"Voices" [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.

Mostly Mary [0:17]

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.

"Voices" [0:52]

Expect the unexpected.

Mostly Uncle Frank [0:55]

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.

"Voices" [1:10]

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

Mostly Uncle Frank [1:14]

There are basically two kinds of people that like to hang out in this little dive bar.

"Voices" [1:18]

You see, in this world there's two kinds of people.

Mostly Uncle Frank [1:21]

my friend, the smaller group are those who actually think the host is funny, regardless of the content of the podcast.

"Voices" [1:30]

Funny. How, how am I funny?

Mostly Uncle Frank [1:32]

These include friends and family and a number of people named Abby.

"Voices" [1:38]

Abby, someone Abby who Abby normal Abbey normal Abbey normal.

Mostly Uncle Frank [1:47]

The larger group includes a number of highly successful do-it-yourself investors, many of whom have accumulated multi-million dollar portfolios over a period of years.

"Voices" [2:01]

The best, Jerry the best years.

Mostly Uncle Frank [2:08]

The best, Jerry, the best. And they are here to share information and to gather information to help them continue managing their portfolios as they go forward, particularly as they get to their distribution or decumulation phases of their financial life.

"Voices" [2:22]

What we do is, if we need that extra push over the cliff, you know what we do Put it up to 11. 11, exactly.

Mostly Uncle Frank [2:30]

But whomever you are, you are welcome here. I have a feeling we're not in Kansas anymore. But now onward episode 385. Today on Risk Parity Radio it's time for our weekly portfolio reviews. Of the eight sample portfolios you can find at wwwriskparityradiocom On the portfolios page.

"Voices" [2:52]

Boring.

Mostly Uncle Frank [2:54]

Yeah, not much happened last week.

"Voices" [2:57]

I'm putting you to sleep. But before we get to that, I'm intrigued by this, how you say Emails.

Mostly Uncle Frank [3:03]

And First off, I'm intrigued by this how you say Emails, and First off. First off, we have an email from Ashley.

"Voices" [3:13]

Oh, ashley, you're wrong. I do want to escape too. I'm so very tired of it all. I've struggled for food and for money. I've weeded and ho hold and pick cotton until I can't stand it another minute.

Mostly Uncle Frank [3:26]

And Ashley writes.

Mostly Mary [3:28]

Hi, Uncle Frank. I've donated $500 to the Father McKenna Center and got my employer match for another $500.

Mostly Uncle Frank [3:35]

Wow, wow, wow, that's very nice.

Mostly Mary [3:38]

I've been listening from the very start of the podcast and haven't missed an episode. Thank you for all you and your wife have done to create and foster this community. I'm reaching out to inquire about setting up time with you to review my portfolio plans for early retirement. I told myself I'd write you this email when I hit three million dollars liquid, and that day has arrived rather quickly, for which I am grateful. Your insight and advice would be greatly appreciated. I'm open to the fee structure you mentioned recently around doubling it or was it tripling your rate and donating to the Father McKenna Center, also happy to pay the standard rate to you directly. Would you be open to setting up a time to review our plans whenever is convenient for you? Thank you for your consideration. Since I know you are not looking for another job, ashley, looks like you've been missing a lot of work lately.

"Voices" [4:29]

I wouldn't say I've been missing it Bob.

Mostly Uncle Frank [4:32]

Well, Ashley, there's an obvious reason that you went to the front of the line.

"Voices" [4:37]

Yeah, baby, yeah.

Mostly Uncle Frank [4:39]

Thank you so much for your generosity. This is really more than I ever expect, but I am always so amazed and grateful for the contributions that you have made and all the other listeners have made over the years here.

"Voices" [4:55]

I don't know what to do. I'm as light as a feather. I'm as happy as an angel. I'm as merry as a schoolboy. I'm as giddy as a drunken man.

Mostly Uncle Frank [5:08]

As most of you know, we do not have any sponsors on this podcast. But we do have a charity we support. It is 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 donate to the charity like Ashley has done, you get to go to the front of the email line and you can do that in a couple of ways. You can do like Ashley has done and go directly to the Father McKenna website and donate there, or you can go to the support page at wwwriskparryradiocom and join our Patreon group and give that way. But I'm pleased that you took advantage of the employer match, because I often forget to mention that that if you donate to the charity directly, there is a provision for those employers who do match charitable donations to check the box. Essentially, because we are a registered 501c corporation, we file our 990 tax form every year and you can actually see it online and so we are eligible for those employer match contributions. And it is getting towards the end of the year and I know that a lot of people have an intention at the beginning of the year to make some charitable donations, but sometimes have not made them by now, and if you are in that situation, I would invite you to consider the Father McKenna Center as a worthy place to donate your charitable dollars for 2024 and in the future, but right now for 2024. And let me just give you a couple of facts that may be appealing to this audience, which values financial efficiency.

