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.

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.

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.

And the basic foundational episodes are episodes one, three, five, seven, and nine.

Yes, it is still in my memory, thanks.

We have also created an additional resource, a collection of additional foundational episodes and other popular episodes.

We have top men working on it right now.

Ooh.

Top men.

And you can find those on the episode guide page at www.riskparodyrador.com.

Inconceivable!

All thanks to our friend Luke, our volunteer in Quebec.

Zach.

We'd be helpless without him.

I have always depended on the kindness of strangers.

Because other than him, it's just me and Marion here.

I'll give you the moon, alright?

I'll take it.

We have no sponsors, we have no guests, and we have no expansion plans.

I don't think I'd like another job.

Over the years, our podcast has become very audienced focused, and I must say we do have the finest podcast audience available.

Really top drawer.

Along with a host named after a hot dog.

Lighten up Francis.

But now onward, episode 479.

Watch me pull a rabbit out of my head.

Again!

Today on Risk Party Radio, we're just gonna do what we do best here, which is attend to your emails.

And so without further ado.

Here I go once again with the email.

And first off.

First off, we have an email from B.

Love the bees!

Love the bees!

And B writes.

Dear Uncle Frank and Queen Mary.

What is this, Logan?

Some kind of fun house.

Hi, having fun.

But now I find I actually enjoy them, and they sometimes pop into my head in day-to-day life.

It's a trap.

This might be the podcast version of Stockholm Syndrome, but I'm okay with it.

The beatings will continue until morale improves.

Daddy is home.

On to my questions.

I am 41 and supporting a wife and two small kids, two and five years old.

We're currently about 60% of the way to our fire target, and with average market returns, expect to hit our target in about seven years.

I've been really good about not trying to time the market.

I've just kept buying throughout the volatility of the last several years and have been rewarded for it, but I'm starting to feel antsy about our investments being almost entirely S P 500 total US market in the current environment.

You've mentioned on the show that you recommend starting the transition to a risk parity portfolio once you're at about 80% of the fire target.

So by that metric, it's a few years too early to start the transition.

But you've also mentioned that there are folks that use risk parity for their accumulation portfolios for a theoretically slower but more stable climb.

That is the straight stuff, O Funkmaster.

So, is there any harm in starting to gradually build up positions now in the bonds and alternatives that I could grow year over year towards a golden ratio portfolio?

Or would I be better served sticking with 100% equities until I reach that 80% mark?

The other thing I'm considering doing is adding more cowbell.

I started buying some small cap value in a taxable brokerage account about a year ago thanks to your show, but it's a tiny portion of my overall investments, as I haven't been able to buy it in my 401k, where most of my retirement investments are.

However, my 401k is with Fidelity and they have a feature called Brokerage Link, which essentially allows us to invest a portion of our 401k funds into almost anything you can buy in a regular brokerage account.

Groovy baby!

They recently upped the portion we can invest through Brokerage Link to a whopping 90% of our 401k.

Oh what?

That means if I wanted to, I could all at once get a 50-50 split of large cap growth and small cap value.

Do you think that would be wise?

I'm not asking for a crystal ball reading, obviously.

No offense intended to Sonia.

The crystal ball can help you.

It can guide you.

Who is she by the way?

I tried searching but can't figure out where those clips come from.

It's just that making such a big change to my portfolio all at once feels like taking a big swing at timing the market.

I'd feel more comfortable gradually increasing the position, but that makes me wonder if there's any benefit in holding a small amount of small cap value during accumulation, or if it's largely pointless without an equal split with large cap growth to get the rebalancing bonus a la Shannon's demon.

Your insight is greatly appreciated.

Thank you both for everything you do to share your knowledge with us DIYers.

Sincerely, B.

Well, first off, thank you for being a donor to the Father McKenna Center.

As most of you, or probably all of you by now know, we do not have any sponsors on this program.

We do have a charity we support.

It's called the Father McKenna Center, and it supports hungry and homeless people in Washington, D.C.

Full disclosure, I'm on the board of the charity and the current treasurer.

