Mary and Others [0:01]

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 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 [0:37]

Thank you, mary, and welcome to Risk Parity Radio. If you have just stumbled in here, you will find that this podcast is kind of like a dive bar of personal finance and do-it-yourself investing. Expect the unexpected. It's a relatively small place. It's just me and Mary in here and we only have a few mismatched bar stools and some easy chairs. We have no sponsors, we have no guests and we have no expansion plans. I don't think I'd like another job. What we do have is a little free library of updated and unconflicted information for do-it-yourself investors.

Mary and Others [1:23]

Now who's?

Mostly Uncle Frank [1:24]

up for a trip to the library tomorrow. So please enjoy our mostly cold beer served in cans and our coffee served in old chipped and cracked mugs, along with what our little free library has to offer. Welcome you can find at wwwriskparityradarcom on the portfolios page, and we'll also be talking about our monthly distributions for December. But before we get to that, I'm intrigued by this how you say Emails, and First off. First off, an email from James.

Mary and Others [2:27]

Well, I'm waiting for you, Jimmy boy.

Mary and Others [2:30]

And James writes Frank, I donated to the Father McKenna Center, glad to support any organization that helps the homeless in Hungary. You recently talked about international funds often being composed of the same large companies in any large cap growth index. The single international fund option in the Thrift Savings Plan is the iFund. This fund now tracks the iShares MSCI ACWI, xusx, china X Hong Kong ETF, which may be ticker symbol ACWX modified. What are your thoughts on the utility of holding this fund, given the other limited low-cost TSP offerings, ie CSF and G funds? Thanks, james.

Mostly Uncle Frank [3:24]

Well, first off, thank you, James, for donating to the Father McKenna Center and I have moved you duly to the front of the line for your donation. For those of you who are unaware those three of you we don't have any sponsors on this podcast, but we do have a charity we support. It's called the Father McKenna Center and it serves hungry and homeless people in Washington DC. Full disclosure I am on the board of the charity and am the current treasurer, but if you give to the charity you get to go to the front of the email line. It's what I got for you. You can do that in a couple different ways. You can go to our support page and join Patreon and be one of our patrons on Patreon and we collect all that money periodically and give it to the Father McKenna Center. Or you can donate directly to the Father McKenna Center at their donation page, and please note that you are a donor in your email so I can move it to the front of the line. Also in the Father McKenna Center news, we are having our annual Lessons in Carols holiday program this Thursday, with a little reception to follow, and the address there is 900 North Capitol Street in Washington DC, the old St Aloysius Church and if you are in the area, we invite you to come down. That's on Thursday, december 5th at 7 pm.

Mostly Uncle Frank [4:47]

But now let's get to your question. Yes, well, they are doing some peculiar things there with the International Fund at the TSP. I could not find a fund that mimics that exactly, but I did find a nice article on Morningstar from September talking about this new arrangement for this fund. So basically it's going to be a worldwide large cap weighted fund, except for companies headquartered in the US, china or Hong Kong, so excluding the two largest markets in the world. So it'll have a lot more companies in it, overall, something like 5,000 of them. But I don't think it's likely to perform much differently since the largest ones are still going to dominate the holdings. So you will get companies like ASML from the Netherlands and Nestle and Novartis, I think you gain Taiwan Semiconductor.

Mostly Uncle Frank [5:45]

I'm not sure whether it's in the old version of the fund or not, but I wouldn't expect the performance to be much different and in some respects it may be a bit worse because you are going to have lower quality overall in this fund. So I don't really see much to recommend it either in the old version or the new version. I think what would make more sense is that you just much to recommend it either in the old version or the new version. I think what would make more sense is that you just hold most of your assets in the C fund for stocks in the TSP and try to do your diversification in other stock funds outside of the TSP with other accounts and assets, and you can choose from a wide variety of funds. Then basically anything you want.

