Rank #1: 2 Funds For Life
A simple strategy to maximize your retirement investments
In this podcast, Paul Merriman and Chris Pedersen – who spent most of the last two years developing the “2 Funds for Life” strategy – discuss the rationale, research, details and benefits to easily implement this simple strategy.
The discussion includes a quick review of the “Three greatest investment products” (podcast and article including mutual funds, index funds and target date funds, with a special emphasis on the reasons TDFs don’t give investors the best options and the best returns. Chris explains the steps he took to research the possible ways to simplify the investment process without giving up the extra returns the portfolios should produce. His focus was to understand the risk (worst case for losses) and the high/low and average returns expected for 9 different combinations compared to the risks and returns of holding only a traditional target date fund. Listeners and viewers will see a group of very simple strategies that can add 25% to 100% more to the traditional target date fund. While the “2 Funds for Life” strategies are more risky, most investors will likely be comfortable with the additional risk.
Please note: This presentation reviews a lot of numbers and the most effective way to review the information is to watch the video that includes all the tables. For those who listen to the podcast, Paul and Chris, have tried to highlight the most important results. Paul suggests those who listen to the podcast will better understand the recommendations if they also read the in-depth article by Chris.
To access graphs, articles and other links referenced in this podcast, click here.
To view this presentation as a video, click here.
Oct 24 2018
Rank #2: Best-in-Class ETF Portfolio Recommendations: 2019 Update
In this special podcast Paul interviews Chris Pedersen about the 2019 changes to the Best-In-Class ETF Portfolio recommendations. This will be helpful to those who want to understand the details of how Chris made the decisions to select the best in each asset class, changing many from the previous year. The discussion includes comparing the long-term results of these recommendations vs. Vanguard ETFs, as well as DFA mutual funds.
• To read the article and tables supporting Chris’ decision-making process, click here His article also answers many of the most commonly asked questions regarding our Best-In-Class recommendations.
• Click here to see the newly recommended ETF Portfolios.
• To implement these portfolios using M1 Finance commission-free services, Click here.
Mar 06 2019
Rank #3: Advice for new, mid-career and retired investors: 8 Q&A's
Paul answers recent questions from readers and listeners:
9:29 1. A young investor asks me to explain, how does compound interest work? I referenced this article: Save $1,000 a year. Retire with millions
19:41 2. Do you expect index funds to keep outperforming actively managed funds?
25:35 3. Most of your articles are focused on accumulators. What advice do you have for those of us who are retired?
30:25 4. What do you think of the recommendations from Personal Capital?
33:03 5. When are you going to provide your Ultimate Buy-and-Hold Strategy report for 2019?
37:52 6. Is mid-cap value part of the small- or large-cap value asset class?
44:40 7. Should I invest in an active small-cap value fund in my 401(k)?
52:51 8. How should I use the Vanguard Monthly Income Portfolio in my portfolio?
Jan 30 2019
Rank #4: The Only 12 Things You Need to Know to be a Successful Investor for Life
In wishing listeners a Happy Thanksgiving, Paul shares some of the reasons for his gratitude, and 12 important decisions/choices that every first-time investor will make. He provides a few reasons why one path is likely to lead to a better financial outcome. Attached is a list of the choices he recently used to teach high school students, as well as a few 30-somethings. Paul’s hope is that this podcast and list will be helpful in sharing your knowledge and care with your loved ones. One day they will surely thank you for this. Click here for "The Only 12 Things You Need to Know to be a Successful Investor for Life.”
Nov 21 2018
Rank #5: The Best Podcast of 2018: Mark Hulbert on “Lessons learned from 40 years of independently tracking investment advisers’ performance”
At the 2018 AAII National Conference, Paul presented key concepts from the Ultimate Buy and Hold strategy and premiered the Two Funds for Life strategy, and had the great pleasure of hearing a talk by Mark Hulbert, founder of the Hulbert Financial Digest and senior columnist for MarketWatch. Considering it was the best talk of 2018, Paul asked and was granted special permission by AAII to share with you Mark’s presentation, “Lessons learned from four decades of independently tracking investment advisers’ performance”.
This podcast begins with an introduction by Paul (5:25), and by AAII President and CEO John Bajkowski (6:00), and then Mark’s 50 minutes of good points about luck, investor emotions, being a patient investor, and why risk is likely higher than you assume. Mark's presentation was accompanied by slides, which you can access here. Paul recommends that if you are not at a computer to view the slides while listening, listen to the podcast first and then look at the slides.
Dec 19 2018
Rank #6: The Most Important Investment Decision of Your Life
Or… Are you missing out on millions of dollars for your retirement?
