Episode 473: Merry Christmas From Testfolio, More Cowbell, KBWP, And Fund Seeder Mania
Dec 17, 2025
Discover how tilting toward small-cap value can enhance safe withdrawal rates but also comes with risks. Explore the value of diversification between small-cap and large-cap stocks. Learn about the new Testfolio tools, allowing for deep historical analysis across 100 years. Uncover the benefits of property and casualty insurers for diversification, especially in turbulent markets. Plus, get insights on the trade-offs of direct indexing versus using ETFs and how to navigate tax implications for retirement accounts.
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volunteer_activism ADVICE
Blend Not Bet On Small-Cap Value
Consider blending small-cap value with large-cap growth instead of going all-in on one corner of the market.
Expect higher volatility with a small-cap value tilt even if it can raise historical safe withdrawal rates.
insights INSIGHT
Century Data Changes The View
Testfolio now offers 100-year factor data that reveals long-run small-cap value outperformance.
More recent decades show small-cap value and large-cap growth performing similarly, so context matters.
volunteer_activism ADVICE
Choose ETF For Simplicity Or Direct Index For TLH
Use KBWP if you want simple exposure to property & casualty insurers instead of managing many individual names.
Direct indexing helps tax-loss-harvesting but adds hassle and tracking error risk.
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In this episode we answer emails from JT, Phil, and Glenn. We revel in the updates to the TestFolio tools, weigh how tilting toward small cap value can lift safe withdrawal rates but also reduces overall diversification, return to KBWP and how property and casualty insurance companies can provide value-tilted diversification, and discuss the tracking results reported on the About page at the website.
Ready to push past rules of thumb and actually pressure-test a retirement portfolio? We dig into how far a DIY investor can tilt toward small cap value to raise a safe withdrawal rate, what history really shows across 30- and 50-year windows, and why correlation—not bravado—decides whether you can keep spending through ugly markets. Using new Testfolio features with 100-year factor data, we compare the Golden Ratio and Golden Butterfly against more value-heavy mixes and pinpoint where the extra “cowbell” helps and where it just adds stress.
We also open a less-traveled door inside equities: property and casualty insurers. Whether you own them through KBWP or direct index the top names, this sleeve has delivered rare intra-equity diversification, often keeping pace with broad markets while zigging in years like 2022. We share the practical trade-offs—expense ratios vs. tracking error, simplicity vs. tax loss harvesting—and explain when the ETF is the smarter, lower-hassle choice. If you already own Berkshire Hathaway for your value core, you’ll hear why insurers can complement or substitute without bloating overlap.
Context matters, so we pull back the curtain on our publicly tracked taxable account and why it can look extreme in a bad year and strong in a good one. The whole-portfolio view is far steadier, closer to a risk parity blend of stocks, long treasuries, and diversifiers like gold and managed futures. The takeaway: if you want a withdrawal rate you can live with, build for multiple regimes—blend small cap value and large cap growth, keep long bonds for deflation shocks, and add real diversifiers that cut correlation when you need it most. Subscribe, share this with a DIY investor who loves data, and leave a review to tell us where you’d tilt next.
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