Mostly Uncle Frank [6:51]

The Father McKenna Center has a budget of about $1.5 million annually, so it's not a really big charity. It is a very efficient charity, though, because, first off, the facilities we operate in are owned by the Gonzaga College High School, which is right there. We are actually on their campus, so none of the donated money has to go to rents or building or anything to do with that kind of administrative overhead. Our space is essentially free free to us, it's donated. As far as the school is concerned, we have a relatively small staff of only about six to eight people, depending on how you count them, but we rely heavily on volunteers, and we had over a thousand people volunteer at the center last year, which effectively doubles the staff, but we're getting all of that labor also for free. As far as we are concerned. A lot of those people are students at the school or students at other schools or colleges that come and bring groups that will come for a week or so and donate their time.

Mostly Uncle Frank [8:01]

And then, of course, we have a nice coterie of retired people that spend a lot of time there working with the clients, including board members that provide donated legal and medical services. We also rely on in-kind donations of food and clothing from businesses in the local area, and all this is to say that any money that you give to the Father McKenna Center is well used and is efficiently used, and so you are getting a lot of bang for your charitable buck. Another question we sometimes get is whether we are promoting religion, and the answer is no, and that we are not proselytizing or discriminating against people who are not Catholic or Christian who come to the center. I think most of us on the board and who work there and who volunteer there do view this as an expression of faith, but it is not a proselytizing organization other than setting a good example.

"Voices" [9:00]

No one can stop me.

Mostly Uncle Frank [9:03]

So thank you for listening to my pitch and my plea. And now let's get to the rest of your email. Based on popular demand, I have engaged in some financial coaching, which is a one-on-one review of your finances, along with some Zoom calls. All I want to do is zoom, zoom, zoom, zoom, and I boom, boom, just shake your boat. Some Zoom calls. I don't advertise it because I don't want to create a business here. So, you're going to get another job?

"Voices" [9:33]

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

Mostly Uncle Frank [9:36]

So I only try to mention it when somebody like Ashley brings it up. I do charge $300 an hour for a two-hour minimum, and the main reason I charge that much is to keep the number of clients down to about one a month, which is more than enough of that kind of activity for me, although I actually do enjoy it at that pace.

"Voices" [9:59]

Well, you haven't got the knack of being idly rich. You see, you should do like me just snooze and dream, dream and snooze. The pleasures are unlimited.

Mostly Uncle Frank [10:07]

If you are interested in that, please send me an email to frankatriskparityradiocom. Now, this bonus fee structure was actually invented by one of our listeners, david, who offered last summer to essentially pay double but pay the money directly to the Father McKenna Center as a donation, and I gladly accepted the offer then. And I will gladly accept the offer again because I think that is a great way to convert my time into your money as a charitable donation.

"Voices" [10:43]

All we need to do is get your confidence back so you can make me more money.

Mostly Uncle Frank [10:48]

Because a lot of the money I collect from this ends up there anyway, as you can imagine. Surprise, surprise, surprise. And before I forget, let me just congratulate you on hitting your $3 million liquid.

"Voices" [11:02]

The best Jerry. The best $3 million liquid. The best Jerry.

Mostly Uncle Frank [11:05]

The best. You are kind of the typical person who asks for financial consultation with me, most of my listeners who are not here for the entertainment value.

"Voices" [11:15]

What do you mean? Funny, funny how. How am I funny?

Mostly Uncle Frank [11:21]

Are actually very good already with personal finances and usually have accumulated some millions of dollars or are well on their way, and I'm fortunate to have such a sophisticated audience.

Mostly Mary [11:30]

Top drawer, really top drawer.

Mostly Uncle Frank [11:34]

And from the notes you gave me, Ashley, that I'm not sharing, I think I can make this consultation worth your while.

"Voices" [11:42]

Could I come home and think that I've been fishing all day or something. That's really not what I do, Peter. However, the good news is I think I can help you.

Mostly Uncle Frank [11:56]

I will share one of your tidbits, which is that Ashley does support her mother in a substantial way. Mary and I also do that for my parents, who are now a robust 95 and 91 years old, but I'm happy to discuss how that can work. That is actually one of the impetuses for the approach that we take to retirement planning here and portfolio construction, which is that we do want to be able to spend the most money we can out of our portfolios precisely because we do need to spend it now. Some things just cannot wait, and so that is why we do choose to construct portfolios that have the highest safe withdrawal rates to permit that kind of spending and do not rely on a strategy that is simply a don't spend much money strategy. So, although a lot of this is an intellectual exercise, it's not just an intellectual exercise. There is an important purpose to all of this, so I'm very much looking forward to working with you, ashley, and thank you for your email.

