Risk Parity Radio

In this episode we answer emails from Luc, Craig, Luke and Lucky.  We discuss updating the website, my recent roundtable on the Stacking Benjamins podcast, Achilles heels, and the inherent problems with not using proper forecasting techniques applied to CAPE ratios and other things, new funds like AVUQ and FFUT, and gold versus bonds in a portfolio. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Stacking Benjamins YouTube Live Stream Roundtable:  Decumulational Strategies: The Special Retirement Spend Down Strategy Roundtable [https://www.youtube.com/watch?v=Pg9i-Toi3RA] Listen Notes Link:  Risk Parity Radio (podcast) - Frank Vasquez | Listen Notes [https://www.listennotes.com/podcasts/risk-parity-radio-frank-vasquez-GW0hrndXkfO/#search] Interview of Bob Elliot on the Compound Podcast:  The Blue Chips of Junk | TCAF 175 [https://www.youtube.com/watch?v=3OLs7I8eP0U] Morningstar AVUQ:  AVUQ – Avantis U.S. Quality ETF – ETF Stock Quote | Morningstar [https://www.morningstar.com/etfs/xnas/avuq/quote] Breathless Unedited AI-Bot Summary: What's the real Achilles heel of risk parity investing? It's not what you might expect. While many point to historical data limitations, the true challenge is psychological—accepting lower returns during bull markets in exchange for better protection when everything crashes. This fundamental trade-off defines the strategy's purpose: enabling you to spend more money now rather than maximizing wealth at death. The forecasting techniques that guide our investment decisions matter tremendously. Drawing from experts like Kahneman, Tetlock, Duke, and Gigerenzer, we explore why base rates (long-term historical averages) consistently outperform crystal ball approaches like CAPE ratios. When investment professionals try predicting market returns based on current valuations, they're often spectacularly wrong—more so than if they'd simply used historical averages. Remember: in forecasting, being less wrong beats being precisely incorrect. The gold versus bonds debate continues to evolve. Bob Elliott, formerly of Bridgewater, suggests that since abandoning the gold standard in the 1970s, gold has performed as well as or better than bonds as a stock diversifier. While 30% gold allocation might seem excessive to some, it could make sense for those concerned about currency risks. Historical context shows both assets have experienced extended periods of outperformance, making a combined approach more resilient than trying to predict which will shine next. We've entered a golden era for do-it-yourself investors, with new ETFs constantly emerging to fill specific niches. Avantis recently launched AVUQ for quality growth exposure, while Fidelity introduced FFUT for managed futures—both reflecting growing demand for sophisticated investment options previously unavailable to retail investors. Don't forget our ongoing campaign supporting the Father McKenna Center for hungry and homeless people in Washington DC. Your donation not only helps those in need but also moves you to the front of our email response line. As we explore these complex investment topics together, we remain committed to freely sharing knowledge rather than hiding it behind paywalls—continuing the spirit of open collaboration that defined the early FIRE movement. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from I Have No Name, Deep and Joel.  We discuss the extraordinary generosity of our listeners and how it uplifts the workers in the FMC trenches, rebalancing in accumulation, tax considerations for an intermediate term portfolio, saving for college, and what to do with new money just a few years from retirement. 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/] FMC Instagram Page:  The Father McKenna Center (@thefathermckennacenter) • Instagram photos and videos [https://www.instagram.com/thefathermckennacenter/] FMC Facebook Page:  The Father McKenna Center | Washington D.C. DC | Facebook [https://www.facebook.com/FatherMckennaCenter/] Breathless Unedited AI-Bot Summary: Charitable giving and strategic investing merge powerfully in this week's episode as we celebrate remarkable fundraising success and tackle sophisticated portfolio questions. What began as a modest matching campaign for the Father McKenna Center has exploded into something extraordinary—over $22,000 raised in just two weeks, including a single $15,000 anonymous donation that left me nearly speechless. The genuine impact of this community's generosity on homeless and hungry individuals in DC cannot be overstated. Diving into listener questions, we explore the nuances of portfolio construction across different life stages. For physicians in their accumulation phase, we distinguish between large cap growth and large cap value when paired with small cap value, revealing how Shannon's Demon effect operates during dollar-cost averaging. The discussion expands into tax-efficient risk parity strategies for high-income earners, offering practical guidance on minimizing taxable events while maximizing returns. Parents of newborns will appreciate our deep dive into college savings strategies, including the optimal 50-50 large cap growth and small cap value