Episode 347: Levered Small Caps, Cash Management Issues, Comparing Bond Fund Durations And Portfolio Reviews As Of June 21, 2024

In this episode we answer emails from Anderson, Sean and Colin.  We discuss the OPTRA sample portfolio, using rising glidepaths or bond tents in portfolio management and Colin's "Smooth Operator" Portfolio.Links:2016 Kitces Article re Bond Tents and Glidepaths:  The Portfolio Size Effect And Optimal Equity Glidepaths (kitces.com)Portfolio Charts Portfolio Matrix Comparison Tool:  Portfolio Matrix – Portfolio ChartsColin's Portfolio:  Backtest Portfolio Asset Allocation (portfoliovisualizer.com)Amusing Unedited AI-bot Summary:Discover the secrets to crafting a retirement portfolio that balances risk and reward in episode 371 of Risk Parity Radio. We introduce the Optra portfolio, a unique blend of risk parity with a hint of leverage, and explore why a descriptive name was chosen over the suggested Uncle Frank portfolio. This episode gives you a backstage pass to our discussion on managing equity exposure and sequence of return risks with innovative strategies like bond tents and equity glide paths paired with risk parity styles, as proposed by our listener Sean.Unlock the power of portfolio construction tools and techniques with us. We demystify the use of Portfolio Visualizer's Monte Carlo Simulator and delve into expert insights from Bill Bengen and Wade Pfau on optimal equity allocations. You'll grasp the significance of historical data as we dissect how different portfolio compositions can affect decumulation strategies, touching on metrics like CAGR and the ulcer index. Our conversation extends to Colin's Smooth Operator Portfolio, which cleverly uses ETFs to enhance diversification and reduce volatility, showing the value of innovative approaches to portfolio performance.As we wrap up, expect a playful twist with Frank Vasquez's rendition of "Smooth Operator" and a reminder that our advice is designed to inform and entertain, not replace personalized financial consultation. We stress the importance of consulting personal advisors for tailored decisions. Join us for an engaging and enlightening session that combines financial wisdom with a touch of humor, ensuring you're well-prepared for your financial journey.Support the show

In this episode we answer emails from Jimmy, Dave and Richard.  We discuss the joys of Joe's Garage, the Bogleheads Simba spreadsheet and Lazy Portfolios and a revisit of the ETF SVOL.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:Simba's Spreadsheet (Article And Link):  Simba's backtesting spreadsheet - BogleheadsSVOL Webpage:  SVOL Simplify Volatility Premium ETF | SimplifyRichard's SVOL vs. Equity ETFs Analysis:  testfol.io/analysis?d=eJxdikEKwjAQRa8S%2FjoL68JFruEBwtCkMu04kUmaIuLdDbgR3%2B7x3guN5y1bRYC79iKuPp5ur%2FfuqO8dHrWRtZio5bEMz5p%2B7Fs7CcJ0GnhQWiPrItS4KMJCUrOHFRHWWzxYUzkQLuOci1n8D9P5%2FQF55jJ4Richard's SVOL Portfolio Analysis:  https://tinyurl.com/bddjy2k4Eric Balchunas Interview:  Eric Balchunas on The Hidden Gems of the ETF World You Need to Know! (youtube.com)Amusing Unedited AI-bot Summary:Imagine a finance podcast that's as entertaining as a night out at your favorite dive bar. I'm Frank Vasquez, and on this playful yet insightful episode of Risk Parity Radio, we hit a milestone of 750,000 downloads, a delightful gift for my 60th birthday. Join me as I reminisce about the impact of Frank Zappa's "Joe's Garage" on my youth and answer listener emails, including a deep dive into Simba's Backtesting Spreadsheet. We ponder the Bogleheads' seemingly timeless investment models and their reluctance to embrace change.Turning our focus to innovative ETF strategies, we dissect the SVOL ETF, an inverse VIX fund with the potential to spice up your portfolio. Despite its lack of historical data and the risk of significant distributions in taxable accounts, this ETF might just find its rightful place in your retirement portfolio. We examine the broader trend of creative ETFs, thanks to recent SEC rule changes, and weigh the psychological appeal against the need for financial prudence. Curiosity piqued, we also explore SVOL's correlation with growth or value stocks.Rounding out the episode, we analyze weekly portfolio performances with strategies like the All Seasons, Golden Butterfly, and Risk Parity Ultimate. I update you on specific portfolio allocations and performances, highlighting the beauty of consistent returns, even if they might seem uneventful. Engage with us through questions or comments, subscribe, and leave a review. As we wrap up, enjoy a humorous tale that weaves together music, relationships, and personal growth, leaving you informed and entertained. Remember, this episode offers insights for entertainment and informational purposes, so consult your personal advisor for tailored financial advice.Support the show

