In this episode we answer emails from Adam, Private Cowboy, and Jose. We discuss managed futures (again with references!), Bill Bengen's latest book and how it integrates into our approach, and the pros and cons of a Vanguard Personal Advisor-created portfolio and the hypocritical quandaries it creates with the gods of Simplicity.
Links:
Demystifying Managed Futures: Demystifying Managed Futures
Bloomberg Presentation On Investments In Inflationary Environments: MH201-SteveHou-Bloomberg.pdf
Dunn Capital Analysis: High-Vol-Trend-Following-Trend-Index-Edition-0825-DIGITAL.pdf
Kardinal Financial Video: What is Alternative Investing?
Interview of Bill Bengen: Episode 195: The 4% Rule and Beyond: Retirement Strategies with Bill Bengen
Weird Portfolio: Weird Portfolio – Portfolio Charts
Afford Anything Episode: #618: How to Retire at 50 While Supporting Aging Parents, with Frank Vasquez - Afford Anything
Corey Hoffstein Interview: Show Us Your Portfolio: Corey Hoffstein
Breathless AI-Bot Summary:
The perfect asset allocation isn't a formula—it's a framework built on uncorrelated assets that dance to different drummers during market storms. This episode dives deep into managed futures, one of the most powerful yet misunderstood portfolio diversifiers available to individual investors.
Three listener questions explore how managed futures fit within retirement portfolios, particularly for those approaching their post-career years. Frank breaks down why managed futures have essentially zero correlation to stocks, bonds, and even gold, making them uniquely valuable during both inflationary crises (like 2022) and deflationary periods (like 2008). He references new research from Dunn Capital comparing various alternative strategies and explains how ETFs like DBMF have democratized access to institutional-quality diversification.
Beyond managed futures, the episode synthesizes Bill Bengen's latest safe withdrawal rate research with Ray Dalio's "Holy Grail" principle of uncorrelated assets. While Bengen's new book doesn't explicitly analyze alternatives, Frank connects these complementary approaches to formulate practical guidelines: maintain 40-70% equity exposure divided between growth and value, use 15-30% treasury bonds for recession protection, allocate 10-25% to alternatives, and limit cash to under 10%.
The discussion takes a critical look at cookie-cutter financial advice, particularly questioning whether paying 0.3% annually to a Vanguard advisor provides value when their recommendations often involve overlapping funds and questionable international bond allocations. Frank challenges the "worship of simplicity" that permeates financial discussions while exposing the irony that these same advisors often recommend complex multi-fund portfolios.
What emerges is a call for "system two" thinking—the willingness to incorporate new information rather than clinging to outdated formulas out of consistency.
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