In this episode we answer emails from Michael, Brian and Ed. We discuss Michael's situation and options as a 34-year old with growing portfolios and a growing family, Brian's questions about the infernal Cederburg paper that won't go away and Ed's questions about accumulation portfolios.
Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
Testfolio Comparison between Total Market and Large Cap Growth: testfol.io/analysis?s=0GbmPE8D9GK
Merriman Best In Class ETFs: Best-in-Class ETF Recommendations | Merriman Financial Education Foundation
Shannon's Demon Article: Unexpected Returns: Shannon's Demon & the Rebalancing Bonus – Portfolio Charts
Rational Reminder Podcast #350: Episode 350 - Scott Cederburg: A Critical Assessment of Lifecycle Investment Advice — Rational Reminder
An Actually Useful Analysis of Global Portfolios: What Global Withdrawal Rates Teach Us About Ideal Retirement Portfolios – Portfolio Charts
Brian's Golden Butterfly Monte Carlo: Monte Carlo Simulation
Brian's All Equity 50/50 Monte Carlo: Monte Carlo Simulation
Brian's All Equity 34/66 Monte Carlo: Monte Carlo Simulation
Amusing Unedited AI-Bot Summary:
Frank Vasquez tackles the complex world of portfolio construction across different life stages, offering practical wisdom mixed with his trademark humor for investors at all levels. This episode dives deep into a $1 million portfolio review, addressing how to balance real estate investments with securities, manage excess cash, and prepare for eventual retirement.
A key highlight is Frank's thorough debunking of a frequently misunderstood academic study suggesting all-equity portfolios are optimal for retirement. With mathematical clarity, he explains why the study's unusual methodology comparing non-reserve currency bonds to U.S. equities across disconnected historical periods doesn't translate to practical investment advice. His Monte Carlo simulation comparisons confirm that diversified portfolios consistently outperform all-equity approaches during drawdown scenarios.
The episode offers particularly valuable insights on pairing large-cap growth with small-cap value investments – not because either category is predicted to outperform, but because they create effective rebalancing pairs operating on different cycles while delivering similar long-term returns. This mathematical principle, known as Shannon's demon, shows how two assets with comparable returns but different timing can outperform either investment held alone.
For younger investors still accumulating wealth, Frank recommends focusing on equity exposure while avoiding unnecessary complexity. His practical advice extends to managing investments across different account types, structuring 401(k) investments with limited options, and maintaining psychological fortitude through market cycles. Whether you're managing a complex portfolio or just starting you
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