In this episode we answer emails from Frank, John, Aaron and Pete.  We discuss bond allocations in treasuries of various durations, when retirement account space is limited and the tax bracket is high, the reasons for the strange presentation of this podcast and how to use a new AI-Bot to circumvent them (with an embedded example of an AI-Bot podcast created from Episode 333 about target date funds), the joys of having younger listeners and Derek Tharp's Monte Carlo based variable withdrawal strategies.Links:The New Google Notebook AI-Bot That Creates Podcasts:  NotebookLM | Note Taking & Research Assistant Powered by AIDerek Tharp Podcast:  Busting the 4% Rule Myth - Retirement Revealed | Podcast on SpotifyDerek Tharp Article:  A Monte Carlo 50% Retirement Success Probability Can Work (kitces.com)Amusingly Inaccurate Unedited AI-Bot Summary:Unlock the secrets of smarter investing and redefine how you approach your portfolio with our latest episode of Risk Parity Radio. Ever wondered if your 401k rollover could be optimized for greater returns? We dive into a listener's question about achieving a 30% bond allocation, weighing the pros and cons of treasury versus municipal bonds. You'll discover insights into balancing tax implications and investment goals, while also considering the volatility of different bond types. Our conversation guides you toward a holistic view of your investment strategy, ensuring your portfolio aligns with your personal financial objectives.Challenging the status quo, we welcome guest Frank Vasco to dissect the perceived simplicity of target date funds. Could these popular investment vehicles be holding your growth potential back? Frank shares compelling findings from a 2022 study, revealing how TDFs might underperform significantly over decades. Even industry stalwarts like Vanguard aren't immune to these criticisms. With this in mind, we encourage you to critically evaluate your 401k plan choices, embracing a mindset of informed skepticism and strategic thinking.Finally, we examine the fascinating world of index funds and question traditional retirement withdrawal strategies. Drawing an analogy to betting on the entire Kentucky Derby, we explore how index funds offer diversification and often outperform active management. As you rethink retirement, we discuss utilizing Monte Carlo simulations to create flexible withdrawal strategies that adapt to changing circumstances. This episode is all about empowering you with financial literacy and the tools to challenge conventional wisdom, putting you in control of your future wealth.Support the show

In this episode we answer emails from Andrew, Jeff, Ron and Javier.  We discuss analysis tools for leveraged funds like UPRO and TNA, Tactical Allocation Strategies, how and where this podcast is distributed, and brokerage account options for foreign (to the US) nationals.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:Andrew's Portfolio Visualizer Link:  Backtest Portfolio Asset Allocation (portfoliovisualizer.com)Testfol Portfolio Analyzer (see the Help link in the drop-down menu for instructions):  testfol.ioAllocate Smartly Website:  What We Do - Allocate SmartlyInteractive Brokers Introduction For Accounts:  Introducción a IBKR | Trading Course | Traders' Academy | IBKR Campus (interactivebrokers.com)Amusing Unedited AI-Bot Summary:Ready to rethink your investment strategy? Uncover the secrets of a diversified portfolio with leveraged funds like TNA and UPRO in our latest episode of Risk Parity Radio. We'll guide you through the nitty-gritty of managing such portfolios, emphasizing the significance of fee considerations and the mechanics of monthly rebalancing. Explore alternative strategies, including rebalancing bands, and discover the power of tools like Portfolio Visualizer and TestFol to optimize your investment approach. We blend humor and savvy insights to create an inviting atmosphere, reminiscent of a friendly chat at your favorite local dive bar.Our exploration doesn't stop there. We tackle Jeff's curiosity about tactical allocation strategies for retirement, diving into the complexities and risks, including overfitting and tax inefficiencies. While some approaches might tempt with short-term outperformance, we advocate for simpler, more reliable diversification techniques. Tune in for our market performance review, where we assess the minimal shifts in major indices and the dramatic moves in commodities and long-term treasury bonds. From the All Seasons to the Risk Parity Ultimate portfolios, we ensure you have the insights needed to navigate your financial journey through market volatility and distribution strategies.Support the show