After deciding to save and invest, the most important investment decision of your life, in Paul’s opinion, is what this podcast addresses. Of the Millennials investing in 401k plans, nearly 25% are refusing to take the risk of investing in stocks (equities) and are choosing only to invest in bonds (fixed income), which they see as “secure”. Secure as bonds may be, Paul is concerned that young investors are missing out on what could be millions of dollars difference in their retirement savings. He makes a strong case that the worst of equity returns are better than the best of fixed-income returns. In comparing the returns of four major U.S. equity asset classes with three fixed-income asset classes, it is clear that those — especially in their early years — who do not “take the risk” of investing in equities — will lose out on significant increases to their long-term retirement plan, based on historical evidence. The point is, if you’re going to bother saving and investing for your future, why not maximize your returns with little additional risk, especially when you have time on your side?
Feb 13 2019
Rank #7: Are you better off investing in bonds or stocks paying dividends?
1. If I need income from my investments, am I better off investing in stocks paying a good dividend rather than bonds? 1:45
2. Is a 60% stocks/40% bonds balanced fund better than a target date fund? 11:35
3. How does VBIAX (Vanguard Balanced Fund) compare to the 2 Funds for Life Strategy? 22:28
4. If I use M1, will the bid-ask spread cost of trading ETFs eat into my profits? 29:10
5. Will there be duplicate holdings if I use your ETF or mutual fund recommendations? 32:45
6. What is your favorite large-cap value ETF? 34:18
7. Why do you need so many ETF holdings in your best-in-class portfolio? 35:35
8. What are all the fees you have to pay if you use the M1 platform? 37:12
9. Where on your website do I find the symbols for all the ETFs you recommend in Portfolio #8? 40:45
10. How have listeners motivated young investors to learn the lessons from your website? 41:45
Mar 13 2019
Rank #8: 10 more things you need to know about the Ultimate Buy and Hold Strategy
The annual Ultimate Buy-and-Hold Strategy article and podcast are among the most important pieces Paul and Rich produce (with a lot of help from Daryl Bahls in creating the updated tables). This podcast addresses topics not covered in the Marketwatch article. Paul answers such questions as: Are returns reasonable? What is the impact of annual and monthly rebalancing? What is the impact on the return if the portfolio is not rebalanced? What are the main differences between UBH strategy and the most prominent/popular Vanguard strategy? And what decisions should you make regarding the balance of U.S. and international equity holdings?
Here are links to relevant tables:
50/50 Ultimate Buy-and Hold table
Ultimate Buy-and-Hold Portfolio (50/50) without rebalancing
70/30 Ultimate Buy-and-Hold table
Mar 20 2019
Rank #9: What do you know about the past and future returns of your investments?
Paul analyzes the 20-year returns of 10 major equity- and fixed-income asset classes. What do we have to learn? Returns can be totally unexpected but the relationship between asset classes remain the same as they have for almost 90 years. The table below allows investors to examine the year-by-year returns of large and small U.S. equity asset classes, REITS, international large-cap blend and U.S. and international bond asset classes. This podcast examines past results as well as predictions for the next decade from both the largest investment management companies and major financial institutions (Vanguard, J. P. Morgan , GMO, Blackrock, and John Bogle).
I think it’s fair to say the Callan Periodic Table is one of the best teaching tools for investors trying to come to the realization that 1. Investing includes a lot of short-term risk 2. Last year's winner is not likely to become next year's big winner 3. Owning many asset classes may not make you more money in the long run but it protects you from making big mistakes. 4. You may not make the kind of returns you expect.
Paul also references an article by Christine Benz, Morningstar’s Director of Personal Finance, “Experts Forecast Long-term Stock and Bond Returns”
Jan 16 2019
Rank #10: How John Bogle changed my life… and yours too!
With the passing of 89-year-old John Bogle, many writers who have covered Bogle’s work wrote thoughtfully about his life and the impact as the creator of the first index mutual fund. For 10 years, Tom Cock, Don McDonald and I interviewed him annually on our “Sound Investing” radio show on KVI in Seattle Washington. It was interesting how his views regarding asset allocation changed during those years.
On this podcast I recall some of the relevant history of his business activities in the mutual fund industry, as well as 10 ways index funds have had an impact on your investments. While everyone knows about the long-term advantages of low expenses, there are other reasons, some rarely discussed, why I think index funds have made you wealthier while giving you more peace of mind. Finally, I discuss the impact John Bogle had on the work I am doing to help investors build more productive portfolios.
In the first part of the podcast I quote liberally from two articles by Jason Zweig, a Wall Street Journal columnist who started interviewing John in 1993. You may find some of what he writes surprising.
Jan 22 2019
Rank #11: How much should I have in equities? And other questions
Since the market started making noises like a baby bear, more investors are asking,”What is the appropriate percentage of equities in my portfolio?" Paul addresses this question from the points of view of a young investor, a pre-retiree and a retiree, and also considers the dangerous probabilities of bad advice from commission-based advisors.In a discussion of “How much money we can safely take out of our retirement portfolio?” Paul mentions these articles of interest: “What’s a safe withdrawal rate in retirement?” And “Retirement Withdrawls: Can you base them on RMDs?"