Mostly Uncle Frank [6:25]

I will repost Paul Merriman's best ETFs in class, which includes both domestic and international, in about 12 different categories. But I think those paired with a C fund are going to be a better overall choice than trying to use either the S or I funds in the TSP itself. To be clear, I don't think this is going to be a horrible thing, but I don't think it's going to add much if you will, or change much either. As I've stated before, the biggest factor in whether international outperforms US is the relative value of the US dollar. When the dollar is getting stronger, international underperforms. When the dollar is getting weaker, international typically outperforms, and that correlation is well known, going back to the 1970s, which is when the currencies were first really allowed to float. Anyway, hopefully that helps a little bit. Check out the article and thank you for your email.

Mary and Others [7:25]

You never could bite your head with both hands, like it used to be, jimmy Remember.

Mostly Uncle Frank [7:36]

Second off. Second off we have an email from Van and Van Writes.

Mary and Others [7:55]

Hi Frank, great work on the Facebook groups and the podcasts. I'm listening to the foundational courses and was wondering why I haven't seen any mention of the pinwheel portfolio. What are your thoughts on it compared to some of your portfolios, such as the golden ratio, or some of your levered portfolios? I would love to hear your thoughts. I'm also curious if you have entered some of your portfolios and compared them to the matrix calculator that Portfolio Charts uses. Thank you, and looking forward to your reply, van.

Mostly Uncle Frank [8:25]

When it's not always raining. There'll be days like this, when there's no one complaining. There'll be days like this Ah, the pinwheel portfolio.

Mary and Others [8:39]

All right, pinhead, your time is up. Who you calling pinhead?

Mostly Uncle Frank [8:46]

Yes, this is another sample portfolio over at Portfolio Charts and I will link to it in the show notes so you can check it out. But basically it's kind of a 60-40 portfolio with five different stock funds, some intermediate treasury bonds, a little bit of gold and some cash. What I've noticed about it is it's kind of in between everything a little bit of gold and some cash. What I've noticed about it is it's kind of in between everything. It's not aggressive enough to be an accumulation portfolio, but it doesn't seem to have the right amount of diversification in terms of non-stock funds to be a great decumulation portfolio.

Mary and Others [9:20]

You are neither cold nor hot, so because you are lukewarm, I will spew you out of my mouth.

Mostly Uncle Frank [9:28]

Now it's better than most at that, but it's not as good as something like a golden butterfly or the golden ratio or the weird portfolio and you can check that out on the portfolio matrix chart. So I always felt like it was just adding a bit of complexity without really adding anything beneficial. So I'd rather use something that's slightly similar that obtains better results in terms of a safe withdrawal rate or some of these other metrics. It does have a lot more international exposure, if that's what you're looking for, but then I would probably modify it to make that international exposure more value focused. Your next question have we entered some of the portfolios and compared them to the matrix calculator that PortfolioCharts uses? And yes, we have. Obviously, the All Seasons and Golden Butterfly are right there. When I put in a golden ratio portfolio, it tends to score in the top three of all the portfolios in every category, except for, I think, standard deviation when it's number six.

Mostly Uncle Frank [10:29]

It's a little harder to model some of these other portfolios and portfolio charts, particularly the ones with leverage. I mean, you can add in over 100% into the calculator to simulate leverage, but I don't think it's quite the same and it does give you these outlandish kind of well, obviously this one's better than everything else that has ever been created, and it's also difficult to model in there anything involving managed futures, because it does not have that category in an asset class. The new Testfolio calculator does have a managed futures proxy going back to the 1990s, and you'll see that it generally does improve the performance characteristics of a portfolio if you add some of that into just about any kind of stock and bond portfolio. Because of the diversification benefits of it, I think the Portfolio Matrix calculator is a great place to start, particularly if you are holding one of these simple portfolios or some modification of it, so you can see exactly how it stacks up with about 19 other ones.

