Risk Parity Radio
Risk Parity Radio is a podcast about investing located at www.riskparityradio.com. RPR explores risk-parity style portfolios comprised of uncorrelated or negatively correlated asset classes -- stocks, selected bonds, gold, managed futures, and other easily accessible fund options for the DIY investor. The goal is to construct portfolios that are robust and can be drawn down on in perpetuity, and to maximize projected Safe Withdrawal Rates regardless of projected overall returns.
Risk Parity Radio
Episode 434: Party Time With Retirement Clubs, Portfolio Visualizer And Portfolio Reviews As Of June 27, 2025
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.
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
Portfolio Charts Free Charts: Charts – Portfolio Charts
Portfolio Visualizer Tutorial Video: Tutorial #4: Portfolio Visualizer Monte Carlo Simulator -- Introduction
Retirement Answer Man Case Study Podcast (start at minute six): I Just Lost My Job. Can I Retire Now?
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.
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: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:Thank you, Mary, and welcome to Risk Parity Radio. If you are new here and wonder what we are talking about, you may wish to go back and listen to some of the foundational episodes for this program.
Voices:Yeah, baby, yeah.
Mostly Uncle Frank:And the basic foundational episodes are episodes 1, 3, 5, 7, and 9. Some of our listeners, including Karen and Chris, have identified additional episodes that you may consider foundational, and those are episodes 12, 14, 16, 19, 21, 56, 82, and 184. Whoa, and you probably should check those out too, because we have the finest podcast audience available.
Voices:Top drawer, really top drawer.
Mostly Uncle Frank:Along with a host named after a hot dog.
Voices:Lighten up Francis.
Mostly Uncle Frank:But now onward, episode 434. Today on Risk Party Radio.
Voices:It's time for the grand unveiling of money.
Mostly Uncle Frank:Which means we'll be doing our weekly portfolio reviews of the eight sample portfolios you can find at wwwriskpartyradiocom On the portfolios page. But before we get to that, we do have at least a couple of emails here, and so, without further ado, here I go once again with the email. And First off. First off, we have an email from Ness.
Voices:This is Elliot Ness. Come on out. We don't want any trouble. We're the fuckers You're never gonna get us.
Mostly Uncle Frank:And.
Mostly Mary:Ness writes. Brother Frank, it's your brother, Ness.
Voices:I'm too old to call you uncle, and you can feel free to insert an Elliot Ness reference. The Untouchables starring Robert Stack.
Mostly Mary:I've been binge listening to you for a few months and really appreciate the education. I'm always skeptical of people trying to separate me from my money and try to do my due diligence before signing on the line which is dotted.
Voices:Because only one thing counts in this life Get them to sign on the line which is dotted.
Mostly Mary:I'm hoping to gain the confidence to leave my current financial advisor and take full control of mine and my wife's portfolios.
Voices:It's all the same to you.
Voices:I'll drive that tanker.
Mostly Mary:I'll drive that tanker. Last year I became a member of a club Rock Retirement Club and thought you made a reference to it in a previous podcast, though you may have been referring to another club.
Mostly Mary:I've got a good mind to join a club and beat you over the head with it. If you were referring to my club, I would respectfully ask you to reconsider your negative judgment. The dues for my club $600,. Get me access to Money Guide Pro, which definitely has some monetary value. The financial advice is rather generic, but that is not the focus of this club. The connections and interactions with others that are getting ready to retire or have recently retired are the main draw and have immense value. I feel they focus more on the personal aspects of retirement, such as health activities, routines and dealing with the loss of professional identification, more than the financial aspects. If you were referring to another club, please delete this paragraph. I've been trying to utilize Portfolio Visualizer but have found it useless unless I pay $360 a year. Without that, I can't backtest more than 10 years. That is not an improvement. That's not an improvement. Am I not understanding the function of their website?
Voices:No more flying solo. You need somebody watching your back at all times.
Mostly Mary:I can't imagine you would use the free version of their website. What am I missing? I went to portfolio charts and found that it has a reasonable $5 per month fee. There may be free features, but everything I try to utilize for free brings me to a page saying members only. Once again, what am I missing? Regardless, I want to thank you for your podcast. I have directly donated $100 on June 25th to the Father McKenna Center.
Mostly Uncle Frank:That's what I'm talking about to the Father McKenna Center, that's what I'm talking about.
Mostly Mary:I tried to go to Patreon to set up a monthly pledge, but I can't seem to find it there. By searching Father McKenna Center, I couldn't find a link to their Patreon site on the Father McKenna Center website either. They really need to make it easier for us to part with our money. All we need to do is get your confidence back so you can make me more money.
Voices:Thank you for many hours of listening to your podcast while I drive from job site to job site. Motor a 440 cubic inch plant. It's got cop tires, cop suspension, cop shocks. It's a model made before catalytic converters, so it'll run good on regular gas. What do you say, Is it?
Mostly Mary:the new.
Voices:Bluesmobile or what.
Voices:Fix the cigarette lighter.
Mostly Mary:God bless you and the Father McKenna, center Ness.
