Episode 409: The PFFA Fund, TSP Allocation Considerations And Those New-Fangled Return Stacked Funds
Mar 27, 2025
Discover the ins and outs of preferred shares and the intriguing PFFA fund, which boasts high returns but comes with added risks. Learn the critical importance of assessing financial needs before diving into fund selection, especially when planning for retirement. The discussion also unpacks the fascinating world of return stacked ETFs, exploring their potential for diversification and long-term gains. With a pinch of humor and thoughtful insights, the conversation keeps financial literacy engaging and accessible.
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Preferred Shares Funds and PFFA
Consider preferred shares funds if you have large taxable accounts and need bond-like investments.
PFFA, a leveraged preferred shares fund, offers higher returns but also higher volatility and a 2%+ expense ratio.
insights INSIGHT
Investment Planning Process
Fund selection is the last step in planning, not the first.
Determine your overall financial needs and asset allocation before choosing specific funds.
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Retirement Planning Steps
First, determine your retirement expenses and how much your pension will cover.
If you are far from retirement, prioritize accumulating in stocks; if closer, consider a more balanced approach.
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In this episode we reflect on our recent meet-up and answer emails from Chris, Gigi and Mark. We discuss preferred shares funds and PFFA in particular, considerations about allocations in a TSP based on goals and current progress in your financial life, and them thar new-fangled return stacked funds.
Welcome to the dive bar of personal finance and do-it-yourself investing, where Frank Vasquez serves up straight talk with a splash of humor. This episode tackles core investment principles that cut through the noise of complex financial products and contradictory advice.
Frank begins by exploring preferred shares funds, specifically PFFA, explaining why its 20% leverage delivers higher returns but also brings greater volatility and a concerning 2%+ expense ratio. This leads into a deeper discussion about when specialized investment vehicles make sense for different investors and why tax implications matter when considering preferred shares positions.
The heart of the episode focuses on a listener's TSP allocation question, which Frank uses to illustrate a fundamental investment truth: many investors start at the wrong end of the planning process. Rather than beginning with fund selection, Frank outlines the proper sequence: first determine your overall financial needs, then establish appropriate asset allocations, and only then select specific funds. He draws an important distinction between accumulation portfolios (where growth is paramount) and retirement portfolios (where volatility management becomes critical).
Throughout the conversation, Frank emphasizes that diversification primarily reduces volatility rather than enhances returns. This insight proves particularly valuable when evaluating new investment products like return-stacked ETFs that combine traditional assets with alternatives like managed futures and merger arbitrage. While intriguing, Frank suggests most investors would benefit more from simpler approaches with established track records.
Whether you're nearing retirement or still in accumulation mode, this episode delivers clear frameworks for making better investment decisions, reminding us that successful investing stems from understanding your unique financial situation rather than chasing complicated strategies. Want more straight talk on building effective portfolios? Subscribe, leave a review, or reach out to frank@riskparityradio.com with your questions.
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