Mostly Uncle Frank [11:36]

But ultimately, I think the best practice is to rely on multiple calculators with multiple data sets, and those should definitely include Portfolio Visualizer, portfolio Charts and this new Testfolio Calculator, because you really want to see if Portfolio A is better than Portfolio B in a variety of calculators in a variety of data sets, and that will help you avoid overfitting the data, because the idea here really is to apply the three principles that we talk about in episode seven and specifically towards whatever goal you are trying to reach, in this case to find portfolios with higher safe withdrawal rates because ultimately you do want to be comfortable with whatever you're holding and have some confidence that it will perform about the same, relatively speaking, to the other portfolios you might consider. Hopefully that helps and thank you for your email Last off. Last off of an email from Michael Michael from Scotland.

Mary and Others [13:07]

Welcome to all things Scottish.

Mostly Uncle Frank [13:09]

Our slogan is if it's no Scottish, it's crap.

Mary and Others [13:13]

And Michael writes Hi Frank and Mary Michael here from Scotland, again, still chuckling over your hilarious take on the Scottish perspective of your crap website. It's crap. I received a small occupational pension, disability benefit and income from two holiday properties. I've now got a small golden butterfly type portfolio aiming to manage sequencing risk in my early years of investing. I'm wondering. One rebalancing Would it be wise to reduce rebalancing after the initial years to allow the portfolio to naturally drift into riskier assets? Two withdrawal strategy Could I simply withdraw 4% of the portfolio annually, adjusting the withdrawal amount each year based on the portfolio's value? This is play money and I don't mind if it fluctuates. My goal is to preserve or possibly grow the pot for my children to inherit. As always, thanks for your expertise and guidance. Best regards, michael from Scotland. Rodney, rodney, get out here and bring some more Scotty posters with you.

Mostly Uncle Frank [14:20]

Well, yes, those are some classic clips from Mike Myers, the comedian.

Mary and Others [14:28]

Oh how very clever. But I don't know why you'd say something like that, knowing that I might come after you with butchering tools.

Mostly Uncle Frank [14:36]

Who actually had a Scottish grandfather and often liked to parody his grandfather to create these characters.

Mary and Others [14:44]

Now, the kilts you have are 100% Scotch kilts, right? Well, actually that's Scots kilts. Scotch is a drink, scots are a people, but we're both quite tasty.

Mostly Uncle Frank [14:57]

Well, let's get to your questions. Let's answer the second one first, as to the withdrawal strategy, could you simply withdraw 4% of the portfolio annually, adjusting the withdrawal amount based on the portfolio value? And the answer, of course, is yes.

Mary and Others [15:12]

You are correct, sir. Yes.

Mostly Uncle Frank [15:15]

This is actually what we do with our sample portfolios, because we don't have any expenses to match them off with, and with a portfolio with a low volatility, like that golden butterfly portfolio, you'll find that those withdrawals are pretty consistent over time. If you wanted to make them even smoother, you would take them every month or every quarter, but I'm not sure that's worthwhile in your case. If you're only taking 4%, the portfolio will continue to grow over time, and so the withdrawals will get larger.

Mary and Others [15:48]

And Leon's getting larger.

Mostly Uncle Frank [15:54]

Now the rebalancing question is more interesting. Your question was would it be wise to reduce rebalancing after the initial years to allow the portfolio to naturally drift into riskier assets? This is essentially adopting an increasing equity glide path, which both Michael Kitsis and now Bill Bengen have indicated will improve the safe withdrawal rate of a portfolio. It's interesting, though I don't actually know anybody who does this or any financial advisor who recommends this, I think because it's psychologically unappealing to be taking more risk as you get older. But it can make sense, particularly if you are planning on just leaving most of this to your heirs anyway, and I'm going to wait for Bengen's book to come out next spring, but I'm thinking of modifying at least one of the sample portfolios to incorporate something like that.