Mostly Uncle Frank:Hmm, I wonder what it would sound like if Elliot Ness was my brother.
Voices:You didn't have to read the papers, frank. You've been described a dozen different times A man with a soft touch. You get around, don't you, fred? Every place Candy stores, restaurants, hotels, grocery stores, the same place as you go. Frank, a little story you told me a few weeks ago never did come true, did it?
Mostly Uncle Frank:You know there's also a nice amber lager called Elliot Ness from the Great Lakes Brewing Company, but of course my favorite beer from that company is in fact the Edmund Fitzgerald Porter.
Voices:The legend lives on from the Chippewa on down At the big lake they call Gitche-goo-ee. The lake, it is said, never gives up her dead when the skies of November turn gloomy.
Mostly Uncle Frank:But I digress, I could have told you that.
Mostly Uncle Frank:First off, thank you for being a donor to the Father McKenna Center. As most of you know, we do not have any sponsors on this podcast. We do have a charity we support. It's called the Father McKenna Center and it supports hungry and homeless people in Washington DC. We are currently running a matching campaign. It's called the Top of the T-Shirt Campaign. You'll have to go back to episode 426 for a full explanation of that. But if you donate to the center, you get to go to the front of the email line, as Ness has done here.
Mostly Uncle Frank:Now there are two ways of doing that.
Mostly Uncle Frank:You can do it on Patreon, and let me just explain how you do that on Patreon, because the Father McKenna Center is not listed as an organization on Patreon.
Mostly Uncle Frank:And let me just explain how you do that on Patreon, because the Father McKenna Center is not listed as an organization on Patreon, just to challenge you. You do it through Risk Parity Radio at Patreon, and the easiest way to get there is to go to the support page at the Risk Parity Radio site, wwwriskparityradiocom, and you can link to the Patreon place there and put your donation there or put your pledge in there. That's a way of contributing monthly. Or you can do as you have done, which is go to the Father McKenna website itself, in which case you're not donating through Patreon, you're just donating and they have a donation page. I will put it in the show notes. If you donate at the Father McKenna website, please put a little note in the dedication box when you donate to note it's Risk Parity Radio related, so we can count it for our campaign. Anyway, either way you do it, you go to the front of the email line and I thank you very much for your donation.
Voices:Top drawer, really top drawer.
Mostly Uncle Frank:But now let's get to your questions. So it sounds like you're having a little trouble with Portfolio Visualizer.
Voices:It's a piece of crap. It doesn't work.
Mostly Uncle Frank:And may have misinterpreted what's there. So it's correct that Portfolio Visualizer requires you to pay if you are going to use the ticker symbol. Analyzer passed 10 years ago, but that's not really what you want to be using there at Portfolio Visualizer anyway, you want to set the tools up to analyze based on asset class and if you do that, you get all the data they have, and that's really the way you want to be analyzing portfolios anyway, because you would only pick specific tickers after you had constructed a portfolio of asset classes, and Portfolio Visualizer is great on that because it has like 30 different asset classes you can put into these tools and calculators. It's a much superior tool to things like CFIRE, sim or FIRACalc, where you're only analyzing two or three things. It is not sufficient to be using a calculator that analyzes, for instance, only stocks, bonds and cash or something like that. That might have been good enough 15 years ago. It's certainly not good enough today, and since we've had calculators like this one out for over a decade, you should be using them for any serious work. So it's interesting.
Mostly Uncle Frank:I recently did a tutorial at a ChooseFI Baltimore group session about Portfolio Visualizer in particular and about the financial goals tool that's connected to the Monte Carlo simulator, then we're going to go through some of that today. There is actually a video that I created a long time ago that is still on YouTube. I will link to that. That was a former version of Portfolio Visualizer, although the tool is pretty much the same. Once you get there, I will link to that in the show notes. And no, I'm not going to be making any more videos. I did that early on and decided I didn't really want that job. It's not that I'm lazy, it's that I just don't care, and it's of the amateurish quality and production values that you've come to know and love from this program. Just come up. But I am going to talk through some more of that today in answer to your question in a few minutes here and provide some links so you can see that tool in action and make the modifications that you want to do to analyze your own situation. But no, it does not cost anything.
Mostly Uncle Frank:In terms of portfolio charts, the best way to use that for free, if you don't want to pay $5 a month, is to simply use the charts, because all of the 12 main charts or so are there for free. You just bring one up and put your portfolio into it. It always brings you a 60-40 portfolio as a default, but then it's got all these boxes for different asset classes so you can put in your portfolio and see what the results are For your purpose. Here, I think a couple of the valuable tools would be the safe withdrawal rate tool there and the retirement spending tool there. You definitely want to be using those when you're modeling your own situation. And again, all this is free. I will link to the charts page in the show notes and you can go there and then start playing with these charts, which you should do, and I'll go ahead and make sure you get another copy of that memo. Okay, all right, let's talk about retirement clubs and Rock Retirement Club in particular, and what Roger Whitney's doing over there.
Voices:Please accept my resignation. I don't want to belong to any club that will accept me as a member. I don't want to belong to any club that will accept me as a member.