If you give to the charity, you get to go to the front of the email line, as B has done here.

Yes!

Two ways to do that.

You can give directly at the Father McKenna website.

I'll link to the donation page.

Or you can become one of our patrons on Patreon.

What you do at the Risk Parity Radio website on the support page.

Either way, you get to go to the front of the email line, but please do reference or mention that in your email so I can duly move you to the front of the line.

Now getting to your email.

Well, I'm glad you become acclimated to the sound clips.

This is pretty much the worst video ever made.

What most people don't realize is that's kind of the default setting of my brain that I'm not thinking about anything.

I'm just like staring at the wall, thinking about everything, setting down, thinking about nothing.

I'll hear something and it will bring up the memory of some kind of comedic sound clip or a song or some commercial from my youth.

Don't don't tell me that!

You're not done!

I don't know, I'm gonna go, don't get me done, you're not, don't you not die?

I don't know, I'm not doing it, I'm gonna do it.

It's a sad state of being, I suppose, but it is what it is.

I did what did it do it?

I don't want to be what did it do it.

So welcome to my Stockholm Syndrome.

It's a trap, it's a trap, it's a trap, it's a it's a trap.

Sounds like you've been doing well at earning and saving, being 41 and being 60% of the way there, which is actually really close in years because of the way compounding works.

But you bring up an interesting topic, and this is one where Tyler of Portfolio Charts and I disagree on, or rather we don't really disagree, but we have different personal preferences.

So someone like him would rather just accumulate in something like the golden butterfly portfolio and not have to deal with the volatility because he's okay taking it on a longer time frame in terms of actually getting to a Phi number.

The value stock geek who has the weird portfolio is similar in outlook, that he's got his work and his stock trading and all of that stuff.

He figures that's my sort of risk assets, if you will, and he'd rather have his weird portfolio just kind of be humming in the background.

And Tyler actually wrote an interesting blog post that relates to this last year that I'll link to in the show notes where he was comparing a golden ratio portfolio for holding or accumulating with a total stock market portfolio and a couple other things.

So the reality is yes, you can transition to a golden ratio kind of portfolio whenever you want.

The slight drawback, and it's only slight in your case because you're 60% of the way there, is that in theory, it will take you slightly longer to get to your FI number than it would if you were to take more risk until you got closer.

Yogi Berra said that in theory there's no difference between theory and practice, but in practice there is.

So unless you have some fixed date by which you were planning on definitely stopping working and you needed to get there faster, no, there's no reason why you can't start your transition, quote, early, unquote.

Because we're really talking about a personal preference here.

I think this is an interesting reverse application of the simplicity principle.

Because obviously the simplest thing to do would be just to accumulate in a golden ratio or a golden butterfly or kind of portfolio like that, and take your time, because then you don't have to make any transitions.

I'm not a smart man.

But from the broader perspective, particularly when you were starting out in your 20s and early 30s when you hadn't accumulated much, that would be kind of counterproductive because you're leaving some of your growth possibilities on the table by not being more aggressive early.

So, yes, if you'd like to do some of this transitioning now, you can definitely do that.

I definitely would use that brokerage link option if it doesn't cost you any extra fees or anything or insignificant extra fees.

We actually had that in our retirement plan going back to like 2005 or 2006, and I found that invaluable because I didn't like the funds that we had in the main fund selector part of the account.

But if you can do a essentially self-directed 401k and pick exactly what you want, I really think that's the way to go.

And I would move as much of your money over there as possible.

This is going to make it a whole lot easier than when you convert to an IRA and just move the whole thing over, hopefully.

Or you can just leave it in the 401k longer if something like the rule of 55, if you end up working that long, comes into play for you.

In our case, I actually left a large chunk of our retirement account money in the 401k because I did retire at 56 and wanted to have the option of taking money out of that before age 60, as it turned out.

I didn't, but I left it in the 401k until recently and then moved it over to the IRA.

But it was all allocated into the ETFs I wanted because it was in this self-directed part of the account.

And yes, then you could move your stock holdings into exactly the configuration you want if you wanted large cap growth and small cap value.