"Voices" [13:07]

Let's run away. We go to Mexico. They want officers in the Mexican army. We could be so happy there. Ashley, I'd work for you, I'd do anything for you. You know you don't love Melanie. You told me you loved me that day at 12 Oaks.

Mostly Uncle Frank [13:21]

Second off. Second off, we have an email from Alexi, so that's what you call me. You know that, or his dudeness or duder, or you know, bruce Dickinson, if you're not into the whole brevity thing, and the dude writes hey guys, the most interesting aspect of the Google Large Language Model podcast on today's pod was how unlistenable it was.

"Voices" [13:49]

I got a lot of problems with you people. Now you're going to hear about it.

Mostly Mary [13:54]

Every time I tune into a Risk Parity Radio episode, I am delighted and entertained.

"Voices" [13:59]

Surely you can't be serious. I am serious.

Mostly Mary [14:02]

And don't call me Shirley, even though some of the questions have been answered before. I understand the basic framework of the show and the philosophy, and many of the audio clips are not unfamiliar to me.

"Voices" [14:13]

No one tells Frank Costanza what to do.

Mostly Mary [14:16]

Each show is delightful to listen to.

"Voices" [14:19]

Are you trying to keep us out of Del Boca?

Mostly Mary [14:21]

Vista, I feel I am spending time with a friend, uncle Frank, and I enjoy him navigating the nuances of each email in question.

"Voices" [14:29]

You think you can keep us out of Florida? We're moving in lock, stock and barrel. We're going to be in a pool, we're going to be in a clubhouse, we're going to be all over that shuffleboard court and I dare you to keep me out.

Mostly Mary [14:47]

The AI version of the podcast sounded like a smoother version of risk parody radio, but it totally lacked life. There's still something about humans that makes us interesting to other humans. We're not doomed yet.

"Voices" [15:05]

AZ who's saying you want a piece of me, you want a piece of me, you got it.

Mostly Uncle Frank [15:09]

Well, it's good to hear from you again and it was good to see you last night. Mary and I met the dude Alexi for the first time last night, as he was in town for a conference. He is a medical professional. He did take us to dinner at a very nice Jose Andrés-themed restaurant.

"Voices" [15:28]

Yes.

Mostly Uncle Frank [15:30]

And we enjoyed it very much.

Mostly Mary [15:32]

Something to drink, monsieur.

"Voices" [15:33]

Yeah, I'll have six bottles of Chateau Latour, 45., 45. And a double Jaroboam of champagne and the usual brown ales. Yeah, now wait a minute. I think I can only manage six crates today.

Mostly Uncle Frank [15:54]

And he even picked up the bill. See, I take donations of all kinds, including single malt scotches.

"Voices" [16:07]

Scotch is a drink, scots are a people, but we're both quite tasty.

Mostly Uncle Frank [16:13]

So it was really great to meet you for the first time in person, Alexei.

"Voices" [16:21]

And I'm sure it will not be the last.

Mostly Uncle Frank [16:24]

You look like a lady, you look like a lady and I'm sure it will not be the last.

"Voices" [16:29]

Never judge a book by its cover, or who you're gonna love by your lover.

Mostly Uncle Frank [16:37]

Now what Alexi is commenting on is our last podcast where I used the Notebook LMAI podcast bot from Google to construct part of the podcast out of an old podcast, and it's funny. I feel like I'm the first one to ever do that, at least that I'm aware of. But since I did it the first time a couple of months ago, I've heard at least three other podcasters employ that particular device. I'm glad you find my usual delivery more entertaining.

"Voices" [17:10]

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

Mostly Uncle Frank [17:15]

And I'll try to avoid using it too much, although it did seem appropriate, since I'd already done a podcast on the particular topic and so gave you the option of the Uncle Frank version or the bland AI bot version.

"Voices" [17:30]

You need somebody watching your back at all times.

Mostly Uncle Frank [17:34]

I have to say, listening to it again though, it's only about 80% to 85% correct as far as the content was concerned. So I do urge you to go back and listen to the original version of that podcast number 238, if you are interested in Cape Fear and Cape Ratios and Cape Crusaders. Anyway, I agree with you, we're not doomed yet.

"Voices" [18:17]

Everything that has transpired has an answer according to my design.

Mostly Uncle Frank [18:23]

Or not too much yet. Oh no, or not too much yet, but I very much appreciate your email and the dinner we had and your friendship, and so thank you for all three. Take it easy, dude. Oh yeah, I know that you will.

Mostly Mary [18:57]

Yeah well, the dude abides.

"Voices" [19:07]

Well done the dude abides Last off.

Mostly Uncle Frank [19:13]

Last off, we have an email from Sean Sean in Philly.

"Voices" [19:19]

Yo Adrian.

Mostly Uncle Frank [19:37]

Adrian Adrian.