Mostly Uncle Frank:First, I think it's important that you understand the context of what I'm going to say and why this sounds differently than what you might get somewhere else Did you ever have?
Voices:a family Frank, a wife, a child. Maybe that's what it takes to have a soul. Or maybe you haven't got a soul, maybe you never had one.
Mostly Uncle Frank:I do not view myself as part of the financial services industry and I do not view myself as part of the financial media. I view myself as a consumer of these things, bing, and as a critic of them.
Voices:Bing again.
Mostly Uncle Frank:And my experience as a lawyer is in cross-examining financial experts. And I think it's more important to offer critiques of things rather than just saying how great everything is. There is a tendency in financial media and in the financial services industry for everybody to just say nice, nice things about each other and pat each other on the back and it results in cross promotions and people being guests on various podcasts and cross promotions and people being guests on various podcasts. It does work kind of hand in glove very nicely for people in those two positions.
Voices:Am I right or am I right, or am I right, right, right, right.
Mostly Uncle Frank:But I don't think it's necessarily that helpful for people who are consuming these things.
Voices:A guy. Don't walk on the lot lest he wants to buy. They're sitting out there waiting to give you their money. Are you gonna take?
Mostly Uncle Frank:it. So I don't have anything personal against anybody who works in the financial services industry or anybody that's in financial media, but we do have to talk frankly about what they are doing and whether that's of service or not to the consumer, or rather when it is and when it is not. Because we do apply Bruce Lee's adage here take what is useful, discard what is useless and add what is uniquely your own. So now let's talk about retirement clubs in general.
Voices:The Inquisition. Let's begin the Inquisition. Look out, sam, we have a mission general.
Mostly Uncle Frank:And this is a relatively new phenomenon that some financial advisors have found to be useful. I think it was mostly rolled out to generate interest or business, which makes a lot of sense, because it's certainly better than free steak dinners Always be closing, always be closing. And so two of the most prominent ones are the one run by McLean Asset Management, which is actually a practically a neighbor of mine, that's Wade Fowle's shop, and then this rock retirement club run by roger whitney, but there are other ones, so you can imagine that, from their perspective, attracting business this way and providing some information, education, social events, whatever makes sense for generating business. I also wonder now and I don't know the economics of these things whether they are becoming their own profit centers, because if you scale it up far enough, yeah, you could be making money off something like this. I doubt that was the original intent, but the way the internet works now, with the possibility of Zoom and every other thing like that, you can imagine that it is possible to scale such things up and make them profitable in their own right.
Mostly Uncle Frank:I do not know if that is what's going on with either one of these or any other one that's out there. I did go to the Rock Retirement web page to find out how much it costs this year to join, and it's $899, which automatically renews, according to their website. You mentioned $600. You must be getting a discount. Good for you. I don't know how you got a discount, but I'm sure there was a code somewhere or something like that. Anyway, for the hoi polloi such as myself, it would be $899 to join this club.
Voices:It is said that the people are revolting.
Voices:You said it they stink on ice.
Mostly Uncle Frank:And it sounds like you're getting at least that amount of money's worth just out of the social aspects of this, and $600 a year is not that much money for a social club actually. So if it's helping you develop relationships or improve relationships or anything like that, I would say it's definitely worth the money for that. And I would say that Roger Whitney and the Retirement Answer man podcast and series is very good on these kind of soft topics of retirement. I think that's what he actually likes to specialize in and doesn't really like the nuts and bolts that much. At least that's my impression from listening to the podcast and I have listened to that podcast for years and I do know some of the people who are in Rock Retirement Club and they seem to get a lot out of it and that kind of ethos to it. But now let's talk about the negative.
Voices:There was this sound like a garbage truck dropped off the Empire State Building.
Mostly Uncle Frank:Part of the negative is just the groupthink of the whole thing. The people that I know who are members of the Rock Retirement Club are people that tend to have trouble spending money. They are natural hoarders, or as Morgan Housel would say, they have frugality inertia. Or, as Morgan Housel would say, they have frugality inertia. And if you spend a lot of time around such people you may believe that that is a normal state. I would say it is a normal state for a lot of what goes on in personal finance world. It is not a normal state and not a good state to be in for most people and, as we learned from Jim Rohn last episode, you become the five people you spend the most time with.
Voices:You are the average of the five people you spend the most time with. Want to know your future. Look at your friends.
Mostly Uncle Frank:So be careful on who you associate with, or at least make sure you're keeping at arm's length those traits that you do not wish to adopt. And I don't know whether you have trouble spending money or not, but I can tell you that a lot of the people in that club have a lot of trouble spending money and they underspend money, and so one of the reasons they join the club is to get more confidence in what they're doing, so hopefully they can enjoy their retirement more and aren't worried about the money all the time. But I think the main problem with this club, and particularly the approach that Roger Whitney takes, is that it's not really that great, honestly. I'm talking about the approach to retirement planning, in particular, how he constructs a retirement portfolio, and I'm pretty sure that's what he teaches in the club, because this is what he talks about on his podcast.