In this episode we answer emails from Mark, Jon and Richard.  We discuss the perils of income investing, covered call funds and SPYI, one potential future of DYI investing using levered and unlevered risk-parity style portfolios, and the use and misuse of historical data in various analyses with a reference to a blog post from Cliff Asness.Links:Video re SPYI:  SPYI Squeezes 12% Yield from the S&P 500 (SPYI ETF) (youtube.com)Portfolio Visualizer Litmus Test of SPYI:  Backtest Portfolio Asset Allocation (portfoliovisualizer.com)Cliff Asness Article:  Efficient Frontier “Theory” for the Long Run (aqr.com)Father McKenna Center Donation Page:  Donate - Father McKenna CenterNote that the usually "Amusing Unedited AI-bot Summary" was so ridiculously inaccurate I had to omit it.Support the show

In this episode we answer emails from Mark, James and Anderson.  We discuss differing performances in managed futures funds, a Portfolio Visualizer calculator and what to do with a TSP, and what to do about 529s when approaching the use date.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:Recent ChooseFI podcast with Yours Truly:  5% SWR, Revealed Preferences and the 3 stories | Frank Vasquez | Ep 508 | ChooseFIFather McKenna Center Main Donation Page:  Donate - Father McKenna CenterPortfolio Visualizer Financial Goals Tool:  Financial Goals (portfoliovisualizer.com)Amusing Unedited AI-bot Summary:How do you ensure a worry-free retirement while navigating the complexities of market trends and withdrawal strategies? Welcome back to Risk Parity Radio! Fresh from a cross-country adventure to the picturesque Washington State, we’re back with a renewed zest to help you master the art of personal finance and investing. Our cozy, dive bar-esque podcast is not just about numbers and charts; it's about community, humor, and shared learning. In this episode, we revisit our eight sample portfolios and shed light on how to build relationships and joy within your retirement hobby. If you're new here, start your journey with episodes 1, 3, 5, 7, and 9 for a solid foundation.Ever wondered how to choose between managed futures ETFs like KMLM and DBMF, or how to predict safe withdrawal rates for early retirement? We’ve got you covered. We explore the intricacies of KMLM's track record and DBMF's market adaptability, helping you determine the best fit for your diversified portfolio. Plus, we answer a listener's burning question about withdrawal rates, and untangle the complexities of the Thrift Savings Plan versus an IRA rollover. Dive into the world of financial planning tools, Social Security strategies, and brokerage firms like Fidelity and Schwab for low-cost investments. Join our informative yet quirky session designed for do-it-yourself investors looking to build a robust, diversified retirement plan.Support the show