Mostly Mary [19:39]

And Sean writes Hi, frank, I've really enjoyed your podcast, thanks for making it and, yes, I even enjoy the mixed-in pop culture drops. Apologies if this is a dumb or overly general question, but I'd like to know your thoughts on what would constitute a reasonable composition of the bonds, ie stable assets portion of my retirement portfolio, considering my circumstances In the financial independence space. There is endless content opining on the quality slash, quantity of the equity portion of a portfolio, but the bond side of the equation feels a little bit like a dark, scary frontier.

Mostly Uncle Frank [20:20]

Real wrath of God type stuff Exactly.

Mostly Mary [20:23]

I am a 47-year-old recent retiree who is looking to fund a God willing 50-year retirement horizon.

"Voices" [20:31]

Death stalks you at every turn.

Mostly Mary [20:35]

I have decided to start with a 60-40 equity slash stable assets portfolio and implement a glide path strategy to slowly increase my equity exposure over the course of my life. I am comfortable with the 60 portion of this equation. It is a combo of S&P 500, small cap value and international stock ETFs. However, the 40 portion to me remains a mystery, a dimension of sound, a dimension of sight, a dimension of mind.

Mostly Mary [21:08]

Right now, my bond bucket is made up of approximately 38% US Treasuries, tspg Fund 7-10 year Treasury Bond Index and I-Bonds 42% total bond market Vanguard, vbtlx, 14% cash and 6% real estate a syndication. I have to admit I reached the above mix by basically winging it and going with my gut.

Mostly Mary [21:35]

Better get a bucket or I'm going to throw up, I guess. So A bucket for monsieur. Obviously I don't want to leave something as serious as my retirement up to my gut and end up eating cat food in my twilight years. Any guidance you could provide on what types of holding I should prioritize in building out my bond fund? Thanks again for the great content, sean in Philly.

"Voices" [21:59]

Ever since, ever since he was with you, ever since he was you think that I'm why today's happened? That's right, you are why today's happened.

Mostly Mary [22:05]

I'm the reason why today happened. I think so.

"Voices" [22:07]

Let's talk about that. Be my guest. The first night that Pat and I met at my sister's, the Eagles beat the 49ers handily, 40-26. The second time we got together, we went for a run and the Phillies beat the Dodgers 7-5 in the NLCS. She's right, dad. The next time we went for a run, the Eagles beat the Falcons 27-14. Wow. The third time we got together, we had Raisin Bran in the diner and the Phillies dominated Tampa Bay in the fourth game of the World Series 10-2. Oh, wow, fascinating. Let me think about that. Wait a minute. Well, why don't you think about when the Eagles beat the Seahawks 14-7? He was with you, he was with me. We went for a run. Really, that's crazy. There have been no games since. Pat and I have been rehearsing every day, and if Pat had been with me like he was supposed to.

Mostly Uncle Frank [22:59]

He wouldn't have gotten in a fight, he wouldn't be in trouble. Maybe the Eagles beat the New York Giants. Well, sean, if you're going to retire for 50 years, I suggest you stop winging it. Winging it is not good enough for your retirement. Not going to do it Wouldn't be prudent at this juncture. And the way you stop winging it is you actually start using calculators, robust calculators that can tell you what your portfolio is likely to perform like, given a Monte Carlo simulation and given how it has performed in the past, and then use that information to compare it with other portfolios. And that's how you should be making decisions here, not by just taking a little bit of this and a little bit of that and hoping it all works out. It probably will, depending on how much you're spending, but that's not really a good approach or a good process. The calculators you should be using are definitely Portfolio Visualizer, definitely Portfolio Charts, and I would also use the new Testfolio website.

Mostly Uncle Frank [23:58]

I would avoid using calculators that are limited in their scope. Ones like Seafire, sim and PhiCalc are not good calculators to use. They're kind of toys, and the reason I say that is because they only allow you to put in stock allocation, bond allocation and cash. That is not good enough for today. That may have been good enough 20 years ago, when we only had primitive calculators like that. We've had much better calculators since about 2016, and if you're not using them, you need to use those. You should also avoid using calculators that require you to guesstimate at returns. What do you think this portfolio or this asset is going to return? And then you put in a number, and then you put in a number for inflation. Don't do that. Don't use that kind of calculator.

Mostly Mary [24:48]

I'm asking you to do that.

"Voices" [24:51]

But what's easy to do is what Easy not to do.

Mostly Uncle Frank [24:55]

That is a crystal ball calculator. You need a crystal ball to get those numbers.

Mostly Mary [25:00]

Now the crystal ball has been used since ancient times. It's used for scrying, healing and meditation.