Voices:Now let's talk about what that approach is and my critiques of it. The Inquisition what a show. The Inquisition, here we go. We know you're wishing that we'd go away, but the Inquisition's here and it's him too, hey talk about it.
Voices:What do you say? I just got back from the Horde of the Fae. Horde of the Fae? What's an Horde of the Fae? It's what you ought to do, but you do anyway.
Mostly Uncle Frank:Fortunately, in the most recent week he did do a kind of mini case study on his podcast, which I'll refer to in the show notes and you can listen to. It starts at minute six of the audio and we'll also tie that into how you would analyze the same thing using Portfolio Visualizer. You can do this work there and you do not need Money Guide Pro to do this. So he goes through his case study and we're talking about a couple that is 59 and 58. They are both working. He lost his job. He's the elder of the two. She plans on working at least for another seven years. They have, I think, $773,000 saved up. They plan on contributing $140,000 more in the next seven years. They will have Social Security of $61,200 annually, starting in about seven years, and in addition to her salary they need $24,000 until then and approximately $84,000 annually total as their spend.
Mostly Uncle Frank:And he had to assume some of these numbers. But that's not the point. The point is, everything I just gave you can be modeled in Portfolio Visualizer using the financial goals tool, and I've done that and I linked to it in the show notes, Because what that allows you to do is not only set up a portfolio for analysis, but also put in these cash flows and have them starting and stopping at various times, and you can have an infinite number of those. And so I've set that up just based on some assumptions here. And you can see that when you go to that link so that you can modify it for your own purposes and situation.
Mostly Uncle Frank:And in his description that's the same thing he's doing in MoneyGuide Pro. Okay. Then we start getting to the problem the same thing he's doing in Money Guide Pro. Okay. Then we start getting to the problem areas with what he's doing. The first thing he does is assume that they're going to be using a 60-40 portfolio in their retirement, Like a simple 60-40 portfolio. It's like stock fund bond fund. I don't know why you would assume that or why you would want that. That is not really a very good portfolio to be using.
Voices:That's the fact, Jack. That's the fact, Jack.
Mostly Uncle Frank:It might have been 20 years ago, but we know a whole lot better today and any advisor of any sophistication knows that that is not by itself a great portfolio to be using in retirement. You need more diversification. So it does not make sense to me to assume that you're using a mediocre portfolio as your portfolio in retirement. You want to use exactly what you plan on holding and analyze that, and in my case, I would use a risk parity style portfolio because I know it has a higher safe withdrawal rate. But as we go you'll see. I've done it actually both ways in the portfolio visualizer analysis that I'm referring to. Okay, then the next thing he does is he assumes a return for this 60-40 portfolio. He's not using historical data to get the return. He's assuming a return for this 60-40 portfolio. He's not using historical data to get the return. He's assuming a return.
Mostly Uncle Frank:This is what is known as a parameterized return that you're assuming a return and he's also assuming a standard deviation for that return. And this is a way you can model portfolios and you can do this at Portfolio Visualizer. It allows you to do parameterized returns or historical returns. It's got two other options. It's actually got four different options there for analyzing this. This is free. You can do this there. You don't need MoneyGuide Pro to do this. Forget about it. So he didn't mention what standard deviation he was applying to this. I went and monkeyed with the Portfolio Visualizer one to try and get the same results that he was getting out of his calculator. But the problem with using a parameterized return is that you are effectively using a crystal ball. That is a crystal ball Because you have some belief that this will be the return in the future. What is that belief based on?
Voices:Now the crystal ball has been used since ancient times. It's used for scrying, healing and meditation.
Mostly Uncle Frank:In this case, he seems to be taking it straight out of the calculator. I don't know what this crystal ball is that's inside this calculator that's throwing out these returns. I do know that a lot of these calculators will throw you out returns with no real explanation as to where that comes from or why they think that's the right return in the future.
Voices:As you can see, I've got several here, a really big one here, which is huge. This is the one that I tend to use more often. I have a calcite ball and I have a black obsidian one here.
Mostly Uncle Frank:Chances are. It's not Chances are their. Crystal ball isn't very accurate and it's certainly not more accurate than long time historical returns.
Voices:Now you can also use the ball to connect to the spirit world.
Mostly Uncle Frank:And to me, that's the way these calculators get misused. It's one of the ways they get misused, because you are starting with something that's obviously not real world.
Voices:The crystal ball is a conscious energy.
Mostly Uncle Frank:So how can you expect to get a good result out of something that is involving guessing to begin with?
Voices:You can actually feel the energy from your ball by just putting your hands in and out.
Mostly Uncle Frank:But anyway, for the purpose of illustration, I did use the parameterized return function, put it into the first link to Portfolio Visualizer and you can see that analysis and it shows you what the success rate would, be so on and so forth. So he did his over 30 years, I did mine over 35. He got an 85% success rate, I got an 80% success rate. And you can see all that in the link with the nice charts and all this stuff. Same kind of stuff you'd get out of Money Guide Pro, just maybe not so fancy looking.
