Risk Parity Radio

In this episode we answer emails from Brian, Gary and Rob.  We discuss the foibles of follies of attempting to market-time gold, the fundamental problems of trying to use TIPS as inflation "hedges" in a diversified portfolio and the limited circumstances in which they make sense, introducing children to financial topics, and tax considerations in making portfolio transitions. Please remember to check out our alternative website design by clicking "Alt Site" at the top right of riskparityradio.com and send your feedback to frank@riskparityradio.com. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Bill Bernstein TIPS Ladder Article  ("A bond fund manager recently related to me his difficulty in figuring out the role of TIPS in his portfolios. After fumbling for a reply, I realized that he was right: like Social Security, they don’t occupy a formal slot in most folks’ asset allocation."):  Riskless at Age 104 - Articles - Advisor Perspectives [https://www.advisorperspectives.com/articles/2023/03/20/riskless-at-age-104] Once Upon A FI Book:  Once Upon a FI by Paul Mollenkopf | Discover Financial Wisdom Today [https://www.onceuponafi.com/] Analysis of LTPZ (-31.68% in 2022 -- "that's not an improvement!"):  LTPZ – PIMCO 15+ Year US TIPS ETF – ETF Stock Quote | Morningstar [https://www.morningstar.com/etfs/arcx/ltpz/quote] Breathless AI-Bot Summary: Ever found yourself frozen by investment indecision? In this illuminating mailbag episode, we tackle three pressing questions from listeners who've generously supported the Father McKenna Center. First, we address the common dilemma of gold market timing. When prices seem high, should you wait for a pullback or stick to your long-term plan? The answer lies not in crystal ball predictions but in understanding the purpose gold serves in your portfolio across decades, not months. Rather than trying to outsmart the market, consider transitioning gradually into your desired allocation—whether that means buying now or implementing a systematic approach over time. The conversation then pivots to one of investing's most misunderstood instruments: Treasury Inflation-Protected Securities (TIPS). Despite their reputation as inflation hedges, the data tells a different story. We examine why TIPS have consistently disappointed during both inflationary and deflationary environments, dragging portfolios down precisely when protection was most needed. For investors seeking genuine inflation buffers, we explore alternatives that have historically outperformed during inflationary periods, including managed futures, commodities, and certain equity sectors. Perhaps most valuable is our discussion about raising financially literate children. Rather than forcing concepts on uninterested young minds (a strategy that often backfires), we suggest meeting children where they are developmentally. From opening teen brokerage accounts to creating opportunities for learning about buyer's remorse with small amounts of money, these practical approaches help children develop healthy relationships with finances without overwhelming them. We conclude with tax-efficient portfolio rebalancing strategies, demonstrating how to reduce overconcentrated positions without triggering massive tax bills. By identifying specific tax lots, directing new investments strategically, and managing dividend reinvestments, investors can gradually transform their allocations while minimizing the tax impact. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Ron, Michael, Jaime and Clare.  We discuss all the generosity bestowed on us and our charity, including the McKenna Man portfolio, a listener's personal portfolio and two-year experience, portfolio longevity issues and common myths thereabout, tax considerations and how to really enjoy retirement after accumulation. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Michael's Portfolio (unlevered) vs. a 70/30 since 2022: testfol.io/?s=fW46hjKw65M [https://testfol.io/?s=fW46hjKw65M] Breathless AI-Bot Summary: Money can buy you more wealth, but it can't buy you more time. This fundamental truth frames our deep dive into the stories of listeners who've transformed their financial futures through risk parity investing. We begin with Ron's creative McKenna Man Portfolio – a 100% equity allocation that makes quarterly charitable distributions while still growing steadily. Michael shares his journey from traditional investing to a risk parity approach that delivers impressive returns with dramatically lower volatility, proving these principles work in real-world applications. The heart of this episode tackles a question many struggle with: how to plan for extremely long retirement periods of 50+ years. Contrary to popular fear-mongering that suggests dramatically lower withdrawal rates, we explore research showing withdrawal rates tend to flatten over extended timeframes. Variable withdrawal strategies that adjust based on actual spending needs rather than rigid CPI increases can support withdrawal rates only slightly lower than traditional 30-year plans. For those concerned about longevity risk, slight adjustments to equity allocations or implementing rising equity glide paths provide additional security without sacrificing quality of life. Perhaps most powerful is Claire's story of transitioning to a work-optional lifestyle at 56, using