Mostly Uncle Frank [25:09]

Use something that processes historical data and then can mix it up in a Monte Carlo simulation to give you a range of outcomes. Which leads me to my next point is I think you're not taking a good holistic view of the portfolio here. You have fallen into the trap that I see frequently, and financial advisors do this all the time. They say, okay, this is my stock portfolio over on this side and this is my bond portfolio over on the other side. And now let's pretend that all of the bonds have the same relationship to the stocks and so we can just use any bond and think it has the same correlation to the stocks. That's wrong, it's wrong-headed, it doesn't work.

"Voices" [25:53]

It's a trap.

Mostly Uncle Frank [25:55]

You need to consider all of the assets together as one big portfolio, because some of those bonds you're holding are going to be highly correlated with the stocks and tend to go down with them all the time. Some of them are going to be less correlated with stocks. Some of them are going to have different durations and behave differently in different environments, and so you cannot treat the bond part of your portfolio as a separate portfolio that you are going to work up and manage by itself, because you need to know what the relationship of any particular asset is in your portfolio to all of the other assets in the portfolio Not all of the other bonds and nothing else. And honestly, at least on the DIY side of this, I think this comes from using these primitive toy calculators like Seafire, sim and FiCalc that only have stocks and bonds as your options in them.

Mostly Mary [26:56]

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

Mostly Uncle Frank [27:00]

There are different kinds of stocks, different kinds of stock funds. There are different kinds of bonds. In fact, the bonds are even more varied in terms of what they do, how they perform and what they're good for. So I'm going to give you some overview here on some factors. But I've talked about this a lot in the past and I would suggest you go back and listen to the following episodes episodes 14 and 16, which are about bonds, specifically episodes 75 and 78, analyzing a corporate bond fund and why you probably don't want to be holding something like that. I would also listen to episodes 142, 186, and 232. And then there is also an episode I appeared on on the Choose Fi podcast. It is episode 194, and it is all about bonds in a portfolio. I will link to that in the show notes, but that will also give you a nice overview, because the first question you need to ask yourself about bonds in your portfolio is why are you holding them? Why are you holding them? Bueller, bueller, bueller?

Mostly Uncle Frank [28:15]

There are typically three reasons one might hold bonds in a portfolio you can hold them for income, you can hold them for diversification and you can hold them for stability. Now, one thing we know about bonds is they tend to underperform stocks over time, just as a general rule Not all the time, but most of the time and most bonds compared to most index funds. If you know that and you know that the main driver of your portfolio is going to be the stocks that is what you're using to drive superior returns in your portfolio then chances are you don't need bonds for income in your portfolio at all. Then chances are you don't need bonds for income in your portfolio at all. If you wanted more return in your portfolio, you'd simply hold more stocks. You wouldn't be shopping around looking for bonds with high returns, because they're never going to be higher than the stocks.

"Voices" [29:11]

Forget about it.

Mostly Uncle Frank [29:13]

And you don't care about the fact that it's paying income in liquid form, because all of these assets are liquid. This is not the 20th century, where it's high transaction costs and it's difficult to convert your liquid assets into cash. You can convert any asset into cash with a few clicks on your phone now, so you do not care and in fact, you do not want that ordinary income coming off of bonds. Why don't you want the ordinary income coming off of bonds?

"Voices" [29:42]

Hello, Hello, anybody home? I think McFly, I think.

Mostly Uncle Frank [29:48]

It's ordinary income. It gets taxed at the highest rate. The worst thing to have in terms of a total return is getting it as ordinary income. The second worst thing to have in terms of a total return is getting it as ordinary income. The second worst thing to have is qualified dividends, because you're still forced to take the income. You would prefer that your assets keep all of their return inside of them as capital gains and then you can manage that and take it when you want it and create your own income.

Mostly Uncle Frank [30:18]

So, unless you are doing something special where you're putting together a pool for a limited amount of time to serve as a bridge or for whatever reason, you've decided that you are going to construct a mainly bond portfolio and not hold many stocks, in which case you should probably be looking at annuities most of the time. You don't care what the bonds are in terms of income. That's not why you're holding them. Why else would you be holding them For diversification? And then you're looking at well, when do stocks and bonds perform differently? When do you get the most diversification? You get the most diversification in economic recessions like 2000s, the early 2000s, 2008,. The brief period in 2020. We really haven't had much in the way of recessions in the past decade. But when that happens, your stocks will fall in value. Certain bonds will increase in value, other ones won't. Some will follow the stocks, some will go the other way. Do you know which ones? It's treasury bonds versus corporate bonds. The more corporate or high yield a bond is, the more likely it is to go with stocks most of the time. So if you're looking for diversification, you are looking for treasury bonds. You do not hold other bonds for diversification from stocks. If your portfolio is mostly stocks, it doesn't make any sense. Fat, drunk and stupid is no way to go through life, son.