Voices:Don't be saucy with me, Bernays.
Mostly Uncle Frank:One of the other things that wasn't clear to me is how MoneyGuide Pro accounts for taxes. It sounded like it's got some internal tax generating part of that program. I actually don't think that's a good way to be doing taxes either. I think you should do that as a separate calculation or estimate and simply add it to your expenses expenses. That is a more logical way of doing things and it keeps things out of these black boxes where you really don't know why it's assuming what it's assuming. It's important to know why you are making a tax assumption and not just accept it out of a calculator. It's another kind of black box crystal ball thing.
Voices:It's kind of looking at the aura around the ball, see the movement of energy around the outside of the ball.
Mostly Uncle Frank:So then he looks at the result. The calculator spits out this 85% success rate, which is not bad for these kinds of calculators. If you know, a Monte Carlo simulation works. The chances of you getting those 0% to 15% results are minuscule. So an 85% success rate is good enough for the purpose of the tool, because it doesn't really mean success rate. It means the chances of having to alter your plan.
Mostly Uncle Frank:But anyway, he declares that to be feasible, and that is a word he uses to say something is workable. But it seems to really mean if the calculator gives me the right number, spits out the right number, I declare that feasible. Otherwise that word really has no meaning. But I know he likes to use that buzzword as part of the marketing, the presentation of what he does. It's all one big crapshoot anywho, but that's all it is.
Mostly Uncle Frank:But then you get to the next problem is he actually does not trust that outcome. Even though he thinks it's feasible or says it's feasible, he doesn't actually trust it and he says he wants to make the thing resilient. So how does he do that? Basically, he just comes up with a bunch of imaginary scenarios. One of them he does is a stress test and he picks 2008 to 2009 to do that. I'm not sure why he would have picked that, because that was the end of a bad period, that, if you really want to do a good stress test, the first period you should pick in our lifetimes is retiring at the end of 1999, and what would have happened for the next 10 years. That is the best modern stress test you can do. You would not pick 2008 as your stress test Now. You probably don't need to do that kind of stress test at all if you were doing an historical analysis to begin with, because the historical analysis would have captured that as part of its calculation of the safe withdrawal rate. If you are using those parameterized returns, though, you have no idea whether what you came up with is going to survive particular historical eras, unless you go back and specifically test them, and you would need to test all of the relevant ones, or at least all the ones you had data for, which is another big drawback of using this kind of crystal ball parameterized return analysis to begin with.
Mostly Uncle Frank:After that, he does a series of what about isms? What about if somebody has a health care scare when they turn 80? What about if somebody has a health care scare when they turn 80? What about if somebody dies early? Some of those things are useful to use, but you need to assess a probability of those things occurring. You can't just be running around catastrophizing, saying what if we get struck by lightning when we turn 78? Turned 78. And in this case, one of the things he said what if there is long-term care, a three-year long-term care event at age 80? That is actually an extremely low profitability event, unless the person dies shortly thereafter, because if you go into long-term care as an 80-year-old, chances are you're not coming out.
Mostly Uncle Frank:Forget about it. So what he really should have been modeling there is an early death, which then would change the income parameters and you would change that in the tool in terms of both the taxes and the income. But in most cases dying early is not a problem.
Voices:Death stalks you at every turn.
Mostly Uncle Frank:Because if you plan for a retirement to go to age 95 or something like that and you die early, obviously you didn't run out of money and in fact you had extra money because you had 10 years of money you didn't even touch. Dying early is almost never a problem in this kind of planning.
Voices:If you don't start making more sense, we're going to have to put you in a home. You already put me in a home, then we'll put you in the crooked home. It's on 60 minutes, I'll be good.
Mostly Uncle Frank:Anyway, it's a fundamental forecasting problem. To just make up what about isms without assessing or assigning some kind of probability to the event. I realize he couldn't really do that, since this is a limited exercise, but I thought the way he approached it was not correct, or at least he did not explain why you would be interested in testing some potential outcomes but not others. You would certainly not test every random catastrophe you could think of. Okay. Then after that he says he wants to make the plan resilient. That's another marketing buzzword he likes to use. What this actually tends to boil down to and I've listened to him talk about this forever is essentially just padding the portfolio. Just adding a big pile of cash on the front is what he usually does. He says, well, you should have five years of cash on the front of this thing and that'll make it resilient. Well, yeah, it'll make it resilient, it'll be over-saved.
Voices:That is the straight stuff. Oh funk master.
Mostly Uncle Frank:If your real plan is don't spend much money, become over-saved and don't spend much money, you don't need to go through all these plans to do that. That's not value add. You got to be doing something more as a financial advisor other than saying, well, you should just save a whole lot more money. What I really would want a financial advisor to do is see if they can construct a portfolio or another plan that will work with the money we already have, or at least not deploy it in a grossly inefficient manner in a giant pile of cash called a pie cake that you ram in front of the thing. That is really not good planning. It's mediocre and it's certainly not something I would be willing to pay anybody for, because you can do that yourself. So he basically suggests that the guy get another job, which I actually don't think is necessary. In this case it could be necessary.
