeball it and take one that looks good. And that's enough for this because it will all come out in the rebalancing anyway. All right, second off. Thinking about bonds, what if you put enough in cash, short-term bonds, and our corporates to make sure expenses are covered for, say, four years? Given short-term bond corporates funds don't appear to have more than one to two consecutive down years, that would give enough cushion to ensure that you aren't selling too low sequence of risk, allowing you to keep the rest of the funds in stocks. This should allow for maximum returns while controlling for sequence of return risk, which is the primary goal of risk parity by giving you a four-year cushion before having to sell stocks. Just trying to reconcile risk parity with what I've been hearing for so long. All right, I think that is an overcomplication and gets you into problems. First of all, if you go look at one of these risk parity style portfolios, say look at the Golden Butterfly, that has 20% short-term bonds in it. So it already has this buffer, whatever you're talking about. And most of these portfolios have some kind of a component that has that buffer characteristic. So really you're looking at the same thing in a different form. Effectively, you're looking at a staircase, whether you look at it on the side and you see the stair steps or you look at it from the front and it just looks like levels. It's the same staircase. The problem with just holding this thing in cash as something different or separate is that you don't have any clear rebalancing rules. So what is the rule here? Are you just going to spend all that and then start spending on the stocks? Are you going to rebalance the stocks as you go? What is the rule here? Without a set of rules, this is really kind of some kind of ad hoc construction that really doesn't have A firm foundation as to how you are managing this portfolio. So it's much better to consider all of these assets you're using overall as one big portfolio with some kind of rules for rebalancing than trying to pull it apart and take this part for the first few years and this other part for something else. To me, that means you don't have a good construction of a portfolio.

Mostly Voices [28:23]

Expect the unexpected.

Mostly Uncle Frank [28:27]

It means you're not really confident of your long-term portfolio being able to withstand drawdowns. Because while the first few years are important, that doesn't mean that the rest of the years are not important or you get some kind of get out of jail free card after that. That's not how it works. That's not how any of this works. So I really consider that kind of advice, kind of 20th century advice that we should know better now how to how to do this and not be kind of guessing at portfolio construction and actually going and doing some analysis of coming up with something as opposed to putting this kind of band-aid solution on things. You don't frighten us English pig dogs. All right, next point. Lack of history for leverage funds worries me, but I see the appeal. Do you think you've seen enough to maybe put 10% of equities and bond allocations to leveraged versions? Or do you think their ability to continue to performing as expected is too unclear to commit to right now? And my answer is, you know, I really don't know. Man's got to know his limitations. I would think 3 to 5% is kind of what I use these things for, but if you had a higher risk tolerance, maybe 10% is fine. Particularly if you're using one of these things in an accumulation portfolio and you're just starting out and you plan to be contributing, you know, hundreds of thousand dollars more into it, your overall risk and that sort of thing is pretty low where your risk would be high is if you got to your retirement, and then you started dumping all of your retirement savings into some kind of leveraged fund portfolio, that would be too risky for me at least.

Mostly Voices [30:28]

You can't handle the gambling problem. All right, point number four.

Mostly Uncle Frank [30:33]

Given the volatility of gold and the fact that you could go over a decade without much gain, I'm surprised that these portfolios do as well as they do. is the regular drawdown when it does well, locking in gains and buying when it is down, amplifying the return and providing a better return than you might see in the standard graph. Yes.

Mostly Voices [30:50]

That is part of why these things work so well,

Mostly Uncle Frank [30:53]

because they are forcing you to buy low and sell high and also generating a situation where when something is going up, something else is going down. So you're getting higher relative prices to the thing that is low. And so the rebalancing in this kind of portfolio gives you a vast improvement over some kind of standard portfolio where you're just holding a pile of cash that's not doing anything.

Mostly Voices [31:22]

As for gold, I love gold.

Mostly Uncle Frank [31:26]