In this episode we answer emails from Mikel, Garrison and Matt.  We discuss our charity and some foundational episodes, the use of leveraged fund UPRO in the OPTRA sample portfolio, and the four phases of learning and knowledge in personal finance, which are (1) Baby Steps; (2) Shiny Object Syndrome; (3) Applying Formulas That Represent Sound Investing Principles; and (4) Understanding Sound Investing Principles And Applying Them Directly.  And Mt. Rushmore and The Dog With The Longest Name.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:Risk Parity Radio RSS Feed With All Podcasts On One Searchable Webpage:  Risk Parity Radio RSS Feed (buzzsprout.com)Father McKenna Center Main Donation Page:  Donate - Father McKenna CenterFather McKenna Center Walk4McKenna Page:  Walk4McKenna - Father McKenna CenterAmusing Unedited AI-Bot Summary:How can long-term treasury bonds cushion your portfolio against turbulent market conditions? This week on Risk Parity Radio, we provide a detailed review of our sample portfolios, showing how treasuries have played a crucial role in mitigating recent stock market losses. We also share an inspiring email from Michael, a new listener who discusses his generous donation to the Father McKenna Center and highlights the upcoming Walk for McKenna fundraiser. Tune in to learn how you can support this meaningful cause while enhancing your understanding of risk parity investing.Embark on a journey to financial independence with us as we dissect the critical stages and pitfalls along the way. We'll guide you through the initial "baby steps," cautioning against the allure of "shiny object syndrome," and emphasize the importance of transitioning to practical, DIY investment strategies. Discover the core principles of successful investing, such as diversification and macro allocation, that will empower you to achieve true financial independence and navigate your personal finance journey with confidence.In a week marked by significant market declines, we analyze the performance of various portfolio strategies, highlighting the resilience of long-term treasury bonds and the impressive gains in diversified portfolios like the All Seasons and Golden Butterfly. Get an inside look at the new Optra portfolio, its composition, and its performance amidst economic fluctuations. We wrap up with an engaging tale about an extraordinarily talented dog, blending financial wisdom with light-hearted storytelling to keep you both informed and entertained.Support the show

In this episode we answer emails from Brian, JD and Andrew.   We discuss using leverage in portfolios (again!), gold ETFs and early retirement considerations and withdrawal strategies.  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:Yours Truly on the Forget About Money Podcast:  🎲 Risk Parity: The Secret to a 5% Safe Withdrawal Rate! | Frank Vasquez 🏆 (youtube.com)Ben Felix Video On Leverage:  Investing With Leverage (Borrowing to Invest, Leveraged ETFs) (youtube.com)Optimized Portfolios Website:  Optimized Portfolio - Investing and Personal FinanceETF Database -- Gold ETFs:  Gold ETF List (etfdb.com)PHYS Fund Article:  Tax Information - Physical Gold Trust (sprott.com)Portfolio Charts Withdrawal Rates Calculator:  Withdrawal Rates – Portfolio ChartsPortfolio Charts Retirement Spending Calculator:  Retirement Spending – Portfolio ChartsMorningstar Report re Variable Withdrawal Strategies:  Six Retirement Withdrawal Strategies that Stretch Savings | MorningstarAmusing Unedited AI-bot Summary:Ready to rethink your investment strategy? Uncover the secrets of leveraging your portfolio from insights gleaned from industry titans like Ray Dalio and practical advice for everyday investors. We promise you'll walk away with a new perspective on the benefits and risks of using leverage, tips on incorporating leveraged ETFs into your own portfolio, and a treasure trove of resources including the Optimize Portfolios site and an enlightening video by Ben Felix. This episode is packed with knowledge that can transform how you approach your investments.But that's not all—we're spicing up this financial discussion with a revisit to one of the most memorable moments in film history. Relive the iconic scene between James Bond and Goldfinger, dissecting the thrilling exchange and the unforgettable line, "No, Mr. Bond, I expect you to die." We'll break down Bond’s daring attitude against Goldfinger’s ruthless intent, highlighting why this scene is etched in cinematic lore. A blend of financial wisdom and pop culture nostalgia, this episode promises to both inform and entertain. Tune in and join the conversation!Support the show