Voices:I don't think I'd like another job.
Mostly Uncle Frank:But I do appreciate that.
Mostly Uncle Frank:I think the real issue that he's dealing with is the one that he's not talking about is in his experience he has a lot of clients like this who do not account for their expenses very well, and so one way around that is to simply pad the plan, if you will, with either more money or assuming more expenses even though they're not accounted for, and I can see that being an issue with a particular, with a client like this, where they are primarily living off Social Security as their primary income source, their portfolio is relatively small, paying for much less than half of their expenses, and that is a different kind of person than, frankly, most of the people that listen to this podcast who are going to be funding their retirements mostly out of their portfolios and relying on Social Security as an extra add-on.
Mostly Uncle Frank:So I do appreciate that. I believe, from the personal experience he has, if he's working mostly with clients that have less than a million dollars, that really honing down on these expenses is going to be really important, and the way to protect them and to protect yourself as an advisor is to pad the whole thing. But that's certainly not a very efficient approach and we do know from the research going back to Bill Bangan that holding more than 10% in cash or cash equivalents in a portfolio tends to reduce its safe withdrawal rate. So the only way that holding a big pile of cash in front in a pie cake, or whatever you want to call it works is if you are over-saved to begin with. And if you're over-saved, you can do pretty much whatever you darn well please, but that doesn't require much planning skill. And calling something quote, resilient, unquote, when what you really mean is oversaved is not really helping clarify what we're talking about here in real financial terms and not feel-good marketing terms.
Voices:Put that coffee down.
Mostly Uncle Frank:Coffee's for closers only, okay. So what if we did this more the way I would approach it in terms of use of the calculator? So if you look at the second portfolio visualizer I link here instead of doing this parameterized return thing I link here instead of doing this parameterized return thing we did an analysis of the 60-40 portfolio on a historical basis and this data goes back to 1972. For this purpose, I also increased the amount being spent to get some interesting results, just because I think that the program he was using was inserting some kind of taxes that weren't accounted for in the $84,000. So I ran it with $93,000 for this purpose as the amount being taken out. And yes, that's inflation adjusted. So don't get all in a tizzy about that. That's the first question people ask when they don't want to believe what I'm saying. Is it inflation adjusted? I think it's adjusted for inflation. Is inflation adjusted?
Voices:Yes, it is. That's how the tool works.
Mostly Uncle Frank:Get over it. You're too stupid to have a good turn, but you can turn that on and off in the tool as well. It's a very robust tool. I should also clarify that he talked about a portfolio of stocks, bonds and cash. That was essentially a 60-40, so the one I used for modeling purposes here is 60-35-5, as in US stock market 10-year treasury, bond and cash, and it comes up with a 85% success rate for what we ran it. And then we ran it again with a better portfolio, the kind of portfolio that it would have started out to begin with. I basically created a simplified risk parity style portfolio to make sure that the data would match up the same data series for both tests. So it's 26% large cap growth, 26% small cap value, 26% 10-year treasuries, 16% gold and 6% in cash, and when I run it with that portfolio I get a 96% success rate instead of an 85% success rate.
Voices:Winner winner chicken dinner.
Mostly Uncle Frank:And so it's better across the board as a retirement portfolio. That's the whole point of what I talk about here in this podcast is that you should start using a really good portfolio for retirement and not a mediocre one, and then run your test based on that retirement and not a mediocre one, and then run your test based on that. And if you do that, if you make the portfolio resilient a resilient portfolio to begin with you are going to have better results and be able to spend more money, and then these people don't have to go back to work.
Voices:No one can stop me, don't have to go back to work Now.
Mostly Uncle Frank:If you were to go to a higher-end financial advisor, they would do such things. They would show you different kinds of portfolios and different outcomes. They would not be using a 60-40 portfolio with a pie cake attached to it. And as consumers at least those of us who have some significant money we should expect more or just do it ourselves if we're so inclined. Because a lot of what financial advisors are doing out there, particularly for their lower end clients, is at least 10 years behind in this area, and it makes sense from a business point of view to come up with something that has worked and then just continue to use it over the decades, because changing your approach means you have to change it for all your clients, or at least tell all your clients about it, and that's not a pleasant prospect. So I understand the inertia here of how this actually works, but if you are the consumer or the client of this, you should be careful about what you're accepting from the financial services industry, no matter how nice they are.
Voices:If you have a milkshake and I have a milkshake and I have a straw. There it is. That's a straw, you see, watch it and my straw reaches across the room and starts to drink your milkshake.
Voices:I drink your milkshake, I drink it up.
Mostly Uncle Frank:Because any financial advisor that's been doing the same thing for a decade or more is probably not up to date on best practices. It's just the reality of the situation, and if this is what they're teaching you in whatever club you belong to, you may question the value of that and whether it's going to cause you more problems than it solves.
Voices:That was the equation Existence.
Voices:Survival must cancel out programming.