It does well when things aren't other things are just not doing well historically. In the past 50 years, that's meant the 1970s and the early 2000s. The 1970s were a bad decade for bonds in particular, and some stocks but not all stocks. And gold did well in that environment. The 2000s were a bad decade for stocks in particular, were fine for most bonds, and gold did well in that decade. What you'll find is that gold does nothing for years on end and then suddenly spikes. If you have a risk parity style portfolio, you will be continually rebalancing into gold while it's doing nothing. and then when it spikes, then you'll be selling it. And so you're buying low and selling high. All right, 0.5. Don't hear much about international equities. Do they have a place here or just stick with the US, assuming you're based in the US? All right, the answer to that is the kinds of funds that you see right now, the large international funds from Vanguard and others. If you do a correlation analysis of those two, US large cap funds or total market index funds. These funds are now highly correlated and maybe that's due to globalization or something else, but the fact of the matter is you're really not getting much, if any, diversification out of those kinds of funds. So I haven't found them to be terribly useful. Now that may not have been true and probably was not true in the 1980s or the 1990s when people first started really talking about International Funds for Diversification. But the correlations then were down around 0.2 or 0.3 and they are over 90% correlated for most of these large international funds. Where I found things that are most interesting and we will be adding one of these funds to our Risk Parity Ultimate Portfolio when we rebalance it in July is there are a few funds that invest in the internal economies of other countries that are well diversified from US equities. And you can find those now in what are called the China A shares funds, which invest in companies that do mostly domestic business in China. And those are only like 0.2 or 0.3 correlated with international stock funds or US funds. So I think that kind of thing is what you're really looking for, something that has a high rate of return that is actually fairly uncorrelated with what you already have. Now, I wish I could find funds like that that invest in places like Nigeria or Pakistan or India or somewhere that's really growing internally, but unfortunately, you don't really see many of those kind of stocks traded because a lot of those economies are run internally by private companies. For the most part, at least that's my observation. So I think if you're going to use international funds, you need to be picky as to what you pick and make sure that it actually has some benefit in being uncorrelated with what you already have. Because if not, you're just adding things for more of the same and it's not going to help you. And the sixth point. Last off. What metrics are most important on portfolio charts? I'm looking at permanent withdrawal rate, standard deviation, and return rate. Well, I suppose it depends on your purpose. Each calculator has different value depending on whether you're looking at accumulations or drawdowns. I do like the one that you can model the drawdowns in retirement by putting in different portfolios and also different drawdown strategies. I think that's a particularly important Calculator for people to sit down and model their portfolio on to see what it's like. Too many people are say things like, well, I think there's the 4% rule, but I think it's going to be less, so I'm going to do 3%. That is not a method of analysis. That's not a process. We need to get away from that sort of thing. You need to go take your portfolio over to one of these calculators, model what your portfolio is going to be, model what your drawdown strategy is going to be, and then make some kind of determination as to whether you need to make a change or not, whether it's the drawdown strategy or the portfolio or both. In terms of what the permanent withdrawal rate or safe withdrawal rate measures, that's a combination of three things. It's a combination of the total return of the portfolio, the maximum drawdown of the portfolio, and that maximum drawdown is both in terms of depth and in length. Statistically, what you're talking about is the standard deviation, but I do like looking at the calculator and portfolio charts that shows you what was the maximum drawdown for the last 50 years of this portfolio that you're analyzing and how long did it last? Because that's the big difference here. The portfolios we're talking about here typically have metrics of drawdowns of 20% or less and lasting for three to four years max. If you took a typical 60/40 portfolio, you're talking about a drawdown max of 30% to 35% that could last up to 13 years. That is a big difference in portfolio construction. But thank you for that interesting set of questions that got in a lot of important issues in portfolio construction. Cool. All right, last email today is from Gregory P and Gregory P writes, hi Frank, thank you like a glass of water in hell. Your podcast is a refreshing change from the numerous so-called experts shilling investment products and funds they either don't understand or receive a cut from selling.

Mostly Voices [37:26]

Do you have life insurance, Phil? Because if you do, you could always use a little more, right? I mean, who couldn't? Always be closing because only one thing counts in this life. Get them to sign on the line which is dotted.

Mostly Uncle Frank [37:42]

By contrast, your rational, data-based, simple explanations clarified several elusive concepts such as bond convexity, asset correlation, and diversification.

Mostly Voices [37:54]

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

Mostly Uncle Frank [37:57]

As an engineer myself, I particularly appreciate that you base your conclusions on data I can validate myself and validate I have. I'm particularly fond of the Golden Butterfly. As an engineer, I found the tools at Portfolio Visualizer and Portfolio Charts immensely helpful in understanding and better planning my investment strategies. Thank you again for those references. To my question, while I have been dollar cost average investing for many years, I'm looking to invest a substantial sum mid six figures and I'm struggling with concerns over losing a large amount to the bid ask spread if we simply drop it in it market. Is this a real concern or am I just overthinking this? Might I humbly suggest discussing this issue or maybe it's really a non-issue as a possible podcast topic. I'd love to hear your thoughts. Final note, I found your podcast after listening to the choose FI. Are you as diversified as you think you are podcast? Big thanks to Brad, Jonathan and yourself for putting that episode together. Well, you should give most of the thanks to Brad and Jonathan because they simply invited me to do that. And I was very happy to be able to do that for them and their audience. As to your question, the real answer to that is to use limit orders, not market orders when you're making purchases or sales in markets. Therefore, if you use a limit order, I'm sorry, you set the price. and you can't get not that price, you'll get that price or better. It is true that these days market orders are a lot more efficient than they used to be. And a lot of times you can get away with making large market orders on things like TLT when the volumes for them are extremely high anyway. But the safest course of action still is to use limit orders whenever you are trading at least substantial amounts of money or shares to make sure that you do not fall into some hole at the time and get bad prices for substantial investments. So my advice is to use limit orders and then you will not have that problem. Yeah, baby, yeah! Alright, now it's time for our weekly portfolio reviews of the six sample portfolios that you can find at www.riskparityradio. com But first, taking a look at the markets before we get to the reviews themselves, we saw the S&P 500 go up 0.41% this week. NASDAQ was up 1.85% this week. Gold was down 0.83% this week. Long-term treasury bonds were the big winner this week. TLT was up 3.01%. You'll see how that impacted our portfolios. Reits represented by the fund R E E T were up 1.77%. Commodities represented by the fund P D B C were up 1.16%. Preferred shares P F F were up 0.42%. Now, one thing you might not be aware of is that when gold goes down and the bonds go up, gold does get jealous sometimes. And this is what it sounds like. This is gold, Mr.

