Truth Tellers on History of Returns & P.E. Ratios

I had an amazing conversation with David Baughier on the Forget About Money podcast! We discussed my 12 One-Million Dollar Ideas for building wealth, the power of starting early, and why index funds are a game-changer for long-term investing. We also covered the importance of diversification, the benefits of small-cap value stocks, and why sticking with a buy-and-hold strategy beats trying to time the market. Whether you're new to investing or looking to refine your retirement plan, this episode has actionable tips to help you secure your financial future. Give it a listen—you won’t want to miss it! Watch the video here. Download the transcript here

Paul starts the podcast with a discussion of his ⁠special presentation⁠ to the graduating nurses from the College of Nursing at Texas A&M. This presentation was part of a Life Transitions Series. He discusses how he might be able to do a similar presentation for other groups of graduating college students, as well as  groups of investors who are trying to get the most from their company 401k. The second topic is regarding a new set of tables that should help investors figure out potential future returns for the S&P 500, ⁠Small Cap Value, U.S. 2 Fund Index Portfolio and U.S. 4 Fund Index Portfolio⁠. The third topic was motivated by Ben Carlson’s articles on “⁠Why Housing is Everyone’s Favorite Investment⁠” and “⁠What is the Historical Rate of Return on Housing?⁠” Paul recently sold his home and discusses the challenges of figuring out how the profits compared to the S&P 500., As promised Paul had his meeting with David Sterman, an hourly CFP, who has followed our recommendations. Paul discusses his services and costs. Here is his contact information: ⁠https://huguenotfinancialplanning.com⁠  1358 Old Ford Rd. New Paltz, NY 12561 Phone: (917) 553-0675⁠ [email protected]⁠  For those interested in the Boglehead Conference: ⁠https://boglecenter.net/2024conference/⁠

Paul starts the podcast talking about the upcoming Boglehead Conference (Sept.27-29) in Minneapolis.  The following link lists the speakers and topics.  https://boglecenter.net/2024conference/ Q1:  Should I invest $300,000 inheritance all at once or dollar cost average? 02:23 Q2:  If SCV is such a great asset class why do the companies all have such low P/E ratios? 8:06 Q3:  Given that our Roth IRAs have unlimited investment options how should we approach investing in our Roth accounts to best complement the life cycle funds in our 401k? 21:54 Q4:  Should we invest our IRA contributions the first of the year or dollar cost average over the year? 24:56 Q5:  I’m 70 and am considering a combination of the 2040 target date fund and small cap value.  How much should be in each? 26:34 Q6: Been in Ultimate Buy and Hold since 2013. I’m thinking about simplifying by using 2 or 4 fund portfolios. What are the pros and cons of change?  ⁠Recommended reviewing.⁠ 29:37 Q7: Can I still rollover regular IRAs into Roth now that I am retired?  ⁠Recommended reading.⁠ 35:50 Q8:  As a risk reducer to equities can I use T-Bills and money market funds rather than any kind of bonds. 37:35

Paul starts with a general discussion of the decision to trust recent returns or make investment based on longer term returns.  He uses AVUV and ARKK as two investments you could have made in September 2019.  In the discussion he references a video where arkk creator and fund manager predicts future arkk returns.  Q: #1:  Why should future results look like the past? 16:15 Q: #2  We are in mid 50s and we think we have more money than we will need in retirement.  Is there a rule of thumb for how much money one needs?  Should one just figure out their cost of living and back into the amount needed for retirement? 26:50 Q#3  Have you done a comparison of your returns compared to Dave Ramsey’s recommended portfolios? 32:55 Q #4  How can we teach young investors about the advantage of starting investing ASAP?  See the following set of PowerPoints for the ⁠⁠Orange County AAII⁠⁠.  40:02 Q #5  What is your take on Crypto Currency?  Here is what people I trust say about CC. Warren Buffett:  “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” Buffett said in 2018. And his stance hasn’t wavered since. According to Benzinga, Buffett believes that cryptocurrencies aren’t a viable or valuable investment.  “Now if you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything,” Buffett said at the Berkshire Hathaway annual shareholder meeting in 2022. Ben Carlson:  I have no idea what will happen with bitcoin or cryptocurrencies in general in the years ahead. Anyone who thinks they know with certainty how this all plays out is delusional. But I can say that my stance on crypto has evolved over the years to the point where I think the best-case scenario just might be the new digital gold. Larry Swedroe  Swedroe took a more skeptical view of Bitcoin. He pointed out that Bitcoin’s value proposition is questionable. ⁠Bitcoin⁠ has a theoretical limited supply, capped at 21 million coins. However, the existence of an unlimited number of substitute cryptocurrencies means Bitcoin faces a daunting challenge.  An asset with an unlimited supply typically sees its value approach zero. Swedroe categorized Bitcoin as a Ponzi scheme, though he acknowledged that it could achieve high trading values based on what people are willing to pay.