Mostly Uncle Frank:I think you recognize that in your email. You said that the financial advice there was rather generic, which makes sense Because, believe it or not, it is still adding up the expenses and forecasting expenses. That is the most important thing to do in this kind of planning. Interestingly enough, though, there are some shortcuts there. Interestingly enough, though, there are some shortcuts there, and I think our experience is relatively typical for at least high earners, in that our nominal expenses in the first five years of retirement have actually gone down, mostly because of reduced taxes, and it is likely that your expenses at least your regular expenses are going to peak early in your retirement. And if that's the case, it makes planning the future a whole lot easier if you already know that you're not going to be spending more money on an inflation-adjusted basis, except in some kind of emergency, because then you don't really need to even know what you are spending it on, just that it's less than what you had before. And that is really the key thing that oftentimes people try to do this from the bottom up on every little thing, like we're going to buy this car in 10 years and replace this HVAC in 15 or go on this particular trip in 12.
Mostly Uncle Frank:It's more important to know the big number. What is your overall expenses? What are they likely to be? Are they going to be higher than what they are now? Are they going to be lower? Is your lifestyle going to change? And then the second most important thing to know is how much of that is mandatory and how much is discretionary, because 40% of our expenses are discretionary and 20% of our expenses are essentially giving money away, either supporting family, giving it to heirs in advance or giving it to charity.
Mostly Uncle Frank:Obviously, if you have that kind of buffer on spending, we could easily reduce that. If we had to, wouldn't want to. All I'm saying there is there is more than one way to skin this cat on expenses, but yes, they are the most important thing to get right within a ballpark. Anyway, we talked about a lot of things here, probably too many things, meaning there won't be any more emails in this podcast, but I hope you got something out of it and I hope you recognize that you can use these tools at Portfolio Visualizer and Portfolio Charts in particular, and you should be using them. As I've told you, there are some links there to help you. Now, while I'm sure MoneyGuide Pro is very nice. If you're not using it properly and you're really generating crystal ball assumptions out of it, it's worse. It's worse to use something like that than Portfolio Visualizer and Portfolio Charts.
Voices:You fell victim to one of the classic blunders.
Mostly Uncle Frank:One other thing I forgot to mention on Portfolio Charts in particular is there is a nice calculator they're called the heat map that you can put in your portfolio and then see how it performed on an annual basis going back to 1970. And what that's nice to look at is it gives you a stress test automatically, because it's got essentially red for negative returns over time and blue for positive, and so you can see putting in a particular portfolio, how many years is this down maximum? And if you put in a portfolio like a 60-40 portfolio, you'll see that it has a max downtime of over a decade, 10 to 13 years Whereas if you're using a risk parity style portfolio, you'll see that it has maximum drawdowns in terms of time of only three or four years. But that's a great way just to do a quick stress test all in one place, at least since 1970. Finally, if you are looking for ticker symbol stuff particularly, you want to analyze ticker symbols.
Mostly Uncle Frank:I think you want to use the test folio tool for that symbols. I think you want to use the test folio tool for that, and that is also another great place to compare portfolios, to analyze asset classes and tickers in particular, and that is being built out more and more all the time. So I highly suggest that you check that one out as well, because it has a lot of simulated tickers that go all the way back to the 1960s, or even the 1920s in some cases. And if you're going to use parameterized returns in any way, shape or form, you should do that as a second test, not the first one. That shouldn't be your first choice. Use the historical ones first, use the parameterized ones second. Hopefully you'll get similar results, but the parameterized ones are going to be more dependent on whatever crystal ball you are relying on or the calculator is providing you my name's sonja.
Mostly Uncle Frank:I'm going to be showing you um the crystal ball and how to use it, or how I use it all right, that's far too much for one episode on this, but it was a good question and good topics, so hopefully this helps. Thank you for your questions, thank you for your support of the Father McKenna Center and thank you for your email.
Voices:So Barker's alright Daughter of my foot. Look how she spelled the lydie. That doesn't prove the boys are hiding there. I smell cigar smoke in the dining room. We better move fast, get over to police headquarters and get local help. I'll stay here and keep the house covered 1 20 pm, january 16th 1935.
Voices:After more than six hours the battle was over. They found Ma Barker's body in the parlor, the debris of the battle all around her. They found Fred Barker nearby, and in the sunroom was Lloyd Barker. The apron strings she had tied to them were finally untied.
Voices:And the case of Ma Barker and her boys was at an end.
Voices:Now we're going to do something extremely fun.
Mostly Uncle Frank:And the extremely fun thing we get to do now is our weekly portfolio reviews. Of the eight sample portfolios you can find at wwwriskpriorityreviewcom on the portfolios page. Just looking at the markets, last week it was mostly all rosy. The S&P 500, represented by the fund VOO, is now up 5.59% for the year. The NASDAQ 100, represented by QQQ, is now up 7.49% for the year. Small cap value is still the big loser this year. Viov representative fund is down 7.41% for the year. Gold is still the big winner.
Voices:I love gold for the year.