Mostly Voices [41:02]

Bond.

Mostly Uncle Frank [41:05]

I think you've made your point, Goldfinger. Thank you for the demonstration. Do you expect me to talk? No, Mr. Bond, I expect you to die. I'm always amazed by the cognitive dissonance that the rise in the value of bonds always causes. A lot of people in financial media who keep almost cheering on inflation and saying, well, the interest rates are going to the moon. And the fact is the interest rates have been falling the past three months and the bond market does not care a whit about the crystal balls that people are looking at in the financial media. You can't handle the crystal ball. So if you were following those people and taking that advice, you would have been wrong again. You would think after being wrong all the time, they would just put the crystal balls away and stop, but that's what attracts eyeballs. Now, the crystal ball has been used since ancient times.

Mostly Voices [42:10]

It's used for scrying, healing, and meditation. That's not how it works. That's not how any of this works. All right, getting to the portfolios, the most conservative one is the

Mostly Uncle Frank [42:22]

all seasons one. This is 30% in stocks and then it's got 55% in treasury bonds divided into long-term and intermediate term treasuries and then it's got 7.5% in gold and 7.5% in PDBC, a commodities fund. And this one benefited from the bonds increasing and so it was up 1.4% for the week. It is up 7.77% since inception last July. Pretty good for a very conservative portfolio. Our next portfolio is the Golden Butterfly. This is one of our sort of three straight down the middle risk parity style portfolios. And this one is 40% in stocks divided into small cap value and a total stock market fund. It's got 40% in bonds divided into long-term treasuries and short-term treasuries. And the remaining 20% is in gold. It was up 0.7% for the week. It was actually up less than all the other portfolios, but it is still up 22. 05% since inception last July, so it's doing just fine. This one has a smaller proportion in bonds in it, and you can see why it did not perform as well this week, but it has a larger proportion in small cap value stocks, and that's why it's been performing better over the past six months. All right, moving to our next portfolio, the Golden Ratio. And this one is 42% in stocks, 26% in long-term treasury bonds, 16% in gold, 10% in REITs, R-E-E-T, and then 6% in cash. It was up 1.34% for the week. It is up 20.28% since inception last July. past that 20% mark for the year. Moving to the next one, our Risk Parity Ultimate. This one is 40% in various stock funds, it's got 25% in various long-term bond funds, and then it's got 10% in REITs, 10% in gold, and 12.5% in PFF, a preferred shares fund, and finally 2. 5% if it is invested in a volatility fund. VXX, which has deteriorated substantially since last July. It's down 76%. Fortunately, there are things in this portfolio that are also up 120%, so it balances out without much trouble. So this one was up 1.49% for the week. It is up 18.99% since inception last July and is also doing quite well. And now we move to our two experimental portfolios.

Mostly Voices [45:10]

Now where did these come from? Tony Stark was able to build this in a cave with a box of scraps.

Mostly Uncle Frank [45:19]

These involve leveraged funds that Tony Stark found in that cave. And the first one is the Accelerated Permanent Portfolio. This one is 27.5% TMF, the leveraged Treasury Bond Fund, 25% Upro Leveraged Stock Fund, 25% PFF, that's preferred shares, and 22.5% in gold. This one was up 2.01% for the week. It is up 17.02% since inception last July. And I thought it might have a rebalancing this month, but it's not going to now that these bonds are going back up in value. All right, the next one is our aggressive 5050, our last one, our most volatile portfolio. This one is 33% in the leveraged stock fund, UPRO, 33% in the leveraged bond fund, TMF, then it's got 17% in PFF, that's a preferred shares fund, and 17% in VGIT, that's an intermediate treasury bond fund. This one was a big winner this week. It was up 3.46% for the week. It is up 19.94% since inception last July. If it continues on that vein, it will overtake the other portfolios next week. But that volatility makes it go up and down quite a lot. That's what leverage will do for you. Ned the Bull, that's me now. But now I see our signal is beginning to fade. If you have questions or comments for me, please send them to frank@riskparityradio.com That email is frank@riskparityradio.com or you can go to the webpage www.riskparityradio.com fill out the contact form and I'll get your message that way. If you want to hear some more of me, I just helped a podcaster from Edinburgh, Scotland put together a podcast featuring yours truly. I will link to that in the show notes. It is called Superb Diamond Range. And it was a fun conversation to have that covered a lot of topics that we talk about here.

Mostly Voices [47:27]

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

Mostly Uncle Frank [47:31]

If you haven't had a chance to do it, please go to Apple Podcast or wherever you get this podcast. Leave it a five-star review and a nice comment. I will appreciate it very much.

Mostly Voices [47:43]

What a strange person.

Mostly Uncle Frank [47:47]

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

Mostly Mary [48:07]

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.