approach that investment educator Paul Merriman and I both recommend. I share tactical insights on 529 plans versus brokerage accounts, suggesting that funding 529 plans earlier in a child's life maximizes tax advantages before transitioning to additional savings vehicles. For those approaching retirement, we address the critical transition from accumulation to decumulation portfolios, emphasizing that your financial independence number—not market predictions—should drive allocation decisions. The episode concludes with our weekly review of eight sample portfolios, highlighting performance across conservative, balanced, and experimental approaches. Follow the Father McKenna Center on social media to witness the direct impact of your donations, and consider contributing to our ongoing "Top of the T-shirt" campaign through July. Your support transforms lives while you transform your investment approach. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Brent, Peter and Cy.  We discuss our Father McKenna Center Top-of-the-T-Shirt Matching Campaign (again), Peter's risk-parity style portfolio in retirement and what to do with new cash coming in, and Cy's small cap value direct indexing experiment. If you'd like to support the Father McKenna Center and get your questions answered on the show, please donate through the link in the show notes. Every dollar will be doubled through our matching campaign. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Stacking Benjamins YouTube Live Stream Roundtable:  Decumulational Strategies: The Special Retirement Spend Down Strategy Roundtable [https://www.youtube.com/watch?v=Pg9i-Toi3RA] Hendrik Bessembinder on Rational Reminder Podcast:  Episode 346 - Hendrik Bessembinder: Why It's So Hard to Beat the Market — Rational Reminder [https://rationalreminder.ca/podcast/346] Breathless AI-Bot Summary: Marching to the beat of your own financial drummer doesn't mean ignoring proven investment principles. In this insight-packed episode, I dive into personalized portfolio construction for retirement success while answering thoughtful questions from listeners who've supported our Father McKenna Center charity campaign. When constructing retirement portfolios, certain parameters consistently enable higher safe withdrawal rates: 40-70% in equities, 15-30% in treasury bonds, 10-25% in alternatives, and less than 10% in cash. We explore how one listener's portfolio elegantly captures these parameters with a 60/40 split tilted toward value and supplemented with gold, managed futures, and preferred shares. The eternal question of adding international exposure resurfaces as we examine AVDV (international small-cap value) and IDMO (international momentum). While these funds have performed admirably this year—partly due to dollar weakness—I caution against chasing recent performance without long-term commitment. The property and casualty insurance sector (KBWP) similarly warrants consideration for its diversification benefits, having weathered the 2022 downturn admirably. Perhaps most fascinating is our deep dive into direct indexing small-cap value stocks. One listener's meticulous experiment—complete with profitability screens, debt filters, and rebalancing protocols—illustrates both the potential and the complexity of this approach. I contrast this with Hendrik Bessembinder's research showing that roughly 4% of stocks drive the vast majority of market returns, underscoring why picking individual small-caps presents particular challenges. For those approaching or in retirement, I offer a counterintuitive perspective on lump-sum cash inflows: sometimes the most efficient approach isn't investing at all, but rather using those funds to cover expenses for several years, potentially reducing tax liability without significantly impacting long-term portfolio growth. Whether you're crafting your retirement strategy, exploring direct indexing, or optimizing your withdrawal approach, this episode delivers practical insights for aligning your investments with your unique financial journey. Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Anonymous, Tim, Mark and Luc.  We celebrate the overwhelming generosity of our listeners and discuss using risk parity style portfolios for intermediate savings, heavy metal, tax efficient portfolio management, and some investing and retirement resources. 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]. 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/] FIRE Takes Podcast Page:  FIRE Takes Podcast [https://firetakespod.com/] Michael Kitces Page and Resources:  Kitces.com - Advancing Knowledge in Financial Planning [https://www.kitces.com/#] Andy Panko Resources:  FREE Retirement Planning Education [https://retirementplanningeducation.com/] Cody Garrett Page and Resources:  Meet Cody - Measure Twice Financial [https://measuretwicefinancial.com/meet-cody/] Sean Mullaney Page and Resources:  The FI Tax Guy – The Tax Efficient Path to Financial Independence [https://fitaxguy.com/] Wade Pfau Book:  Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success (The Retirement Researcher Guide Series): Pfau, Wade: 9781945640155: Amazon.com: Books [https://www.amazon.com/Retirement-Planning-Guidebook-Navigating-Researcher/dp/1945640154/] Ashvin Chhabra Book:  Amazon.com: The Aspirational Investor: Taming the Markets to Achieve Your Life's Goals eBook : Chhabra, Ashvin B.: Kindle Store [https://www.amazon.com/Aspirational-Investor-Taming-Markets-Achieve-ebook/dp/B00NEOSFTM?ref_=ast_author_dp#averageCustomerReviewsAnchor] AQR and Antti Ilmanen:  AQR Principal Antti Ilmanen Authors New Book on Investing in a Low-Return Environment [https://www.aqr.com/About-Us/News/2022/Press-Release] Breathless Unedited AI-Bot Summary: Have you ever wondered what to do with money that's not for emergencies but not quite for retirement either? Today we tackle the often-overlooked middle ground of intermediate-term savings and reveal why risk parity strategies offer a powerful solution for these "in-between" financial goals. Most financial advice focuses heavily on either emergency funds or retirement accounts, leaving a significant gap in guidance for money you're saving for goals 3-10 years away. Whether you're planning for a home down payment, vehicle purchase, or building a Roth conversion ladder, the traditional advice to simply park this money in savings accounts is leaving significant opportunity on the table. We explore how portfolios like the Golden Butterfly and Golden Ratio can provide meaningful growth while keeping drawdowns manageable, typically recovering within 3-4 years at most. Beyond just investment selection, we dive into the tax efficiency of managing these portfolios in taxable accounts. Unlike high-yield savings accounts that generate ordinary income taxed at your highest marginal rate, properly managed risk parity portfolios create opportunities for tax-loss harvesting and strategic rebalancing. We explain how directing new contributions to underperforming assets eliminates the need for selling investments to rebalance, substantially reducing your tax burden while maintaining your desired allocation. For younger investors, managing an intermediate-term risk parity portfolio serves anoth Support the show [https://www.riskparityradio.com/support]

In this episode we answer emails from Katie, Sean, Glen, Anonymous and Kelly.  We discuss our matching campaign for the Father McKenna Center (rolled out in Episode 426), the BOXX ETF and the Rorschach test it presents, direct indexing, Risk Parity Chronicles, and the real purpose of Financial Independence and how to win at retirement and life. Links: Father McKenna Center Donation Page:  Donate - Father McKenna Center [https://fathermckennacenter.org/how-you-can-help/donate/] Interview of Wes Gray about BOXX and other tax strategies:  Episode 70: Dr. Wes Gray discusses the unique tax benefits of ETFs and other topics of interest, host Rick Ferri | Bogleheads On Investing Podcast [https://bogleheads.podbean.com/e/episode-70-dr-wes-gray-discusses-the-unique-tax-benefits-of-etfs-and-other-topics-of-interest-host-rick-ferri/] KBWP at Morningstar:  KBWP – Invesco KBW Property & Casualty Ins ETF – ETF Stock Quote | Morningstar [https://www.morningstar.com/etfs/XNAS/KBWP/quote] Risk Parity Chronicles on YouTube:  Risk Parity Chronicles - YouTube [https://www.youtube.com/@riskparitychronicles] The Life of Catherine McAuley:  Catherine McAuley [https://www.youtube.com/watch?v=4hQwTdx36Sc] Breathless Unedited AI-Bot Summary:   Money without purpose is just numbers in an account. Financial independence isn't the finish line—it's the starting point of a more meaningful journey. In this deeply personal episode, Frank Vasquez tackles sophisticated investment strategies while unveiling the philosophical underpinnings of his approach to wealth. He examines the tax-efficient BOXX ETF, explaining how it allows investors in higher tax brackets to potentially convert ordinary income into more favorable long-term capital gains. Drawing on insights from Alpha Architect's Wes Gray, Frank positions this strategy within the evolving landscape of personal finance technology, contrasting innovators against those clinging to outdated viewpoints. The conversation shifts to direct indexing—a strategy where investors replicate indices by purchasing individual securities rather than funds. Frank cuts through the marketing hype, offering practical guidance on when this approach makes sense (primarily for those in higher tax brackets) and when it's simply not worth the complexity. His personal experience with property and casualty insurance companies demonstrates selective implementation without paying unnecessary fees. Most powerfully, Frank shares the story that shaped his retirement philosophy—his aunt Sister Francine of the Sisters of Mercy. This "firebrand and hellraiser" ran schools and soup kitchens, challenged the wealthy to contribute more, and built deep community connections. When she died without money or fame, her funeral filled a cathedral with mourners—the ultimate testament to a life well-lived. What's the purpose of saving all that money if not to create meaningful impact? How might your financial independence serve something greater than account balances? Listen and reconsider what truly constitutes "winning at life." Support the show [https://www.riskparityradio.com/support]