He discusses the good news from Vanguard — lower minimums and lower fees in 38 mutual funds, and the new “donation” button for the Merriman Financial Education Foundation, which can be found at the bottom of the home page of his website, paulmerriman.com
Nov 28 2018
Rank #12: Paul Merriman’s 2018 in Review
Not all of the numbers are in, but enough are to discuss the returns of 2018. Of course a single year is not indicative of much, but it is often a test of our commitment to Buy-and-Hold.
In this podcast, Paul reviews the numbers for his favorite equity asset classes (big, small, value, growth, REITs, U.S. and international), as well the government, corporate, high grade and high yield bond funds. The comparison of ETFs and mutual funds didn’t create any new revelations but they are numbers a lot of investors want to know.
Paul ended the year with a couple of private meetings with old friends and can’t help but talk about the investor who wants to take all of his money out of the market "for a few months." As always, Paul makes his point for staying the course.
Jan 02 2019
Rank #13: Explaining the Ultimate Buy-and-Hold Portfolio
This recent interview with Jonathan and Brad of ChooseFi.com is both an excellent starting point for new investors and a refresher for seasoned investors as Paul discusses how to know who to trust, the role emotions play in making sound decisions and staying the course, the importance of diversification and choosing asset classes, and the pros and cons of active vs. passive management. He also explains stock market history and numbers and what they mean to investors, how to increase your odds of success, and simplifying the Ultimate Buy-and-Hold portfolio, using target date funds, small-cap value and his Two Funds For Fund strategy.
Jun 05 2019
Rank #14: Value, risk and retirement
In a recent conversation with Ken Roberts, of Ken’s Bulls and Bears, Paul answers some timely questions, such as:
- Do you expect value to be a top performer again?
- How much do you think investors should have in value?
- With the market being so high, what are you telling investors who are just retiring to do?
- Emerging markets have not done well recently. Do you think the possible returns are worth the risk?
Tune in for these and a lot more.
Oct 17 2018
Rank #15: How to invest in a bear market
Paul shares bear market observations and advice from Sir John Templeton, Warren Buffet and Peter Lynch, as well as offering his own ideas.
He starts the podcast by reading an article by Jason Zweig, "Everything You Know About the Crash Is Wrong". Jason discusses a period when investors would buy funds at 150% to 200% more than their net asset value because the managers could compound the investments at an average of 20% or more. He notes that the P/E ratio and book value of Radio Corporation of America (RCA), at the peak before the 1929 crash, and the present ratios for Amazon are virtually the same. P/E 73 times earnings and 16 times book value.
The bottom line is few saw the crash coming, no one predicted how big the losses eventually would be, or how long it would take to break even.
There are several huge decisions that investors will make. Those life changing decisions will be when to start investing, asset allocation, fund selection, expenses, how to take advantage of bull markets, and how to manage money during a bear market. Anything that gets in the way of making these decisions prudently will likely make much less in the long term. It may be the decision of how to invest in the bad times is the toughest of all.
Paul asks investors to carefully figure out what their primary objective is. “That will give you most of what you need to know about investing in bear markets,” he says. He discusses the difference between how young investors, pre-retirees and retirees should deal with a bear market, and the bear market differences between taking variable and fixed distributions.
Nov 06 2019
Rank #16: Thoughts on 2020 and Q&A from Paul’s Listeners & Readers
Listen to Sound Investing on your favorite listening platforms:
In this podcast, Paul shares his thoughts for the coming year and answers investor questions.
- The S&P 500 has made 5% more than the portfolio you recommend. Should I put it all in the S&P? 14:50
- What do you think of the new Avantis ETFs?27:05
- What do you think about structured notes? In the answer I make reference to an article by Larry Swedroe: 31:34 https://alphaarchitect.com/2019/08/22/structured-notes-the-exploitation-of-retail-investors/
- Can whole life insurance cash value be considered the same as bonds? 37:59
- I am 27 with a wife and 2 year old daughter. What should I do with $150,000? 41:45
- I want to live on $2 million in retirement. What dividend funds do you recommend? 48:16
- What do I do if my 401k does not offer target date funds? 53:31
- For a young investor do you prefer your portfolio 7 (well diversified) or portfolio 8 (all value). 58:33
This is the link to the recommended portfolios: https://paulmerriman.com/best-in-class-recommended-portfolios-2019/
Jan 03 2020
Rank #17: Is dollar cost averaging the best approach? And what’s the future of small-cap value index funds?
In a recent article and podcast on diversification, Paul noted that dollar cost averaging can be a form of timing diversification. It ensures that an investor will not put all his/her money in at the top of a market. It also ensures "picking up more shares when prices are lower and fewer shares when prices are higher.” Paul suggested that many "lump sum” investors would enter the market more successfully by dollar cost averaging into it.