Yeah, I would definitely do that because that by itself is still an accumulation allocation as far as the stocks are concerned.

That's also a good reason why to start with an allocation like that, because then you don't have to transition it or transition it too much.

And if you really care about overall valuations, which I do not use as a decision-making process, it is true that the split between small cap value and large cap growth is one of the largest it's ever been.

So you're getting a whole lot more value for buying that value now.

Guess what?

I got a fever.

And the only prescription is small cowbell.

And we saw last year that on the international side, particularly on the developed country side, small cap value was the best performer with close to 50% returns on that.

I don't know if that's gonna ever bleed over into the US side of things.

We'll see what happens with this tariff decision.

Everybody thinks that's gonna be meaningful.

A really big one here, which is huge.

But I wouldn't use that for making any decisions about my portfolio either.

Forget about it.

So I would definitely use the brokerage link option, assuming it's not expensive in any way, shape, or form.

And I would readjust your stocks to the allocation that you want to have.

You can go ahead and do that right away.

And then whether you want to build out alternatives and bonds and things, you can do that too.

Just make sure you're doing those in appropriate accounts and you're not putting that in a taxable account because you don't want to incur a lot of extra ordinary income, especially while you're still working.

I think you're gonna be in good shape any way you go.

And now to Sonia.

Yes, that woman's name is Sonia Parker.

My name's Sonia.

I'm gonna be showing you um the crystal ball and how to use it or how I use it.

And I found her on YouTube and she had a little 10-minute video about crystal balls and how she uses them.

Now the crystal ball has been used since ancient times.

It's used for scrying, healing, and meditation.

And I'm sure they're very effective for scrying, healing, and meditation, and to connect to the spirit world.

Now you can also use the ball to connect to the spirit world.

Well, they're probably not that great when it comes to making decisions about your finances or your portfolio.

Although she may disagree.

But I will link to that entire video in the show notes for your edification, as it were.

It's kind of looking at the aura around the ball.

See the movement of energy around the outside of the ball.

You can actually feel the energy from your ball by just putting your hands in and out.

Hopefully that helps.

Thank you for being a donor to the Father McKenna Center.

And thank you for your email.

Hey Nikki!

Cover Winkler in Bees!

You can do it!

Sorry, Henry.

Second off.

Second off, we have an email from Brian.

Hey Brian, care to place a wager?

And Brian writes.

Hi, Frank.

I made a donation to the Father McKenna Center using my new donor-advised fund.

Top drawer.

Really top drawer.

Last year I opened a DAF in early December and funded it with appreciated stocks that were a carryover from when I had a traditional AUM advisor.

I didn't want that mutual fund any longer, but I also didn't want to realize any capital gains.

Last year was my last full year of working my corporate job, so the DAF was an amazing learning that really helped me at just the right moment, hitting the higher tax brackets.

A quick note of thanks.

Finding your podcast was a voice in the wilderness last year as I broke up with my financial advisor to go full DIY.

Yeah, baby, yeah.

I was really struggling with finding a good way to manage my portfolio as I enter into early retirement.

I just wanted to express my gratitude for the excellent content you provide and the help it has provided me personally as I transition to a golden ratio type of portfolio.

A number is so perfect, perfect.

Defined everywhere, everywhere.

Side note, I'm helping a friend understand how to move away from an AUM advisor.

I was able to show my simple portfolio versus the Uber complex portfolio of mutual funds, CEFs, and less than optimal ETFs that they were invested in.

Brian.

Uh, how's everything else going?

Good.

All right, all right.

See you later.

Well, Brian, thank you also for being a donor to the Father McKenna Center, which has also moved you up to the front of this email line.

I'm glad you're making good use of a donor-advised fund that is a very convenient device for tax management and charity management, if you will.

And for those listeners who don't have one but do plan on donating to charities in the future, I would highly recommend that you set one of those up.

I know Fidelity has a good system, but DAFI does too.

Some of my listeners like that.

And there are other ones.

