Risk Parity Radio

In this episode we answer emails from Dustin, MyContactInfo, and Mark.  We discuss the ETF GDE and combo return stacked funds generally, why you probably don't want to use economists' "life cycle model" for personal finance planning due to its unrealistic underlying assumptions, and whether we could use historical high interest rates to create market timing and allocation signals between stocks and bonds.

And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

Article About BTGD:  New ETF Offers Dual Exposure to Bitcoin, Gold | etf.com

Optimized Portfolios Site:  Optimized Portfolio - Investing and Personal Finance

Rational Reminder Podcast Re Lifecycle Model:  Ben Mathew: The Lifecycle Model vs. Safe Withdrawal Rates (SWR) | Rational Reminder 340

Debunking Economics:  Debunking Economics - Revised and Expanded Edition: The Naked Emperor Dethroned?: Keen, Steve: 8601406370678: Amazon.com: Books

Amusing Unedited AI-Bot Summary:

When market turbulence strikes, diversification proves its worth. This week, as the S&P 500 tumbles nearly 4% year-to-date and the NASDAQ falls over 6%, gold emerges as the standout performer—surging past $3,000 an ounce with returns exceeding 13%. These dramatic market movements create a perfect real-world demonstration of why uncorrelated assets matter in portfolio construction.

We dive deep into the limitations of economic models for personal financial planning, examining why the Life Cycle Model—while logically sound in theory—falls apart when confronted with life's inherent unpredictability. The assumption that we can accurately forecast our lifespans, relationships, and changing preferences decades in advance reveals a fundamental disconnect between theoretical economics and practical personal finance.

A thought-provoking listener question explores whether allocation strategies should shift dramatically if interest rates ever reach levels where risk-free returns match or exceed historical stock returns. Drawing on lessons from the early 1980s when Treasury yields exceeded 15%, we consider why developing investment rules based on rare historical anomalies rarely serves investors well.

The weekly portfolio review shows mixed performance across our eight sample portfolios, with those holding significant gold allocations weathering the current volatility far better than stock-heavy alternatives. We also examine rebalancing decisions for the Levered Golden Ratio portfolio, making thoughtful adjustments to improve its value tilt and diversification characteristics.

Whether you're curious about combining assets in hybrid funds, wondering how managed futures perform during market corrections, or simply wanting to see how different portfolio strategies are navigating current conditions, this episode delivers practical insights for the thoughtful, independent investor. Join us for this exploration of asset allocation in uncertain times.

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In this episode, we answer emails from Spencer, Ko and Steve.  We discuss REITs as a portfolio allocation, why vacant land is probably not a good investment for most people, "talking your book" with bitcoin for fun and profit and how it looks today in a portfolio, law school education and that infamous Cederburg paper (again but only briefly). 

Links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

NAREIT -- Types of REITs:  Learn about Investing and Market REIT Sectors Today

Weird Portfolio:  Weird Portfolio – Portfolio Charts

Ko's Michael Saylor Video:  Michael Saylor’s Big Bitcoin Prediction | Relai Bitcoin Podcast #90

Amusing Unedited AI-Bot Summary:

Ever caught yourself obsessing over a particular asset class? In this engaging episode of Risk Parity Radio, Frank Vasquez tackles three fascinating investment topics that challenge conventional wisdom while providing practical guidance for DIY investors.

We begin with an exploration of REIT allocations beyond the standard 10% recommendation. Frank breaks down why correlation with broader markets matters more than yield history, why individual REITs often outperform REIT index funds for diversification purposes, and why these investments belong in retirement accounts rather than taxable brokerage accounts. A listener's cautionary tale about vacant land investing serves as a powerful reminder that illiquid, non-income-producing assets can become financial quicksand rather than solid foundations for retirement.

The conversation shifts to Bitcoin's evolving role in investment portfolios. Frank cuts through the promotional noise from crypto evangelists, explaining how Bitcoin's behavior has transformed from a true diversifier to essentially "a three times leveraged QQQ fund" highly correlated with tech stocks. This critical insight helps investors properly categorize crypto within their asset allocation rather than viewing it as a separate diversifying asset class.