risk parity principles to escape a high-pressure career and create space for relationships and experiences. Her wisdom cuts through financial noise with crystal clarity: "Don't worry about running out of money, worry about running out of time." When we reflect on Bronnie Ware's "Five Regrets of the Dying," none involve wishing for more wealth. They center on authentic relationships, self-expression, and allowing more happiness – precisely what proper financial planning should ultimately enable. The purpose isn't maximizing wealth, but confidently answering "how much is enough" so you can stop playing the accumulation game and start truly living. What would your life look like if financial fears no longer dictated your choices? Join our community at riskparityradio.com to continue the conversation. Support the show [https://www.riskparityradio.com/support]

In this episode we explore one big long answer to an email from Bob about why people refuse to spend money in retirement despite having more than adequate resources.  We touch on the math and psychology of the Possibility Effect and how to use Base Rates to overcome that, what the numbers say you really should be afraid of, how to break down expenses to alleviate fears and the real underlying problem in many cases, which is not fear, but personal identity rooted in "Frugality Inertia." 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]. Books Referenced: "The Top Five Regrets of the Dying" by Bronnie Ware "Falling Upward" by Richard Rohr "Strength to Strength" and "Build The Life You Want" by Arthur Brooks "The Second Mountain" by David Brooks "The Soul of Wealth" by Daniel Crosby "The Art of Spending Money" by Morgan Housel "Die With Zero" by Bill Perkins Additional Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Morgan Housel Podcast:  The Morgan Housel Podcast, Episode 1: The Art of Spending Money [https://www.youtube.com/watch?v=NDtZBPlbMug] Narrative Psychology:  How to tell stories that give you meaning | Jane Goodall, Terry Crews & Dan McAdams [https://www.youtube.com/watch?v=mCo7F9h743o] ChooseFI Pod #508:  508 | 5% SWR, Revealed Preferences, and the 3 Stories | Frank Vasquez [https://www.youtube.com/watch?v=QvmTPQnJISU] Four Idols Video:  https://tinyurl.com/4vua3eb2 Satisficing:  Satisficing - Wikipedia [https://en.wikipedia.org/wiki/Satisficing] Breathless AI-Bot Summary: This episode tackles the psychology behind the "golden coffin" phenomenon – wealthy retirees who maintain sub 3% withdrawal rates, essentially ensuring they'll die with maximum assets. While justified as prudent planning, the real barriers to enjoying retirement wealth are more complex and fascinating. We dive into cognitive science, exploring how the "possibility effect" (identified by Kahneman and Tversky) distorts our risk perception. Your brain amplifies the tiny probability of running out of money while downplaying the vastly higher probability of running out of time. A 55-year-old man has an 11.3% chance of dying within 10 years – yet many obsess over financial scenarios with less than 1% probability of occurring. Beyond cognitive biases lies an identity crisis. Many successful investors have spent decades defining themselves through wealth accumulation. This "frugality inertia" becomes so embedded in self-image that spending feels wrong, even when mathematically sound. The financial services industry exploits these fears, selling products that promise impossible certainties while encouraging hoarding behaviors. The solution? Reframing retirement spending around four evidence-based wellbeing categories: relationships, experiences, work avoidance (paying for freedom from tedious tasks), and giving. These categories reliably generate happiness returns far superior to watching account balances grow. For those struggling to make this psychological transition, books like "Falling Upward" (Rohr), "Strength to Strength" (Brooks), and "The Soul of Wealth" (Crosby) provide frameworks for evolving beyond accumulation as life purpose. What retirement story are you living? The miser who dies rich but unfulfilled, or the transformed Scrooge who discovers generosity's joy? The choice defines not just your retirement, but your legacy. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Tracy, Mike and "Some Call Me" Tim.  We discuss the speculations and gambles of Forex, portfolio transitions, the Vanguard Market Neutral Fund and moving overseas.  And we have a mystery guest reader! Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Catching Up To FI Website:  Financial Independence - Catching up to FI [https://catchinguptofi.com/] VMNFX Testfolio Comparative Analysis:  https://testfol.io/analysis?s=eFgblWT8SJO VMNFX Home Page:  VMNFX-Vanguard Market Neutral Fund Investor Shares | Vanguard [https://investor.vanguard.com/investment-products/mutual-funds/profile/vmnfx] Morningstar VMNFX:  VMNFX – Vanguard Market Neutral Inv Fund Stock Price | Morningstar [https://www.morningstar.com/funds/xnas/vmnfx/quote] Breathless Unedited AI-Bot Summary: Navigating the complex world of personal finance often means confronting tough questions about investments we don't fully understand, partners who approach money differently, and life transitions that demand portfolio adjustments. This episode dives deep into three listener questions that illuminate these challenges. When Tracy's