I'm not an expert on donor-advised funds in particular, in terms of having surveyed all of them.

But I know a lot of our listeners find them very useful.

And I'm glad you're enjoying the podcast and have gotten a lot out of it.

Your email made me kind of reflect on the various conversations I've had with a number of listeners over the past few years.

And you know, I hear a lot of horror stories from people with bad experiences from financial advisors or the financial services industry in general.

A number of you have been caught up in overly complicated schemes involving dozens of investments that aren't really well planned and are difficult to unwind.

You fell victim to one of the classic blunders.

Others of you had said that their financial advisor seems to be speaking from a script and couldn't really answer the questions about what they were doing or why they were doing it.

Always be closing.

Always be closing.

And that is the unfortunate state of much of the financial services industry.

You know, as we talked about last time, a lot of the institutional stuff is designed to extract commissions or fees coming and going, and a lot of those people get hired and trained up essentially as salespeople, and really aren't thinking for themselves.

They're just speaking from scripts that they're given by the institution they're working for.

Because only one thing counts in this life.

Get them to sign on the line which is dotted.

But this is the inherent problem with fields with low barriers to entry, like the financial services industry.

Because almost all All of those fields tend to be driven largely by sales-based marketing and sales-based business models.

As we're adding a little something to this month's sales contest, as you all know, first prize is a Cadillac El Dorado.

Anybody want to see second prize?

Second prize a set of steak knives.

Third prize is your fire.

Which makes it very difficult and frustrating for us as consumers to figure out what we should be consuming and to just parse all this garbage and nonsense and separate some of the wheat from the chaff.

No more fire, solo.

You need somebody watching your back at all times.

But a lot of times what you find out is that these self-proclaimed emperors don't really have any clothes.

Hello!

Hello, anybody home?

I think McFly think.

And they know a whole lot about running their business model and the psychology of sales and marketing.

You know, whenever I see an opportunity now, I charge it like a bull.

Ned the bull, that's me now.

In the financial services industry, as I mentioned last time, they're largely doing one of two things.

It's fear-based either way.

Real wrath of God type stuff.

Either they're attempting to exploit fears with some stoking of them, which you'll typically get in free steak dinner promotions.

Fire and brimstone coming down from the skies, rivers and seas boiling.

Forty years of darkness, earthquakes, volcanoes, the dead rising from the grave.

Or they're catering to fears.

Human sacrifice, dogs and cats living together, mass terrium.

I was thinking back to being a guinea pig for the RISA psychological profile that a lot of these advisors use now.

Get up and shit that hog out there.

And to me, that is really an example of catering to fears.

Because what that test is really doing is putting up a fear meter and seeing where the person lands on it and what they're afraid of.

You can't handle the dogs and cats living together.

And then coming out with some kind of program or products that cater to those particular fears.

This is easy, folks.

It's so simple.

Isn't it you guys?

Isn't it simple?

I know that annuity salesmen love that thing because it helps them identify safety first people, and safety first people are easy to sell annuities to.

Stupid as stupid does, sir.

What more people are actually afraid of is only really the near term.

That's as far as they can think.

And that is the kind of fear that leads to these bucket strategies and time segmentation things.

Ahoy there, matey!

Which again are catering to a particular fear.

A person with what they call a risk-wrap profile really just fears specific kinds of events.

Choose, choose the form of the destructor.

Which lead to essentially versions of portfolio insurance.

I think most people that listen to this podcast are interested in doing it themselves, are really mostly just afraid of not knowing things they need to know.

Fat, drunk, and stupid is no way to go through lifestyle.

Which in my mind is a very healthy fear to have.

What he was doing.

And should be exercised expansively whenever you're dealing with somebody from the financial services industry because you don't know how they're being paid or why they're saying what they're saying, and whether it's really in your best interest or in their best interest in many circumstances.

Particularly if they're doing something like hat switching and not telling you when they're working for you and when they're working for them.

What's all gone?

The money in your account.

It didn't do too well, it's gone.

Anyway, it's very funny that when you listen to people who are financial advisors try to defend what they do or defend the industry.