Finally, we examine the controversial academic paper promoting 100% equity portfolios for retirees. Frank exposes the significant limitations of this research, demonstrating why seemingly groundbreaking financial theories often collapse under real-world scrutiny. Throughout the episode, Frank's pragmatic approach reminds us that successful investing requires looking beyond popular headlines and understanding the fundamental characteristics of what we own.

Whether you're rethinking your REIT strategy, curious about crypto's place in your portfolio, or questioning conventional retirement wisdom, this episode offers clarity amidst the noise of financial media. Share your own investment questions at [email protected] and join our growing community of thoughtful DIY investors.

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In this episode we answer emails from Eli, Garrison and Van.  We discuss usig treasury strips ETFs like GOVZ and ZROZ and how they relate to long-term treasury bond funds like TLT and VGLT, a "returned-stacked" portfolio similar to O.P.T.R.A. for accumulation and early retirement and why the Golden Ratio portfolio performs very well on many metrics. 

And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

Portfolio Charts Portfolio Matrix Tool:  Portfolio Matrix – Portfolio Charts

(Note to compare the discussed Golden Ratio portfolio to other portfolios, input 21% LCG, 21% SCV, 26% LT bonds, 16% gold, 10% REITs and 6% t-bills as "My Portfolio")

Amusing Unedited AI-Bot Summary:

Dive into the nuanced world of portfolio construction with insights that challenge conventional wisdom about retirement planning and asset allocation. We kick off with an exploration of treasury bond strategies, examining whether STRIPS funds like ZROZ or GOVZ offer "free" 1.5x leverage compared to standard long-term treasury funds. This seemingly technical distinction opens fascinating possibilities for freeing up portfolio space while maintaining effective recession hedging.

The heart of the episode tackles a young investor's audacious plan for early retirement using a leveraged portfolio containing 11% UPRO (3x leveraged S&P 500) alongside small-cap value, treasuries, gold, and managed futures. We dissect the Monte Carlo simulations suggesting sustainable withdrawal rates above 6% and consider whether such "return stacked" portfolios represent the future for younger investors seeking growth with manageable volatility.

Most surprising is our deep dive into the Golden Ratio portfolio, which a listener discovered ranks #1 overall on Portfolio Charts despite containing just 42% stocks. We unpack the five fundamental rules that drive this portfolio's exceptional performance: strategic stock allocation between 40-70%, balanced growth and value exposure, precise treasury bond positioning, thoughtful alternative asset integration, and minimal cash holdings. The revelation that this construction is essentially an expanded 60/40 portfolio demonstrates how traditional wisdom can be enhanced rather than abandoned.

Our weekly portfolio review reveals gold's dominant performance in 2023 (up 10.89%) while small-cap value struggles (down 6.47%), reinforcing the value of thoughtful diversification in navigating today's market landscape. Whether you're planning for early retirement, optimizing your current portfolio, or simply seeking investment wisdom beyond mainstream advice, this episode delivers practical insights for the serious do-it-yourself investor.

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In this episode we answer emails from Caleb, Visitor #4565, Paul, Michael (from Scotland) and Jamie.  We discuss tax location (or asset location for tax purposes), the zeitgeist of this podcast, an old book by Don Coxe about gold and other things, a good website for finding ETFs in the UK and otherwise outside the US, and how to best incorporate and prioritize (not) international vs. US funds.

Links:

Asset Swaps Video:  How to Do an Asset Swap

Sean Mullaney On 72(t):  475 | How to Access Your Retirement Accounts Before 59.5 | Sean Mullaney

Mad Fientist on Accessing Retirement Funds Early:  How to Access Retirement Funds Early

Merriman ETF Recommendations:  Best-in-Class ETF Recommendations | Merriman Financial Education Foundation

JustETF website and Sample Small Cap Value Fund:  SPDR MSCI USA Small Cap Value Weighted UCITS ETF | A12HU5 | IE00BSPLC413

Amusing Unedited AI-Bot Summary:

Get ready for an enlightening episode of Risk Parity Radio, where we unravel complex investing strategies designed for the do-it-yourself investor! In this episode, we dive deep into key topics like the critical distinction between asset allocation and tax location, helping you understand how to manage your investments more efficiently. With listener emails sparking insightful discussions, we shed light on the often-misunderstood role of gold in your portfolio and why it might be a savvy addition during economic uncertainties.

