Risk Parity Radio

In this episode we answer emails from Andy, El Yama and Paulo.  We discuss a follow up to the question on margin accounts at Interactive Brokers in Episode 424, the use of SCHD fund as a large cap value fund in a risk parity style portfolio, the meaning of "safe" in "safe withdrawal rates" and the current popular obsession with international funds, as well as diversification considerations for using them.  And an upcoming appearance on the "Afford Anything" podcast.  And the famous SCTV parody "The Queen Haters." Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] SCHD Analysis on Morningstar:  SCHD Stock - Schwab US Dividend Equity ETF | Morningstar [https://www.morningstar.com/etfs/arcx/schd/quote] Breathless Unedited AI-Bot Summary: Dive into the murky waters of investment strategy as Frank tackles listener questions with his signature blend of expertise and irreverent humor. This episode peels back the layers on three critical investing topics that frequently trip up even experienced investors. Frank first dissects the mechanics of margin accounts at Interactive Brokers, clarifying how leverage percentages work differently when withdrawing cash versus purchasing additional assets. With characteristic frankness, he explains why brokers might offer leverage limits up to five times an account's value while emphasizing that such levels represent "way more margin than anyone really needs or would want, unless they truly have a gambling problem." The conversation shifts to dividend ETFs, specifically SCHD, which Frank analyzes not by its label but by its actual characteristics. He reveals how this fund functions effectively as a conservative value play that "sits right on the border between mid-cap and large-cap" with "an even lower average PE ratio than most value funds." This practical approach to fund classification—looking beyond marketing labels to actual investment behavior—exemplifies the podcast's commitment to clear-eyed analysis. Perhaps most valuable is Frank's demolition of several sacred cows in retirement planning. He explains how safe withdrawal rates already incorporate worst-case scenarios, making additional conservative assumptions not just unnecessary but potentially harmful. "When people are talking about 3% or less withdrawal rates, they are really just doing bad forecasting," he argues, characterizing such excessive conservatism as "essentially leaving life on the table by not spending the money when you're alive." The episode culminates in a masterful takedown of the current "fervor" for international stocks. Frank explains how currency fluctuations—not magical mean reversion—drive performance differences between markets, and why holding total market US and international funds provides minimal true diversification. "That is pretty much the least diversified way of using international funds against US funds," he notes, before offering practical alternatives for constructing a genuinely diversified portfolio across meaningful factors. Want to support the show? Consider donating to the Father McKenna Center, which helps homeless people in Washington DC. Email your questions to frank@riskparityradio.com or visit riskparityradio.com. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Yangon, The Value Stock Geek, and Graham.  We discuss the ins and outs of margin accounts at Interactive Brokers, some annoyances with gold ETFs and 1099s, and BTAL vs. treasury bonds. And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio [https://www.riskparityradio.com/portfolios]. Additional Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Tyler On The Security Analysis Podcast:  Tyler (@PortfolioCharts): The Amazing Power of Uncorrelated Assets [https://www.securityanalysis.org/p/tyler-portfoliocharts-the-amazing] Analysis Of BTAL vs. SPY vs. TLT With Correlations:  testfol.io/analysis?s=jAQO2TjzA [https://testfol.io/analysis?s=jAQO2TjzAQA] Paper Re Stock Market Volatility And Treasury Bonds (C. Moise):  Flights to Safety, Volatility Risk, and Monetary Policy by Claudia E. Moise :: SSRN [https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1436124] Breathless Unedited AI-Bot Summary: Diving deep into the financial weeds, Frank tackles several practical questions that impact do-it-yourself investors managing their own portfolios. What begins as a detailed exploration of Interactive Brokers' margin loan program reveals valuable insights about using portfolio assets as collateral, the tax deductibility of margin interest, and how to monitor your account to avoid margin calls. The conversation shifts to an unexpected tax headache many gold ETF investors face: those annoying tiny distributions that clutter 1099 forms while providing minimal value. Frank compares how different brokerages handle these transactions, offering practical advice for simplifying your tax reporting experience. For those weary of manually entering dozens of nickel-and-dime transactions each tax season, this segment provides welcome relief. Perhaps most valuable is Frank's thoughtful analysis of asset correlations and why treasury bonds remain irreplaceable in risk parity portfolios despite recent correlation changes. "Correlations are not magical and they're not random," Frank explains, dismissing the notion that we've entered a "new paradigm" where