Mostly Uncle Frank:Gold is still the big winner. I love gold. Representative fund GLDM is up 24.58% for the year. Long-term treasuries, represented by the fund VGLT, are up 2.29% for the year. Reits, represented by the fund REET, are up 3.85% for the year. Commodities, represented by the fund PDBC, have fallen a lot last week but they are still up 0.31% for the year. Preferred shares, represented by the fund PFFV, are up 0.04% for the year and managed futures are managing to recover. Representative fund DBMF is still down, though 0.41% now for the year.
Mostly Uncle Frank:Moving to these sample portfolios, first one's a reference portfolio called the All Seasons. It is only 30% in stocks and a total stock market fund, 55% in intermediate and long-term treasuries and the remaining 15% in gold and commodities. It's up 2.36% for the month of June. In gold and commodities it's up 2.36% for the month of June. It's up 5.2% year-to-date and up 14.2% since inception in July 2020. Moving to these bread and butter kind of portfolios, first one's Golden Butterfly. This one's 40% in stocks divided into a total stock market fund and a small cap value fund, 40% in treasury bonds divided into long and short and 20% in gold GLDM. It's up 1.96% for the month of June. It's up 5.65% year-to-date and up 41.49% since inception in July 2020.
Mostly Uncle Frank:Next one's golden ratio. This one is 42% in stocks divided into a large cap growth fund and a small cap value fund, 26% in long-term treasury bonds, 16% in gold, 10% in managed futures and 6% in cash in a money market fund. It's up 2.61% for the month of June. It's up 4.76% year-to-date and up 36.13% since inception in July 2020. Next one's the risk parity ultimate the kitchen sink of portfolios. I'm not going to go through all 14 of these funds, but it's up 2.29% for the month of June, 4.3% year-to-date and 24.47% since inception in July 2020. Now moving to these experimental portfolios. These all involve leveraged funds, so don't try this at home.
Voices:Tony Stark was able to build this in a cave With a box of scraps.
Mostly Uncle Frank:First one's the accelerated permanent portfolio. This one is 27.5% ina levered bond fund TMF, 25% in a levered stock fund UPRO, 25% in PFFV, a preferred shares fund, and 22.5% in GLDM. In gold, it's up 3.84% month to date. It it's up 5.57% year-to-date and up 6.66% since inception in July 2020. Next one is the aggressive 50-50. This one is the most levered and least diversified of all these portfolios and also the worst performer. It's one-third in a levered bond fund TMF, one-third in a levered stock fund UPRO, and the remaining third divided into intermediate treasury bonds and a preferred shares fund. As Ballast, it's up 5.86% month-to-date. It's up 0.63% year-to-date and still down 11.37% since inception in July 2020.
Mostly Uncle Frank:Next one's the levered golden ratio. This is a year younger than the other ones. It is 35% in a composite levered fund called NTSX that's the S&P 500 and treasury bonds, 20% in gold, gldm, 15% in a international small cap value fund AVDV, 10% in a managed futures fund KMLM, 10% in TMF, a levered bond fund, and the remaining 10% in UDOW and UTSL, which are levered funds that follow the Dow and a utilities index. It's up 2.77% month-to-date. It's up 8.14% year-to-date and up 3.36% since inception in July 2021. And the last one is our newest one, the Optra portfolio that is just going to be a year old next week.
Mostly Uncle Frank:This one is 16% in a levered stock fund, upro, 24% in AVGV, which is a worldwide value fund, 24% in GOVZ, a treasury strips fund, and the remaining 36% divided into gold and managed futures. It's up 3.8% month to date. It's up 6.43% year to date and up 9.8% month-to-date. It's up 6.43% year-to-date and up 9.53% since inception in July 2024. And that really concludes our portfolio reviews. Boring Things are looking much nicer now this year than they had been for most of it, although we've been doing fine actually for the most part. Next week we will have our monthly distributions, and won't that be special.
Voices:Well, la-dee-freaking-da.
Mostly Uncle Frank:But now I see our signal is beginning to fade. Just one little programming note we're having some visitors next week, so there may or may not be a podcast. Stay tuned, we'll see how that plays out. Maybe I'll get a guest reader for the emails, though We'll see.
Voices:Yeah, hi, it's Bill Lumber. Yeah.
Mostly Mary:Okay, then I'd like to go ahead and welcome a new member.
Voices:This is yeah, uh, yeah, yeah I'm gonna need you to go ahead and come in tomorrow. Um we uh and uh, thanks.
Mostly Uncle Frank:In the meantime, if you have comments or questions for me, please send them to frank at risk parity radiocom. That email is frank at risk, parityityradiocom. That email is frank at riskparityradiocom. Or you can go to the website wwwriskparityradiocom. Put your message into the contact form and I'll get it that way. If you haven't had a 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. You, that would be great. Okay, thank you once again for tuning in. This is Frank Vasquez, with Risk Party Radio, signing off.
Voices:In a musty old hall. In Detroit, they prayed in the Maritime Sailor's Cathedral. The church bell chimed and it rang 29 times For each man on the Edmund Fitzgerald. The legend lives on from the Chippewa down of the big lake. They call Gitche Gumee. Superior, they said, never gives up or dead when the gales of November come early.
Mostly Mary: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.