We explore how misconceptions in diversification can derail potential growth and offer tactical advice on choosing between growth and value investments. Listeners will gain a holistic view of their assets, empowering them to make informed decisions that align with their long-term financial goals.

Whether you’re a seasoned investor looking to refine your strategies or a beginner eager to learn, this episode provides valuable insights to enhance your portfolio's performance. Join us for an engaging conversation that invites you to reflect on your approach to investing. Don't miss your chance to redefine your financial strategy today! Subscribe, share, and review—we’d love your thoughts!

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In this episode we answer emails from Andy, Mark and Graham.  We discuss what may do well under the current US administration and related concerns, what a weak dollar means for risk assets and allocating to volatility, and how inflation should realistically be accounted for in withdrawals. 

And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

New Catching Up to FI Podcast with Yours Truly:  “The Risk Parity Paradox” an Exercise in Simple Complexity? | Frank Vasquez | 124

US vs International Stocks In Strong And Weak Dollar Markets (link from Episode 393:  us-dollar-strength-has-correlated-with-performance-03312023.pdf

Spending Trajectories After Age 65 Research Paper and  Summary (link from Episode 336):  Spending Trajectories After Age 65: Variation by Initial Wealth | RAND

Amusing Unedited AI Bot Summary:

Unlock the secrets of resilient investing with our latest episode of Risk Parity Radio! Join us as we explore the dynamic relationship between risk and reward in today's unpredictable market landscape. With insights from Frank Vasquez, we discuss how various asset classes, including gold and bonds, are performing amid rising economic uncertainty.

We feature an in-depth analysis of eight sample portfolios, shedding light on their performances and the lessons they offer for individual investors. Our host encourages listeners to reflect on their investment strategies and promotes the importance of diversification as a safeguard against market fluctuations.

Listeners are invited to engage with us through insightful emails, tackling current economic concerns such as inflation and its implications for retirees. Wrap up the episode with practical advice, encouraging self-education and proactive engagement in personal financial management.

Don’t miss this opportunity to refine your financial strategies! Subscribe, share your thoughts, or leave a review to join our growing community of informed investors.

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In this episode we answer emails from Philip, David and Keith.  We discuss an aggressive risk-parity style portfolio (without leverage), review QREARX, which we analyzed in Episode 81, and how the value factor is determined by various funds and indexes.

Links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

Portfolio Matrix Tool at Portfolio Charts:  Portfolio Matrix – Portfolio Charts

The Weird Portfolio:  Weird Portfolio – Portfolio Charts

Morningstar Page for QREARX:  QREARX – TIAA Real Estate Account Fund Stock Price | Morningstar

Amusing Unedited AI-Bot Summary:

Ready to rethink your investment strategies? Discover how pushing the boundaries with aggressive risk parity portfolios can transform your financial growth. Inspired by listener Philip's question, we unravel the potential of a 70% equity allocation, showing you why it might be your ticket to a prosperous retirement with a longer horizon or increased growth needs. Learn how to artfully allocate the remaining 30% across assets like large-cap growth, small-cap value, long-term treasuries, gold, and managed futures for optimal diversification. Plus, get the scoop on our informal meetup at the Economy Conference—it's where finance meets fun.

In this episode, we're not just about strategies but interactions. As we sift through listener emails, we spotlight financial strategies and fund analysis, tackling topics from the intriguing weird portfolio to critiques of funds like QREARX. Unearth the complexities of value stock categorization and challenge the purported benefits of illiquidity premiums in outdated financial structures. As travel plans call for a brief hiatus, we invite you to keep the conversation alive through emails and our website. Tune in for insights, engagement, and a touch of humor designed to entertain and inform our valued listeners.

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In this episode we answer emails from Richard, Robert and Jacob.  We discuss Richard's generosity and excellent example as a role model, an ill-conceived and biased critique of small cap value allocations, why you probably should not use popular personal finance gurus as retirement role models due to their workaholism and hoarding behaviors, and why having too much cash or very short term bonds in a portfolio is not a good idea.