Mostly Uncle Frank [31:46]

What else is a factor here? Well, we know that bonds with longer durations tend to move more, whether it's up or down, given the economic environment they're in. So in a recession, a longer-term bond will move more up. It'll give you more diversification, if you will, from your falling stocks than an intermediate-term bond or a short-term bond, which is essentially going to do nothing. The intermediate-term bond is going to move a little. The longer-term bond is going to move more little. The longer-term bond is going to move more. What that tells you is that you can hold less in terms of how much in bonds you need to hold if they are of longer duration and we're still talking about using them for diversification here. So if you're picking bonds for diversification, you're probably picking intermediate and long-term treasury bonds.

Mostly Uncle Frank [32:36]

Now what if you want bonds for stability? That's just short duration and in fact you can hold corporates, you can hold treasuries, you can hold savings accounts, you can hold CDs, you can hold any number of other things. As long as they are short duration, they will be cash-like and they just won't move much at all in either direction and in any environment. They'll just sit there. And what we know about those in terms of your overall portfolio construction, going back to Bill Bengen's work in the 1990s, is that if you hold more than about 10% of those kind of things in your portfolio, it does detract from the overall performance of the portfolio. Over time it becomes a cash drag. So the rule on those is hold some, but probably not more than 10%, at least if your goal is to have a higher safe withdrawal rate. All right.

Mostly Uncle Frank [33:28]

So let's look at what you've got right now. You say you got 38% in US Treasury's intermediate Treasury bond index and I-bonds. I-bonds are actually short-term. So those are the short-term stability, the 7 to 10-year treasuries. Would you be holding those for diversification? You have 42% in a total bond market fund. That is a problematic fund these days. Yeah, that was the best idea 20 years ago. No, it's not the best idea today. It's just not so. Get over it.

"Voices" [33:58]

You're going to end up eating a steady diet of government cheese and living in a van down by the river.

Mostly Uncle Frank [34:07]

And there are two reasons it's not the best idea today. One is it has a mix of corporate and treasuries in it. You probably don't need any of the corporates if you're holding this thing for diversification. If you were trying to get income out of it and I don't recommend you do that then you would start looking at corporate bonds. The second problem with it is that it's all in one. It's got short, intermediate and long-term bonds all in one thing that you cannot rebalance, and so you've got basically stuff in there for income, stuff in there for stability and stuff in there for diversification, but you can't rebalance any of it. You're kind of stuck with it in the form it's in, and these days you don't need to do that because we have a whole suite of specific ETFs for specific kinds of bonds, and Vanguard was a little late to the party, as they always are, but they have some great ETFs now. They're very low cost.

Mostly Uncle Frank [35:02]

So you can get a short-term treasury bond fund VGSH. You can get an intermediate treasury bond fund VGIT there. You can get a long-term treasury bond fund VGLT there. You can get a variety of short-term ultra-shorts like VUSB there they're coming out with a couple new ones you can get a variety of corporate bonds of different durations, and so what this allows you to do is specifically pick the kinds of bonds and kind of durations you actually want because you have analyzed what you want in those calculators we talked about and then only use those bonds. And what that will also give you is room in your portfolio, because if you get rid of the, for instance, the corporate aspect of this total bond fund, all of a sudden you have more room for either stocks or alternatives, or more of the bonds you actually want, if you still want them.

Mostly Uncle Frank [36:04]

But in any event, there's no reason in this day and age anybody needs to be holding a total bond fund, because you have more and better options. And if you're holding that, it's a symptom that you don't know what you're doing. You haven't really analyzed what you're holding. That it's a symptom that you don't know what you're doing. You haven't really analyzed what you're doing to figure out what you really want.

Mostly Uncle Frank [36:21]

And one thing you should definitely do at portfolio charts in particular is go to the portfolio matrix calculator and put your current portfolio in there as best you can. There's a lot of different asset classes. You can put in the percentages, but that will allow you to compare what you're holding now to a bunch of other portfolios about 19 other common ones on a variety of metrics, including safe withdrawal rates, maximum drawdowns and other things, and you'll get an idea for what your portfolio is like with respect to those sorts of things, because I do think you want one that performs very well. As to safe withdrawal rates, if you are planning on spending money and just looking at what you've got there, I think it's probably in the middle of the pack right now, but it could be improved upon.

"Voices" [37:09]

We had the tools, we had the talent.

Mostly Uncle Frank [37:12]

All right. The next thing you have is 14% cash. That's just too much cash. You don't need that much cash if you want to maximize your safe withdrawal rate. The only reason you would hold that much cash is if you were actually planning on spending more of it early on. Or if you're just one of these people that just likes to have buckets of cash around as a security blanket and you just plan on underspending the portfolio and that is a common strategy amongst financially independent people. They underspend their portfolio and then they can pull a whole bunch of cash to make them feel better. That's fine if that's what you want to do, but you're not optimizing for spending. You're optimizing for hoarding.