1.  My husband and I are moving to Fidelity to set up your Ultimate Buy and Hold Portfolio.  How do we make the change from our holdings to your portfolio?  Do I have to sell all of my holdings?  Plus we want to find an hourly advisor  to help.  Can you make a recommendation? 1:45   2. I have $1million in a money market fund.  Do you think it is time to start reducing the cash position and moving to short term bonds or equity ETFS? 8:45   3.  Are target date funds the same as all in one funds? 17:15   4.  I would like your guidance on the decision to put together a S&P 500 and Small Cap portfolio using 3 to 1 leveraged fu?nds.  Does the extra return justify the higher risk? 20:00   5.  How should I protect my portfolio against inflation from the loss of the petrodollar? 35:00   6.  From what I can see you have not addressed investment needs of older people in their 80s and 90s.  How should I invest?  I just can’t afford to lose money at my age. 39:17   7.  Would I be dumb to have 10% of my retirement funds in gold? 46:20   8.  With the fed getting ready to lower interest rates should I move my money market funds into 10 year Treasuries? 52:40   9.  In the small cap blend and small cap value indexes it seems investors don’t get the advantage of owning small companies that grow to be the giants of corporate America.  How do you get the premium when you have to sell the companies when they move beyond their index? 59:15   10.  What is the difference between your 2 Funds for Life strategy and the two fund strategy that holds the S&P 500 and small cap value? 1:01

1. What is the best glide path (asset allocation) for a 58 year old pre-retiree and then in retirement? This is the link for Chris Pedersen’s 2 Funds for Life glide path. 2:50 2. I don’t need all of my RMD (required minimum distribution). How should I invest the excess? Here is the link to the video on "My 12 Favorite Vanguard Funds for Retirees” and the link to all of the Fine Tuning Tables. 11:19 3. My wife has easily onset demential. It’s costs $200,000 a year. How should a family invest in a situation like ours? Here is the link to the Vanguard Brokerage CDs (⁠https://investor.vanguard.com/investment-products/cds⁠) and ⁠stantheannuityman.com⁠ for MYGA rates.  17:18 4. What are your thoughts regarding precious metal investing? And if there is a place, what is the best way to do it? 22:52 5. Will the massive increase in passive investing, which has benefited the large cap growth indices, reduce the long term returns of small cap value? Here is the link to the long term returns Paul mentions. 28:50 6. How would the long term returns change if we overweight the U.S. 4 Fund Portfolio with slightly more small and large cap value? Here is the link to the Equity Asset Classes (1928-2023) 32:01 7. I’m 72 and my wife is 63. How different should our glide paths be? Here is the link to the Vanguard and Blackrock TDFs. 44:10 8. Are REITTs more like stocks or bonds? 46:41

On July 25, 2024 Paul and Chris made a presentation to the Puget Sound AAII.  Paul spoke to the latest research on small cap value and Chris spoke to the latest research on his 2 Funds for Life Portfolio.  Following the presentation  they answered questions from the guests. Q:  What advice do you give on conversion of regular IRAs to Roth IRAs?Q:  What investments do you recommend to offset large losses in the equity markets?Q:  Why do you recommend AVUS over VOO, or other S&P 500 funds?  In Chris’ answer he recommends listeners read his AAII article on ETF Selection.  Q:  Why don’t you recommend Long Term Treasury Bond fund?  Vanguard Long Term Treasury VGLTQ: Do you recommend a pension and/or Social Security  be considered the equivalent of a bond fund?Q:  Can you compare RSP (an equal weighted S&P 500 Fund) vs. SPY? Watch the full video here.

In this podcast Paul discusses an article by Truth Teller Ben Carlson (The Biggest Winners in the Stock Market), regarding a study by Dr. Hendrik Bessenbinder (Which U.S. Stocks Generated the Highest Long-Term Returns ) This study is an update from an earlier study from Bessenbinder that Paul has recommended many times.Paul also discusses an article by Truth Teller John Rekanthaler,  "When Rebalancing Creates Higher Returns—and When It Doesn’t” This article adds to THE discussion of the impact of rebalancing on the latest video/podcast.

Paul, Daryl, and Chris are together again to discuss what they each think are the best single charts or graphs to help people understand investing and make good decisions. Paul starts by asking Chris and Daryl how much we can rely on the past to predict the future. Paul follows that with a deep dive into his choice for the most important chart -- the quilt chart. Daryl follows up with his choice -- a discussion of the tell-tale chart.Chris finishes with his choice: a discussion of the 2 Funds for Life Fine Tuning Table. Tables referrenced- Table J1b- Equity Index Returns: 1-yr Periods (1928-2023)  ⁠Table K1a⁠- 4 US Asset Class Indexes & 4 Fund Combo Relative Return Ranking (1928-2023)  ⁠Table K2a⁠ Asset Classes & 4 Fund Combo (1928-2023) - Return Rank Frequency  ⁠Table K1b⁠ S&P 500 & US SCV Relative Return Rank Comparison (1928-2023)  ⁠Table K8a⁠ Sound Investing Port. Returns: 10 Yr Periods (1928-2023)  ⁠Table K6a⁠ Sound Investing Portfolios, S&P 500 & US SCV Relative Return Ranking (1928-2023)  ⁠Table K7a ⁠ Sound Investing Portfolios, S&P 500 & US SCV (1928-2023) - Return Rank Frequency    Watch video here.

One of the most challenging aspects of being a 100% do-it-yourself investor (DYI) is dealing with the emotions of wanting to make major changes in a portfolio due to what may easily be seen as catastrophic news. The DYI doesn’t have a professional to help them think through the difficult times like the 2008 meltdown, the October 19, 1987 22% one day decline or currently, the upcoming election results. Paul believes one of the best sources of professional support a DYI could have is George Sisti’s,  "On Course Financial Planning Vectors" newsletter.  On this podcast Paul reads Sisti’s July issue focused on “The Election!” as well as the misleading “noise” that investors get from the typical predictions that Wall Street produces this time of year. Paul recommends investors read George's letters anytime they are feeling uncomfortable with the market.  He even suggests that investors download his archived letters for future reading.