And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

ERN Small Cap Value Article of 2 December 2024:  Small-Cap Value Stocks: Diversification or Di-WORSE-fication? - Early Retirement Now

First Merriman Response to SCV Article:  The True Story About Small Cap Value

Supplemental Merriman Responses To SCV Article:  Why should small cap value make higher returns?

Testfolio Comparison Of IWN vs. IJS vs. VISVX vs. DFSVX vs VFINX Since July 2000:  https://testfol.io/analysis?s=gkqbgk7mzka

Shannon's Demon Article Re Math Of Diversification:  Unexpected Returns: Shannon's Demon & the Rebalancing Bonus – Portfolio Charts

ERN Safe Withdrawal Rate Post of 15 April 2016:  Pros and cons of different withdrawal rate rules - Early Retirement Now

Michael Batnick Article re Shifting In CAPE Ratio:  Stocks Are More Expensive Than They Used to Be

Rick Ferri Interview:  Show Us Your Portfolio: Rick Ferri | Why a Simple Approach Beats 90% of the Pros

Core 4 Portfolios:  Process – Core-4

Rob Berger Interview (with transcript):  Bogleheads on Investing with Rob Berger – Episode 48 - The John C. Bogle Center for Financial Literacy

Interview of Michael Kitces Re Problems With TIPS Ladders:  Michael Kitces: How Higher Yields Affect Asset Allocation and Retirement Planning | Morningstar

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In this frolic and detour from our regularly scheduled programming, we create a "Reference Episode" by employing two AI podcasters to summarize the information contained in Episodes 1, 3, 5, 7 and 9, which are some of the foundational episodes for this podcast.  BTW, choose PFFV instead of PFF if you are interested in that.  But the point was to teach you how to analyze investments.

Here are (most of) the original links and notes from those episodes.

Episode 1:

In this episode we answer five basic questions:

1.  What is Risk Parity Radio?

2.  Who is this podcast for?

3.  Gee willikers, what does "Risk Parity" mean anyway, Uncle Frank?

4.  How will will make this real and actionable for you?

5.  How can you get involved?

Episode 3:  

In this episode we explore the ancient origins of asset allocation and diversification.

Bava Metzia 42a:  https://steinsaltz.org/daf/bavametzia42/

70-year History of Investment Consulting:  https://seekingalpha.com/article/4357226-70-year-history-of-investment-consulting-1950minus-2020

Episode 5: 

In this follow-up to Episode 3, we explore the development of risk-parity style investing from the 1980s to the present day.

The All Weather Strategy Paper:   Bridgewater Paper 2009.12 AW Info Pack.doc (granicus.com)

Risk Parity Portfolios:  Efficient Portfolios Through True Diversification:  https://www.panagora.com/assets/PanAgora-Risk-Parity-Portfolios-Efficient-Portfolios-Through-True-Diversification.pdf

Risk Parity:  Silver Bullet Or A Bridge Too Far (CFA Multi-Asset Strategies Manual Chapter 4):  CFA Manual Risk Parity Chapter-2018.pdf - Google Drive

Episode 7:

In this episode we discuss the three basic principles are (1) the Holy Grail Principle; (2) the Macro-Allocation Principle; and (3) the Simplicity Principle.

March draw-downs for professional risk-parity style portfolios: https://www.markovprocesses.com/blog/risk-parity-funds-in-the-coronavirus-market-rout/

Ray Dalio explains the Holy Grail principle of risk-parity style investing: https://www.youtube.com/watch?v=Nu4lHaSh7D4

Episode 9:

In this episode we discuss how NOT to choose investments and how to employ a good process to analyze an investment.  We adopt the process of David Stein's 10 Questions and apply it to an exchange-traded fund of preferred stocks.

Ishares description of PFF:  https://www.ishares.com/us/products/239826/ishares-us-preferred-stock-etf

The 10 Questions To Ask When Considering An Investment:
1.  What is it?
2.  Is it an investment, a speculation, or a gamble?
3.  What is the upside?
4.  What is the downside?
5.  Who is on the other side of the trade?
6.  What is the investment vehicle?
7.  What does it take to be successful?
8.  Who is getting a cut?
9.  How does it impact your portfolio?
10.  Should you invest?