In this episode we answer emails from Phil, MyContactInfo, and Eric.  We discuss implementing factor investing and making portfolio adjustments in a risk-parity style portfolio, HECOMs and other considerations about reverse mortgages and buffered products, the fundamental problems with IUL that need to be accounted for before using it, and just how rich you probably need to be to be using insurance products as investments.  Hint:  You are not that rich.Links:Swedroe Factor Investing Book:  Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today by Andrew L. Berkin | GoodreadsLong View Podcast About HECOMs:  Don Graves and Wade Pfau: How - The Long View - Apple PodcastsAndy Panko Cautionary Video About IUL:  Beware of misleading Indexed Universal Life insurance ("IUL") illustrations (youtube.com)Andy Panko IUL Critique On Big Picture Retirement Podcast:  Unmasking the IUL Sales Pitch with Andy Panko (bigpictureretirement.com)Private Placement Life Insurance:  How Does Private Placement Life Insurance Work? - ValuePenguinAmusing Unedited AI-Bot Summary:Is your portfolio prepared for the next economic downturn? Join us on this episode of Risk Parity Radio as we tackle an intriguing email from Phil, a listener from Portugal contemplating a major portfolio overhaul. We dig deep into the nuances of factor investing, particularly momentum and profitability factors, and offer critical advice on the potential risks of reducing bond allocations in favor of equities. We emphasize the importance of leveraging financial analysis tools like Portfolio Charts and Portfolio Visualizer to make informed decisions, and stress the need for a balanced approach throughout both the accumulation and decumulation phases of investing.We also navigate the labyrinth of investment strategies and financial products, evaluating the pros and cons of dollar-cost averaging amidst market volatility, and scrutinize costly options like Home Equity Conversion Mortgages (HECMs) and Indexed Universal Life (IUL) insurance products. Highlighting the potential pitfalls of these profit-driven offerings, we advocate for well-diversified portfolios as the cornerstone of robust financial planning. Tune in to discover practical tips on managing taxable accounts, avoiding misleading insurance products, and achieving optimal portfolio performance, all while staying grounded in sound financial principles.Support the show

In this episode we answer emails from Robert, Jamie and Richard.  We discuss transitioning away from a Boglehead Three Fund portfolio due to its obsolete nature, a query about the DBMF prospectus and an early retirement with a 70/30/10 risk-parity style portfolio in the face of some spurious Sonia-like objections.Links:Father McKenna Center Donation Page:  Donate - Father McKenna CenterMerriman Best-In-Class ETF List:  Best-in-Class ETF Recommendations | Merriman Financial Education Foundation (paulmerriman.com)Morningstar Portfolio Analysis Of VTI:  VTI – Portfolio – Vanguard Total Stock Market ETF | MorningstarVXUS:  VXUS – Portfolio – Vanguard Total International Stock ETF | MorningstarAVDV:  AVDV – Portfolio – Avantis International Small Cap Val ETF | MorningstarAVES:  AVES – Portfolio – Avantis Emerging Markets Value ETF | MorningstarEarly Retirement Now Spreadsheet Toolbox:  An Updated Google Sheet DIY Withdrawal Rate Toolbox (SWR Series Part 28) - Early Retirement NowAmusing Unedited AI-bot Summary:What if your international and bond funds aren't providing the diversification you think they are? On this episode of Risk Parity Radio, we address Robert's inquiry about optimizing his family's portfolio during the accumulation phase. We'll dissect the limitations of total international funds when paired with a U.S. S&P 500 or total market fund, and why they may fail to deliver the diversification you seek. We'll also explore Robert's proactive strategy of reallocating bond investments into stock funds during market downturns and discuss the merits of increasing U.S. stock exposure while rethinking the necessity of international holdings.We'll further challenge the conventional wisdom of international versus domestic funds and introduce modern alternatives that can bring true diversification to your portfolio. Recommendations from the Merriman Foundation, such as AVDV and AVES, are highlighted for their potential to balance your investments by tilting towards small-cap and value stocks in international markets. Lastly, we dive deep into the complexities of fund disclosures and benchmarks, offering alternative methods to evaluate funds more effectively. Gain insights that will guide you toward a more strategic and diversified investment approach for long-term growth.Support the show