Mostly Uncle Frank [16:50]

I think the easiest way to do it would simply be to only rebalance into stocks, and what I mean by that is, if your stock positions are doing well, you would take distributions out of them, but otherwise you would just leave them alone and let them gradually increase over time, and so the only time you do any serious rebalancing is after a stock market crash. You would take the other assets the bonds and the gold and rebalance those into more stocks and that would kind of naturally tilt you toward an equity glide path or an increasing equity glide path. It will add to the volatility of the portfolio, but I'm not sure that's such a bad thing when you're starting with something that is not very volatile to begin with. And since this is play money and you're probably going to leave it behind, I would say go for it in this case, because it would also be appropriate. Let's do it.

Mary and Others [18:01]

That's not an improvement.

Mostly Uncle Frank [18:04]

But you've got some interesting possibilities there in Food for Thought, so thank you for sharing them with us, and thank you for your email. Oh, do you think I'm stupid?

Mary and Others [18:14]

Shut your gob, you wee little girl. Now that's it. One lazy-ass incision in the small ear. Back and away we go. Mr Keddie, oh yeah, I'll kick you so hard in the groonies you'll be peeing out your mouth.

Mostly Uncle Frank [18:27]

Well, at least I've got greenies. Well, at least I've got a brother. Oh, no fair.

Mary and Others [18:30]

I love you, I love you, I love you, I love you, I love you, I love you. But hold on, hold on. Welcome to all things Scottish. If it's no Scottish, it's crap.

Mostly Uncle Frank [18:45]

Now we're going to do something extremely fun, and the extremely fun thing we get to do now is our weekly and monthly portfolio reviews. Of the eight sample portfolios you can find at wwwriskparryravecom on the portfolios page. As crappy as it is, it's crap, but just looking at the markets last week, it was a good week for most things. A better week for bonds than most other things. The S&P 500 was up 1.06% for the week. The Nasdaq was up 1.13% for the week. Small cap value, represented by the fund VIOV, was up 1.39% for the week. Gold was down. Gold was the big loser last week. It was down 1.72% for the week. Long-term treasury bonds, represented by the fund VGLT, were the big winner last week. They were up 3.6% for the week. Reits, represented by the fund REET, were up 1.82% for the week. Commodities, represented by the fund PDBC, were down 1.69% for the week. Preferred shares, represented by the fund PFFV, were up 1.45% for the week and managed futures managed to be almost flat. Our representative fund DBMF, was down 0.15% for the week and managed futures managed to be almost flat. Our representative fund DBMF was down 0.15% for the week.

Mostly Uncle Frank [20:17]

Moving to these portfolios, first one's this reference portfolio, the all-seasons. It's only 30% in stocks, 55% in intermediate and long-term treasury bonds and the remaining 15% in gold and commodities. It was up 1.62% for the week. It's up 10.54% year-to-date and up 12.22% since inception in July 2020. For December, we will be distributing $32. Out of it. It will come from the allocation to VTI. It's at a 4% annualized rate. That'll be $367 year-to-date and $1,690 since inception in July 2020.

Mostly Uncle Frank [20:56]

Moving to these bread-and-butter kind of portfolios, first one's a golden butterfly. This one's 40% in stocks in a total stock market fund and a small cap value fund, 40% in treasury bonds, divided into long and short, and 20% in gold, gldm. It was up 0.89% for the week, it's up 14.96% year-to-date and 38.56% since inception in July 2020. For December, we will distribute $46. That will come out of the small cap value fund, viov. It's at a 5% annualized rate. That'll be $523 year-to-date and $2,301 since inception in July 2020.