traditional diversification no longer works. He articulates why correlation changes are tied to macroeconomic conditions and why treasury bonds still serve as essential recession insurance that alternatives like BTAL cannot replace. The weekly portfolio review brings welcome news as most sample portfolios show positive performance, with gold continuing its strong 2024 despite recent pullbacks. Small cap value remains the year's underperformer, while the diverse range of portfolio strategies demonstrates how risk parity principles can adapt to different investor needs. Whether you're considering margin loans, puzzling over gold ETF tax statements, or questioning the role of treasury bonds in today's market environment, this episode delivers practical wisdom for navigating these complex investment waters. Frank's straightforward approach strips away the mystique surrounding these topics, empowering listeners to make more informed decisions with their portfolios. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Dave, Jeff and Peter.  We discuss a new risk parity ETF, ALLW, a social security claiming question and considerations, and how a listener has been misled regarding so-called dividend investing by misinterpreting a misleading source. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] ALLW Fund Main Page:   ALLW: SPDR® Bridgewater® All Weather® ETF [https://www.ssga.com/us/en/intermediary/etfs/spdr-bridgewater-all-weather-etf-allw?WT.mc_id=ps_etf-gen_active-fl_us_google_slink_psb_mf1_sl4_mar25&gad_source=1&gad_campaignid=22386962114&gbraid=0AAAAACz5AuMgC3EQXA6Pu8y7Dq245D-bZ&gclid=CjwKCAjw24vBBhABEiwANFG7y6FZyIMs7-hJwI7EtnoNgJyGxHVEHjUcR9U7rhlGdW-hFNl5LM4Z4BoCXGcQAvD_BwE&gclsrc=aw.ds] Open Social Security:  Open Social Security: Free, Open-Source Social Security Calculator [https://opensocialsecurity.com/] Hartford Funds Dividend Fund Page:  The Power of Dividends: Past, Present, and Future [https://www.hartfordfunds.com/insights/market-perspectives/equity/the-power-of-dividends.html] Ben Felix Dividend Video:  The Irrelevance of Dividends [https://www.youtube.com/watch?v=f5j9v9dfinQ] Ben Felix Dividend Video #2:  The Relevance of Dividend Irrelevance [https://www.youtube.com/watch?v=4iNOtVtNKuU] Breathless Unedited AI-Bot summary Financial misconceptions can cost you dearly. This eye-opening episode tackles three critical investment topics that challenge conventional wisdom and may transform how you approach your portfolio. When State Street and Bridgewater Associates launched their All Weather ETF (ALLW), it promised the stability of risk parity with the pedigree of Ray Dalio himself. We dissect this new offering—examining its 175% leverage, complex asset allocation, and 0.85% expense ratio—to determine whether it delivers on its promises or falls into the same traps as similar products like RPAR and UPAR. For investors approaching retirement, understanding these nuances could be the difference between confidence and confusion in the decumulation phase. Delaying Social Security benefits remains one of retirement planning's most debated decisions. We cut through the noise of oversimplified break-even calculators to explore what truly matters: appropriate risk-free rate calculations, the value of guaranteed income streams, and perhaps most importantly, how your family's longevity history should influence your claiming strategy. For married couples, the analysis becomes even more critical as spousal benefits create powerful optimization opportunities that generic calculators often miss. The episode concludes by dispelling one of investing's most persistent myths: the magical power of dividends. When Hartford Research noted that "85% of the S&P 500's return came from reinvested dividends and compounding," many investors misinterpreted this to mean dividends themselves were responsible for these returns. We reveal how this fundamental misunderstanding leads investors astray, explain why dividend payments offer no advantage in today's zero-commission environment, and demonstrate why creating your own "dividend" through strategic selling provides superior tax control. Whether you're building wealth or planning your withdrawal strategy, these insights will help you see beyond marketing claims to make decisions based on financial reality rather than comforting illusions. Listen now to align your investment approach with actual market mechanics instead of persistent financial folklore. Have a question about risk parity investing or portfolio construction? Email frank@riskparityradio.com or visit riskparityradio. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Ed, Joe and Jack.  