Many readers and listeners took issue. They noted that the probabilities of higher returns were greater by putting all of the money to work immediately. Some claimed that his recommendation — to split the investment into a year or two of smaller investments — was going to cost investors a lot of money.
In response, Paul switches sides and makes the case in favor of lump-sum investing over dollar-cost averaging into the market. However, he maintains, there are reasonably high probabilities that some investors could end up with 10 to 20 times more money by using the more conservative dollar-cost averaging approach. Listen and learn why.
In Part II of this podcast, Paul addresses the likelihood that small-cap value index fund returns in the future will be as profitable as they have been in the past. He explains why he thinks total returns may be lower than the past, but also why the relative returns — compared to the S&P 500 — may continue to be higher than most investors expect.
He also addresses the questions:
Has survivorship bias been taken into consideration in creating the long-term returns of small-cap value?
What does Paul Merriman mean by conservative, moderate and aggressive portfolios?
Jul 31 2019
Rank #18: Why doesn't Vanguard add more small-cap value to its TDFs?... and 13 more Q&A
Paul addresses 14 questions from listeners and readers, but first he speaks to an interesting case of an investor who has greater trust in a bar of gold than a government bond-based Vanguard fund.
- Where are your Fine Tuning Tables for 2019? 9:33
- Where can I get a better rate of return in my checking account? 11:20
- Does indexing work as well in a multi-market system, such as international or emerging market funds, as it does in a single market (US)? 15:30
- Do bonds or bond funds have any place in a retirement portfolio before age 50? 19:50
- How should I diversify Vanguard funds in my 401k planner? 23:20
- How can I convince my mother to put a small part of her portfolio in equities? 26:30
- If more small-cap value makes so much sense, why don’t target date funds do that for investors? 31:00
- Where can I find the “Merriman aggressive Target Date Glide Path” recommendations on your website? 36:00
- Do you recommend using Dimensional Funds? 38:00
- Do you believe any specific company provides better investment funds/ETFs than another? 43:00
- There are so many vehicles to invest with: Vanguard, SPDR, DFA, WisdomTree. Invesco etc. Do you think any of these actually have an advantage over another? 45:22
- Do you ever use other forms of investment vehicles, such as closed-end funds? 47:00
- I am 66 and have not considered target date funds. Is there a 2 Funds for Life strategy for older investors with low risk tolerance? 50:45
- I am 62 and have no prior investing experience. Can you advise me on how to invest so I can make a little more money? 1:01:36
- I like your 2 Funds for Life strategy but I would like to add a few more funds beside small-cap value. What additional 2 funds could I add? 1:06:52
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Nov 20 2019
Rank #19: How to avoid the big mistakes pre-retirees make
How to avoid the big mistakes pre-retirees make
Paul addresses the huge decisions facing investors in the final push to meet their retirement goals, about 10 years before retirement. Cautioning against the tendency to jump from one strategy to another or be swayed by Wall Street, Paul presents 12 points for creating a solid long-term investment strategy before you retire. This evergreen recording is from the 2012 special, “Financial Fitness After 50” produced as a premium package for contributors to their local PBS station.
- Have a plan.
- Stop listening to the wrong people; start listening to the right ones.
- Stop paying unnecessary expenses or looking to beat the market.
- Get rid of asset classes with low returns at high risk.
- Add asset classes that have long histories of success.
- Treat every dollar you have invested as if it’s the most important dollar. Do not play with your portfolio.
- Maximize contributions to 401ks and IRAs.
- Become super savvy about the amount of fixed income in your portfolio.
- Don’t conclude that risk is just about losing principle; protect against inflation.
- Know how much you need to retire, driven by distribution plan.
- Know what is “enough" and when enough is enough, and when it isn’t.
- Get good professional help.
Aug 21 2019
Rank #20: Financial Independence Retire Early (Part 1)
Financial Independence Retire Early (Part 1)
Paul joins Ed Fulbright of Fulbright & Fulbright, CPA, PA, on his weekly educational radio program, Mastering Your Money, to discuss the FIRE Movement. F.I.R.E. is an acronym for Financial Independence Retire Early. It's a growing movement of people who are practicing FIRE principles — high savings rates, frugal living, and low-cost index funds — with the expectation of retiring decades earlier than expected. Paul sees “FI”, Financial Independence, as a long-held desire of most people, while the “RE”, Retire Early part, makes sense in an age where people often work multiple jobs, have multiple careers, and working from home is an increasing option. Join them for this discussion on "Do You Want To Retire Early?” Paul will be addressing the “Choose FI” group in Seattle on Sept. 28 and in Charlotte, NC on Oct. 12. See this link for more details about these presentations.
Sep 11 2019