Because it just reminds me of two quotes.

One from Upton Sinclair that it's difficult for a person to understand something when his salary depends on him not understanding that thing.

That's the fact, Jack!

That's the fact, Jack!

So when people are saying, well, it the financial services industry, oh, it's not so bad, and AUM is not so bad, it's not evil.

Come on, guys, it's it's not acceptable.

That's the issue.

Forget about it.

The funny one is from insurance salesmen, they're they always come back to when you press them, is like, well, I gotta make money some way.

I gotta support my family.

It's like there are no other jobs out there that you could take.

Watch out for that first step, it's in doozy.

Maybe not if you're Ned Ryerson.

Needle-nose Ned Ned the head.

Come on, buddy, Case Western High.

Ned Ryerson, I did the whistling belly button trick at the high school talent show.

Bing!

And then the other observation is the one from Charlie Munger, which is that if you know what somebody's incentives are, those incentives ultimately drive a lot of what their behavior is.

And to me, that's why it's important when you're dealing with anybody, particularly somebody that's providing you services, is what is their business model?

How does their business model work?

And I've come more to the conclusion that a large segment of the financial services industry, at least the retail industry, operates their business model essentially on those fears, either exploiting fears or catering to fears.

We got a scary one for you this week.

Because that is the best model for the business.

Even if it's not for any one person's personal finance, particularly if you're a do-it-yourself investor, that should not be a priority.

Other than making sure you can stick with whatever you're doing.

But for people like us, just being more informed is really the solution to quelling that kind of a fear.

That's what I'm talking about.

Now, your last paragraph you mentioned helping a friend get away from an AUM advisor and then dealing with this uber complex portfolio of mutual funds and closed-end funds that a lot of these people like to jack around with to make themselves feel sophisticated and justify their fees, even though that they really don't justify their fees that way.

And then looking at ETF options.

And all this just reminds me that financial services and personal finance is an evolving technology, and that is the best way to look at it.

Because a lot of the practices you're talking about were the norm 10, 15, 20 years ago, but there's no reason they need to be the norm anymore.

And in fact, as we move forward, we see we have more, better, and less expensive options as do-it-yourself investors.

So something like going from a standard index fund like VBR to a better algorithm like the one you find in something like AVUV, that is a consequence of the evolving technology, the evolving industry.

Because those kinds of funds you originally had to go through advisors who were affiliated with DFA.

And there was no way that you could get access to those better funds without doing that.

With the ETF revolution that has occurred recently and the move to no fee trading with fractional shares, we can all just do that ourselves.

And so a large swath of advisors who used to use that business model, that business model has now become effectively obsolete, which is a good trend because we do want to put a lot of these business models used by the financial services industry in the past out to pasture or in the grave.

You get nothing back for all you say, just a turnity in a spacious grave.

Because they're not serving us as a consumers or society anymore, even though they certainly are quite serviceable to the people using them on the provider side because these are very lucrative business models.

Ah, the sweet smell of an old-day sucker.

So I'm very hopeful you'll be successful in your endeavor to help your friend keep more of their money and spend it on themselves and their family and their interests instead of on some bloated advisory practice that's using a 15 or 20-year-old business model.

Tell them the good part.

The good part, William, is that no matter whether our clients make money or lose money, Duke and Duke get the commissions.

Well, what do you think, Valentine?

Sounds to me like you guys a couple of bookies.

I told you he'd understand.

So thank you for giving us a chance to commiserate here about the plight we are collectively overcoming.

It's like some kind of giant hangover if you've been marketed to over a few decades, like many of us have.

Am I right or am I right or am I right?

Right, right, right.

Thank you for being a donor to the Father McKenna Center.

And thank you for your email.

So, Brian, we're even now, right?

Ready to start a new life in England.

I've got my money.

Your wounds have healed up nicely.

What do you say we let bygones be bygones?

You shot me in both my knees, then lit me on fire.

Last off.

Last off of an email from Derek.

No way.

And Derek writes.

On the old website, you had a month-by-month breakdown for each portfolio.