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In this episode, we celebrate Ground Hog Day and answer emails from Ron, Jay and Pete.  We discuss the value of giving and the new McKenna Man portfolio that Ron is constructing, preferred shares vs. REITs, holding gold, what financial advisors really think about their hoarding clients but can't say in front of them but I will, and Pete's risk parity style portfolio and his 6-year old's potato chip gambling problem. 

And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Additional Links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

Dennis And The McKenna Center Team:  Our Team - Father McKenna Center

Andy Panko Interview of Eric Niergarth: 
Retirement planner chat, with Eric Niergarth from Retirement Roadmap Financial Planning

Pete's Fund and Correlation Analysis:
https://testfol.io/analysis?s=4Qh1xI3JKMl

Amusing Unedited AI-Bot Summary:

Unlock the secrets of alternative investments and discover a fresh perspective on asset allocation with Risk Parity Radio. Ever wondered how creative financial strategies can transform charitable giving? Listen in as we highlight Ron, a dedicated listener, who proposes an innovative approach to support the Father McKenna Center in Washington, D.C. We'll dissect his all-equity portfolio idea, and explore an alternative inspired by the Rick Ferri Core 4 portfolio, tailored for an 8% withdrawal rate. This episode promises to inspire with its blend of community-focused financial creativity and solid investment insights.

Curiosity piqued? Learn why PFFV trumps PFF in cost-effectiveness and tax benefits, especially for those in higher tax brackets. The episode tackles listener questions head-on, like the VNQ versus PFF debate, and shines a light on the essential role of gold in diversification. A personal tale unfolds as I recount my unexpected removal from Andy Pankow's Facebook group, sparking a discussion on the dynamics of online financial communities. This engaging narrative provides a nuanced view of maintaining a steady allocation amidst the ebb and flow of digital interactions.

Explore the lighter side of finance as we analyze the performance of various portfolios in a quirky review of January's market highlights. With imaginative requests, like a breakfast order for the "bacon man," and the intriguing concept of combining Bitcoin and gold in an ETF, this episode offers both entertainment and education. From the conservative All Seasons to the experimental Golden Ratio, each portfolio reveals unique allocations and outcomes. Join us on this enlightening journey through investment strategies, and uncover the unexpected joys of charitable giving through creative financial planning.

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In this episode we answer emails from George, Kyle and Andy.  We discuss whether to prioritize DBMF or VGLT (for tax location purposes) in a traditional retirement account, weighing limited choices for small cap funds in a 457, Vanguard's new short-term bond funds and dealing with brokerages' cya requirements for investing in particular funds.

Links:

Father McKenna Center Donation Page:  Donate - Father McKenna Center

Vanguard Fund Announcement:  Vanguard Expands Fixed Income Lineup with New Actively Managed Bond ETF | Vanguard

Amusing Unedited AI-Bot Summary:

Unlock the secrets to optimizing your investment portfolio and navigate the complex world of power dynamics in our latest podcast episode. Have you ever wondered whether choosing a higher dividend yield or balancing fund fees could impact your financial future? Join us as we guide George through the decision-making process between VGLT and DBMF, ultimately landing on DBMF for its tax-efficient benefits. Meanwhile, Kyle finds himself at a crossroads between a high-fee small-cap value fund and a more budget-friendly Vanguard option. Our advice? Balance is key to managing costs and maintaining a diverse portfolio. And don’t miss our take on Vanguard's new actively managed short-term bond fund—could it be the missing piece in your investment strategy?

Transitioning from the tangible to the philosophical, we embark on a thought-provoking exploration of submission and power through our metaphorical dialogue with "the daughters." Here, we challenge the conventional wisdom of power structures and the humility required to navigate them. Using vivid metaphors and evocative imagery, we invite listeners to question their own roles within these paradigms and consider how such dynamics manifest in financial and legal realms. This episode promises a blend of practical investment insights with deeper musings on the human condition, leaving you with plenty to ponder as we draw parallels between finance and life’s broader themes.

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