"Voices" [37:53]

Are there no prisons? Are there no workhouses? Are there no prisons? Are there no workhouses?

Mostly Uncle Frank [38:02]

because you don't. Actually you have more than 14 in cash. You have 14 in cash that you've identified. Also, a third of that total bond market is essentially short duration, so that's close to cash as well. The I bonds are close to cash as well. The I bonds are close to cash as well. You have probably 20% of your portfolio in cash or short-term bonds and that's too much. Now the 6% in real estate I wouldn't consider that a bond at all.

Mostly Uncle Frank [38:26]

That is an alternative investment. It's got its own return characteristics. It's got an illiquidity issue that you need to be aware of. Illiquidity is not a good thing to have, but if it's only 6% of a portfolio, it's not a big deal. But if you're happy with that, it's fine. Just be aware of the tax implications of it. And what's nice about that is it is likely to be uncorrelated with both of your stocks and bonds, which is really what you want out of an alternative. It does have some positive correlation, however, with stocks, in that if there is some kind of big recession, depression environment, that syndication could fail. At the same time your stocks are going down, but in relatively normal times it's going to perform in a very uncorrelated manner and be a very useful thing. So you wanted some guidance. There is some guidance.

Mostly Uncle Frank [39:18]

I would go listen to those other things I mentioned, because there is a lot more detail there. What I just gave you is a brief overview of some of the issues that you're dealing with or need to deal with here and no, I realize it sounds like I'm taking you to the woodshed, but it's not really you that this is directed at. I feel that you've been misinformed, like a lot of people who are looking at outdated information about how to use bonds in the 2020s or in the past 10 years, as opposed to what people were doing 20 years ago, and so there is a lot of flimsy information out there. People start talking about bond portfolios and buckets, ladders, hoses and flowerpots of bonds and cash in the neat little rows. We need to get beyond that.

Mostly Uncle Frank [40:09]

Personal finance is an evolving technology. It's not written on a Dead Sea Scroll somewhere. We have better tools today. We have better funds today. We have better options today than we did 10, 15, 20 years ago, and we should start using them. If we're not using them, especially if you're going to be in a 50-year retirement scenario, because your only other option is the option that people usually use, which is don't spend much money.

"Voices" [40:38]

Another idol has replaced me in your heart, a golden idol. It's singular. The world that can be so brutally cruel to the poor professes to condemn the pursuit of wealth. In the same breath, you fear the world too much, with reason. But I am not changed towards you, aren't you? But I am not changed towards you.

Mostly Uncle Frank [40:55]

Aren't you. And if your real plan is don't spend much money here, as in 3% or less of your portfolio, then what you're doing is fine right now. You can just hold that. It won't matter. But don't kid yourself that what you're doing now is optimal in any way, shape or form for spending in retirement. It's not. And if somebody tells you otherwise, ask them to show you their analysis from calculators, from Monte Carlo simulations that model all of the assets that are available. And if they can't do it or they haven't done it, they haven't done their homework either. There's no analysis there. That's not good enough for the 2020s. It's not good enough for your 50-year retirement. You need to be able to say I have analyzed this portfolio. I believe it to be better than alternative portfolios that I could hold for the purpose I'm holding. And that means go and use calculators. It doesn't mean tell stories. It doesn't mean go read things where people just casually say well, I like a total bond market portfolio. That's what Jack Bogle said 20 years ago Must be good enough, huh.

Mostly Mary [42:03]

That's not an improvement.

Mostly Uncle Frank [42:05]

And I'm sure what they are actually doing or planning on doing is adopting a don't spend much money strategy, because that is what I see. People come up with all of these buckets and ladders and hoses and flowerpots of cash and this and that and the other Tell some story about needing to only survive a three-year downturn, as if that is the standard. It's not. You better be able to survive a decade-long downturn if you're serious about this, because you will have the one in the next 50 years. I can guarantee you that. But if they can't show you an analysis, then they're not worth listening to. They're just not worth listening to anymore in this day and age. Forget about it. But you can do this, I know you can, and I encourage you to take an analytical approach using the data and the robust calculators that are now available.

"Voices" [42:58]

I'm asking you to take charge of your own retirement, take charge of your own life. Once you look back on it, you will never turn back. You'll never go back to the old ways and the old language and the old neglect Never.

Mostly Uncle Frank [43:11]

Thank you for bringing this topic up. We hadn't talked about it in a long time, and thank you for your email.