I used that to copy the data to a personal spreadsheet to run other averages over time.

Any way to get that info again?

I have the data through February of 2025.

If not, where were you pulling that data from?

And I will manually pull it.

What's the answer?

What's the answer?

What's the answer?

Well, Derek, yeah, I was kind of wondering if anybody would actually miss that.

I used to post a little screenshot of an Excel spreadsheet where I kept track of some of the monthly data on these portfolios and compared them to a couple of commercial products.

And I don't think you're going to be able to replicate that, at least not in that form, because I pulled those from the Fidelity stats on the accounts themselves.

And I'm not going to allow you to log into my Fidelity account.

Forget about it.

Sorry about that inconvenience.

But the real reason I dropped it was that it ended up being kind of ill-conceived from the beginning.

Not keeping monthly stats like that, but I was hoping to be able to use that to compare the performance of various portfolios.

The problem, though, is that because they were being subjective to different rates of withdrawal, you could not do any meaningful comparison between any of those portfolios like that.

So it didn't really serve any purpose.

I do keep it.

Still trying to figure out whether I can do anything with it or not.

But I didn't really appreciate the folly of it until I read a paper by a guy named Jim Sandage, which is talking about chaos theory applied to portfolios and his observation that when you start drawing down on a portfolio, you are essentially injecting volatility and chaos into it, which is why drawdown portfolios need to be different than accumulation portfolios.

I'll link to that paper in the show notes again.

And so if you're varying the amount of chaos, essentially you're sticking into various different portfolios, you can't really compare that on an apples to apples basis.

There is a better and easier way to do this though, which is to use testfolio.

Testfolio, you can set the start date instead at July 6th, 2020.

If you wanted to go back to the start date for most of those portfolios, you might as well just make it July 1st of 2020.

But if you set that start date and put the portfolios in there, then you can subject them to a standard withdrawal or no withdrawal using the testfolio website and compare them very quickly and very accurately and get all kinds of stats out of that and then compare them to other kinds of portfolios or funds.

It's also a lot less work than keeping track of monthly results for each of the portfolios.

So I would just do something like that.

You do also need to keep in mind that since we've only been running this for five years, it is not really that big of a sample or good of a sample to make a long-term decision on.

That's why you do want to be looking at decades worth of data for anything you're doing if you're talking about holding something for decades into the future.

As I've mentioned before, we haven't even gone through one complete economic cycle in the time I've been running this podcast or had these sample portfolios.

In order for that to happen, we have to go through a recession again and come out of it.

Because where we started in terms of economic cycles is we had just come out of the 2020 recession and we're sort of back on the recovery road from that.

And so you really won't get a good sampling, if you will, until we go through that next recession, whenever that may occur, and come out of it.

And once we've gotten to that point, I think that would be a good place to kind of look back and see, well, how did these all perform through a complete economic cycle and how did other possibilities perform through that same cycle?

Anyway, I am sorry to disappoint you that I'm not republishing that or plan to republish it again because I don't think it's honestly that useful from an analytical perspective.

But you can do the same thing elsewhere.

I've mentioned test folio, you could run the same kind of thing over at Portfolio Visualizer on that time frame.

But thank you for noticing what was going on.

At least somebody did.

You're the first person to mention that at all.

Abby Normal.

Abby Normal.

Thank you for writing in.

Hopefully, my suggestion that you try testfolio or portfolio visualizer helps.

And thank you for your email.

Hey, Rocky!

Watch me pull a rabbit out of my hat!

But that read never worked this time for sure.

Well, I'm getting close.

But now I see our signal is beginning to fade.

If you have comments or questions for me, please send them to Frank at RiskPardyRadio.com.

Then email us frank at riskpartyra.com.

Or you can go to the website www.riskperdyradio.com.

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, and me some stars, a follow, a review.

That would be great.

Okay.

Thank you once again for tuning in.

This is Frank Vasquez with Risk Party Radio.

Signing off.

I'm sitting in my room.

My mom and my jacket.

They both girls back down.

Don't get your bottom dog.

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.