Episode 426: Impressing Your Significant Other With Portfolios, Factor And Demon Fun, And Portfolio Reviews As Of May 23, 2025
May 25, 2025
Listeners dive into creative portfolio experiments, like the quirky 'Berry Pie' strategy, offering fresh perspectives on investment efficiency. The discussion humorously challenges traditional value and size factors, bringing in Shannon's Demon to spice things up. Charity initiatives are also highlighted, promoting support for the Father McKenna Center. Weekly and monthly portfolio reviews reveal insights on shifting to ETFs and the surprisingly strong performance of gold and other assets, all wrapped in a light, engaging tone.
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question_answer ANECDOTE
Pete's Portfolio Experiment Tale
Pete experimented with diversified portfolios including gold, managed futures, and various equity allocations.
His "Berry Pie" portfolios outperformed a 60-40 portfolio with less maximum drawdown, but failed to impress his wife.
insights INSIGHT
Factor Investing Diversification Insights
Factor investing still appeals because data supports its diversification benefits, not necessarily outperformance.
Splitting stocks into growth and value helps reduce risk through rebalancing, exemplified by Shannon's Demon principle.
volunteer_activism ADVICE
Portfolio Construction Advice
Construct portfolios starting with asset classes before choosing specific ETFs or tickers.
Use ETFs over mutual funds due to better efficiency and modern trading features like fractional shares.
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In this episode we answer emails from Pete, Kevin and Dale. We discuss Pete's "Berry Pie" portfolio experiments on the testfolio site, the ongoing debate about the size and value factors and why it doesn't matter that much for constructing diversified portfolios due to Shannon's Demon, and some basics on the process for constructing portfolios moving from asset classes to specific ETFs.
We also roll out our "Top of the T-Shirt" Matching Campaign to benefit the Father McKenna Center. Please support the Father McKenna Center by visiting their website and mentioning "Risk Parity Radio" in the dedication box when donating. Your contribution will be matched dollar-for-dollar and help provide meals and services to homeless and hungry people in Washington DC.
And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Ever walked into a dive bar and found unexpected wisdom? That's Risk Parity Radio—a refreshingly honest approach to investing where movie quotes mix with mathematical principles, and portfolio theory comes without the corporate jargon.
In this episode, Frank Vasquez launches the "Top of the T-Shirt Campaign," where an anonymous donor will match up to $15,000 in listener contributions to the Father McKenna Center. This small but mighty charity serves thousands of meals to homeless and hungry people in Washington DC with remarkable efficiency, using a $1.5 million budget, donated space, and an army of volunteers to maximize impact.
The heart of the episode tackles a fundamental investing misconception—that we include value stocks or small cap funds because they'll outperform. Frank explains that diversification isn't about prediction but about mathematical certainty: "That's Shannon's Demon. If you have two assets with similar long-term performance but they aren't fully correlated, you're better off holding both than either one alone." By splitting stock holdings between growth and value, investors create systematic rebalancing opportunities when these segments diverge—as they dramatically did in 2022, when growth cratered while value remained relatively stable.
Listeners get practical portfolio construction wisdom too: start with your goals, select appropriate asset classes, then choose specific funds—not the other way around. Frank emphasizes that ETFs have made mutual funds largely obsolete for new investments, offering better tax efficiency and portability.
Weekly portfolio reviews reveal gold's continued dominance (up 28% YTD) while diversified portfolios showed modest gains despite volatile markets. Risk parity approaches demonstrated their resilience, with the Golden Butterfly portfolio up 3.13% year-to-date and 38.12% since inception in 2020.
Ready to build a portfolio that doesn't require predicting winners? Want to support a worthy cause while learning? This episode combines financial wisdom with practical generosity—a perfect introduction to the Risk Parity Radio approach.
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