Mostly Uncle Frank [21:41]

Next one's golden ratio this one is 42% in stocks and three funds 26% in long-term treasury bonds, 16% in gold, 10% in a REIT fund and 6% in cash, a money market fund. It was up 1.32% for the week. It's up 15.87% year-to-date and up 35.61% since inception in July 2020. This one we always distribute out of the cash the money market, so we'll be taking $46 out of it. It's at a 5% annualized rate. It'll be $510 year-to-date and $22.61 since inception in July 2020. Next one's the Risk Parity Ultimate Portfolio our kitchen sink, if you will. Inconceivable. It was up 1.57% for the week. It's up 18.08% year-to-date and up 25.87% since inception in July 2020. We'll be distributing $41 out of this. We're going to take it out of the small cap value fund, viov, for December. That's also at a 5% annualized rate, although we may be going back to 6% next month if it continues to do well. That will be $463 year to date and $2,450 since inception in July 2020. Now moving to these experimental portfolios.

Mary and Others [23:10]

You have a gambling problem.

Mostly Uncle Frank [23:13]

These all involve levered funds, so don't try this at home.

Mary and Others [23:17]

You can't handle the gambling problem.

Mostly Uncle Frank [23:21]

First one's the accelerated permanent portfolio. This one is 27.5% in a levered bond fund TMF, 25% in a levered stock fund UPRO, 25% in PFF, a preferred shares fund, and 22.5% in gold, gldm. It was up 3.19% for the week. It's up 19.81% year-to-date and up 9.8% since inception in July 2020. We'll be distributing $41 out of it from UPRO for December. That's at a 6% annualized rate. That will be $451 year-to-date and $2,632 since inception in July 2020. Next one's the aggressive 50-50. This is the least diversified and most levered of these portfolios. It's one-third in a levered stock fund UPRO, one-third in a levered bond fund TMF and the remaining third divided into ballast and a preferred shares fund, pffv, and an intermediate treasury bond fund VGIT. It was a big winner last week. It was up 5.28% for the week. It's up 18.99% year-to-date and down 2.42% since inception in July 2020.

Mostly Uncle Frank [24:35]

We'll be, distributing $36 out of it from TMF. That'll be for December. It's at a 6% annualized rate. It'll be $364 year-to-date and $2,600 since inception in July 2020. Next one's the levered golden ratio. This one is 35% in a composite fund, NTSX, 25% in gold, GLDM, 15% in a REIT O, 10% each in TMF, a levered treasury bond fund, and TNA, a levered small cap fund, and the remaining 5% in a managed futures fund, KMLM. It was up 1.5% for the week. It's up 18.93% year-to-date and up 2.92% since inception in July 2021. It's a year younger than the first six. We'll be distributing $36 out of it from TNA that's the Levered Small Cap Fund. For December. It's at a 5% annualized rate. That'll be $389 year-to-date and $1,556 since inception in July 2021. $1,556 since inception in July 2021.

Mostly Uncle Frank [25:52]

And moving to our last one, the Optra portfolio, this year's model, it has 16% in a levered stock fund, UPRO, 24% in a composite worldwide value fund called AVGV, 24% in GOVZ, which is a treasury strips fund, and the remaining 36% divided into gold and managed futures in GLDM and DBMF. It was up 1.87% for the week. It's up 8.84% year to date and 8.84% since inception, since it's only been around since July 2024. We'll be distributing $53 out of it from YouPro for December. That is at a 6% annualized rate, so it'll be $260 year to date and since inception in July 2024. And with that we have concluded our weekly reviews and our monthly distributions, and you can find all of this information at the website, on the portfolios page, if you so wish. But now I see our signal is beginning to fade.

Mostly Uncle Frank [26:58]

If you have comments or questions for me, please send them to frank at riskparityradarcom. That email is frank at riskparityradarcom. Or you can go to the website wwwriskparityradiocom. That email is frankatriskparityradiocom. Or you can go to the website wwwriskparityradiocom. 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. Give 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 Parity Radio signing off. Oh, my mama told me there'll be days like this.

Mostly Uncle Frank [27:50]

Oh, my mama told me there'll be days like this. Oh, my mama told me there'll be days like this. Oh, my mama told me there'll be days like this.

Mary and Others [28:09]

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