husband becomes deeply invested in forex trading despite a significant loss, she makes the bold decision to split their investment portfolios. This raises fascinating questions about marriage, money, and risk tolerance. Frank unpacks the reality of forex trading, explaining why it's neither an investment nor typically suitable for most individual investors. Drawing from his own trading experience in the 1990s, he distinguishes between disciplined speculation and outright gambling, offering clarity for anyone tempted by the allure of currency trading. As Tracy approaches her financial independence number, Frank provides thoughtful guidance on transitioning from an accumulation portfolio to a more conservative allocation while markets remain strong—wisdom applicable to anyone approaching their financial goals. The exploration continues with an analysis of Vanguard's Market Neutral Fund, revealing how even traditional investment companies offer alternative strategies that many investors overlook. While this long-short fund provides impressive diversification benefits, its lackluster returns highlight the trade-offs investors must consider when pursuing uncorrelated assets. For listeners curious about expanding beyond conventional index funds, this segment offers valuable perspective on evaluating alternative investments. Finally, for those contemplating international moves while managing US retirement accounts, Frank provides practical advice that cuts through confusion. By focusing on investment fundamentals rather than geographical considerations, he reminds us that solid financial principles transcend borders. Whether you're wrestling with a spouse's different investment philosophy, considering alternative assets, or planning an international life change, this episode delivers insights to help navigate your financial journey with confidence and clarity. Support the show [https://www.riskparityradio.com/support]

In this episode we answer a question from Ness.  We have fun with The Untouchables, retirement clubs, Portfolio Visualizer and many other things.  And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio [https://www.riskparityradio.com/portfolios]. To donate to the Top of the T-Shirt campaign and double your fun, please visit the Father McKenna Center donation page and note "Risk Parity Radio Match" when making your contribution. Additional Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Portfolio Charts Free Charts:  Charts – Portfolio Charts [https://portfoliocharts.com/charts/] Portfolio Visualizer Tutorial Video:  Tutorial #4: Portfolio Visualizer Monte Carlo Simulator -- Introduction [https://www.youtube.com/watch?v=pqDvOI6agTA] Retirement Answer Man Case Study Podcast (start at minute six):  I Just Lost My Job. Can I Retire Now? [https://www.youtube.com/watch?v=SXsXt585lyo] Portfolio Visualizer Simulation #1:  https://tinyurl.com/yuev3s59 Portfolio Visualizer Simulation #2: https://tinyurl.com/kjy5ur7n Portfolio Visualizer Simulation #3:  https://tinyurl.com/yc2rstr7 Breathless Unedited AI-Bot Summary: Tired of retirement planning approaches that feel more like crystal ball gazing than strategic analysis? In this episode, we demystify the often-confusing world of retirement planning tools and techniques, revealing how to achieve better results without expensive software or club memberships. We dive deep into how free tools like Portfolio Visualizer can perform sophisticated retirement planning when used correctly – specifically by analyzing asset classes rather than ticker symbols. This approach not only provides access to decades of historical data but creates a more robust foundation for retirement decisions than the parameterized returns many paid services rely upon. Through a detailed case study, we demonstrate how a risk parity-style portfolio improved a retirement plan's success rate from 85% to 96% compared to a traditional 60-40 portfolio. This significant enhancement required no additional savings or lifestyle changes – just smarter portfolio construction based on proven diversification principles that many financial advisors haven't incorporated into their practices. The episode also examines retirement clubs that charge $600-900 annually, questioning whether their financial planning guidance justifies the cost when their approaches often lag behind current best practices. While these clubs may offer valuable social connections and psychological support for the transition to retirement, their portfolio construction recommendations frequently default to outdated models followed by excessive "padding" rather than optimization. For DIY investors, we provide practical guidance on using free or low-cost tools like Portfolio Charts' heat map to stress-test portfolios and identify maximum drawdown periods – crucial information that many expensive planning tools don't clearly reveal. This approach helps you build true resilience into your portfolio structure rather than compensating for mediocre construction with excessive cash reserves. Ready to take control of your retirement planning with sophisticated tools that won't cost you hundreds of dollars? Listen now to discover how to analyze your portfolio like a pro and potentially improve your retirement outcomes without paying for expensive software or memberships. Support the show [https://www.riskparityradio.com/support]