Mostly Uncle Frank [43:18]

Now we're going to do something extremely fun, and the extremely fun thing we get to do now is our weekly portfolio reviews. Of the eight sample portfolios you can find at wwwriskparityradiocom on the portfolios page. Not much happened last week, so we will move through this with alacrity. The S&P 500 was up 0.96% for the week. The NASDAQ was a big winner last week. It was up 3.34% for the week. Small cap value was a loser last week. Representative fund VIOV was down 1.18% for the week. I should say some of these funds had distributions over the past week, so this information may not be exceedingly accurate, but it's what it says on the chart. Gold was down 0.73% for the week. Long-term treasury bonds, represented by the fund VGLT, were up 0.36% for the week. Reits, represented by the fund REET, were down 2.43% for the week. Commodities, represented by the fund PDBC, were down 1.04% for the week. Preferred shares represented by the fund PFFV were down 1.14% for the week and managed futures Futures managed to be up last week. Representative Fund DBMF was up 0.51% for the week.

Mostly Uncle Frank [44:33]

Moving to these portfolios, first one's this reference portfolio. It's called the All Seasons. This one is 30% in a total stock market fund VTI, 55% in treasury bonds intermediate and long and the remaining 15% in golden commodities. It was up 0.66% for the week. It's up 11.03% year-to-date and up 12.72% since inception in July 2020. Moving away from the reference to something that somebody might actually hold in retirement these next few, first one of these is a golden butterfly. This one is 40% in stocks divided into a total stock market fund and a small cap value fund, 40% in bonds divided into long and short-term treasuries Note, they are not in one total treasury market fund but are available for rebalancing in those durations and the remaining 20% in a gold fund, gldm. It was down 0.1% for the week. It's up 14.84% Year-to-date. It's up 38.41% since inception in July 2020.

Mostly Uncle Frank [45:41]

Next one's a golden ratio. This one's 42% in stocks and three funds 26% in a long-term treasury bond fund, 16% in gold, 10% in a REIT fund and 6% in a money market fund. In cash, it was down 0.05% for the week. It's up 15.78% year-to-date and up 35.52% since inception in July 2020. Next one's the risk parity ultimate our kitchen sink. I'm not going to go through all 15 of these funds, but the Bitcoin and Ether funds have been doing well recently. We'll probably be starting to take more distributions out of them in the coming months. This one was up 0.34% for the week. It's up 18.36% year-to-date and up 26.21% since inception in July 2020. Now moving to these experimental portfolios these all involve leveraged funds, so don't try this at home.

"Voices" [46:38]

You have a gambling problem.

Mostly Uncle Frank [46:40]

First one is 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 0.85% for the week. It's up 20.83% year to date and up 10.73% since inception in July 2020. Next one's the aggressive 50-50. This is the least diversified and most levered of these funds and worst performing, which isn't surprising given those characteristics. It's one-third in a levered stock fund UPRO, one-third in a levered bond fund TMF, and the remaining third in a preferred shares fund and an intermediate treasury bond fund is Ballast. Remaining third in a preferred shares fund and an intermediate treasury bond fund is ballast. It's up 1.53 percent for the week. It's up 20.39 percent year to date, but down 0.83 percent since inception in july 2020.

Mostly Uncle Frank [47:38]

Next one's the levered golden ratio. This one is 35 percent in a composite levered fund called ntsx, that is, the s&P 500 and treasury bonds, 25% in gold, 15% in a REIT O, 10% each in a small cap levered fund, tna, and a levered bond fund, tmf, and 5% in a managed futures fund KMLM. It was down 0.48% for the week. It's up 18.43% year-to-date and up 2.49% since inception in July 2021. It started off at a really bad time, and the final one is our newest one, the Optra portfolio. One portfolio to rule them all.

"Voices" [48:23]

My precious day to me, my love.

Mostly Uncle Frank [48:33]

This one is 16% in a leveraged stock fund, upro, 24% in a composite worldwide value-tilted fund called AVGV that has value stocks from around the world, 24% in a treasury strips fund, govz, and the remaining 36% divided into gold and a managed futures fund, dbmf. It was up 0.47% for the week. It's up 9.35% year-to-date and since inception, which was only in July 2024. So it's still only a few months old. And that concludes our portfolio reviews, so you can wake up now.

"Voices" [49:15]

Mama, this ain't good Money.

Mostly Uncle Frank [49:19]

All this money and nothing to do and nobody to do it with. You were saying something, old boy, but now I see our signal is beginning to fade. 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, wwwriskparityradarcom, put your message into the contact form and I'll get it all that way. If you don't have any other 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.

"Voices" [50:04]

I don't know what day of the month it is. I don't know how long I've been amongst the spirit. I don't know anything of the month it is. I don't know how long I've been amongst the spirit. I don't know anything. I never did know anything, but now I know that I don't know anything. I don't know anything. I never did know anything, but now I know that I don't know All. In the Christmas morning, I must stand on my head. I must stand on my head. I must stand on my head.

Mostly Mary [50:29]

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.