We discuss a commodities fund, BCI, some more cowbell, and Fidelity's share lending program. And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio [https://www.riskparityradio.com/portfolios]. Additional Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] BCI vs. PDBC vs. COM vs. DBMFX:  testfol.io/analysis?s=3NIFkA7mNB9 [https://testfol.io/analysis?s=3NIFkA7mNB9] Small Cap Value vs. S&P 500 In 21st Century:  testfol.io/analysis?s=gkqbgk7mzka [https://testfol.io/analysis?s=gkqbgk7mzka] Comparison Between Small Cap Value And Overall Market With Histogram:  Backtest Portfolio Asset Class Allocation [https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=1H1D8vWnXoe5O7T8waP5TU] Breathless Unedited AI-Bot Summary: Looking for that perfect balance between return potential and downside protection? This episode delivers practical insights for DIY investors navigating today's complex markets. We dive deep into commodity ETFs as listener Ed asks about PDBC versus BCI for his portfolio. The comparison reveals surprising differences in expense ratios, management approaches, and tracking errors that could significantly impact your returns over time. Frank shares why he's personally shifted away from dedicated commodity funds toward managed futures for inflation protection. The conversation then turns to small cap value investing, but with a crucial twist that many investors miss. Rather than focusing solely on whether small cap value will outperform the broader market, Frank emphasizes its diversification benefits during market downturns. The 2022 market crash provides a perfect case study: while growth stocks plummeted 30-50%, value stocks ranged from -10% to +10%, creating powerful rebalancing opportunities that can enhance long-term performance. We also examine Fidelity's Fully Paid Lending Program, which allows investors to earn additional income by lending their securities. While the potential return seems modest (around 0.625% annually), we consider the counterparty risks and regulatory protections you might sacrifice. The episode concludes with our weekly portfolio reviews revealing fascinating performance patterns in 2024. Gold continues to shine with a remarkable 26.81% year-to-date gain while the broader market struggles. This performance disparity highlights why thoughtful asset allocation matters more than ever for investors seeking to build truly resilient portfolios. Whether you're managing a multi-million dollar portfolio or just starting your investment journey, these insights will help you navigate market volatility with greater confidence and clarity. What's your approach to balancing growth and value in your equity allocation? Have you considered how different assets might interact during the next market downturn? Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Luc, Ellen and Andrew.  We discuss Luc's target portfolio, the process for evaluating and choosing new assets for a portfolio -- comparing why managed futures pass the test, while covered call fund and TIPs funds don't --, what's actually in our personal variation of the Golden Ratio portfolio, finding old podcast episodes and basic rebalancing principles as to timing.  And learn some Canadian French and Minnesota vernacular along the way. Links:  Andrew Beer Interview on Masters In Business Podcast:  Andrew Beer on the Hedge Fund … - Masters in Business - Apple Podcasts [https://podcasts.apple.com/us/podcast/andrew-beer-on-the-hedge-fund-industry-podcast/id730188152?i=1000506224022] RPR Episode 40 on YouTube:  Episode 40: Answering A Question About Big ERN's Gold Analysis From Joseph K. [https://www.youtube.com/watch?v=0CBeRm_mGQA] Kitces Article on Rebalancing:  Optimal Rebalancing – Time Horizons Vs Tolerance Bands [https://www.kitces.com/blog/best-opportunistic-rebalancing-frequency-time-horizons-vs-tolerance-band-thresholds/] Breathless Unedited AI-Bot Summary: What makes a truly resilient portfolio? In this revealing episode, Frank Vasquez pulls back the curtain on both theoretical and practical aspects of risk parity investing through thoughtful listener questions. When a software engineer from French-speaking Canada shares his leveraged risk parity portfolio, Frank offers nuanced guidance on balancing potential returns with sustainability. Rather than dismissing leverage entirely, he suggests a more measured approach—reducing exposure to funds like UPRO while maintaining their rebalancing benefits. This practical compromise exemplifies Frank's philosophy of building portfolios that remain psychologically manageable through market turbulence. The conversation takes a fascinating turn as Frank reveals his framework for evaluating new investment opportunities. Unlike many advisors who chase trends, his three-question methodology ensures only truly valuable assets earn portfolio space. His explanation of why managed futures succeeded where TIPS failed demonstrates how professional-grade analysis can be applied to personal investing. "The truth is," Frank notes, "a lot of otherwise viable or interesting strategies actually just don't fit into what we're trying to do here." Perhaps most valuable is Frank's unprecedented breakdown of his personal portfolio holdings. Beyond the expected allocations to stocks, bonds, gold and alternatives, he shares his experiments with direct indexing of property and casualty insurance companies—a Warren Buffett-inspired approach that provided positive returns even during 2022's difficult markets. This rare glimpse into a professional's actual implementation bridges the gap between theory and practice. Whether you're questioning how often to rebalance, wondering about international exposure, or simply curious about how a professional approaches their own money, this episode delivers actionable insights while maintaining Frank's trademark blend of humor and wisdom. Ready to build a portfolio that marches to a different drummer? This is the roadmap you've been waiting for. Support the show [https://www.riskparityradio.com/support]