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Your questions answered, our plans revealed
53:33This podcast (also a video) answers questions from our listeners, viewers and newsletter subscribers, and updates you on our upcoming projects. Paul Merriman, founder and president of The Merriman Financial Education, is joined by Chris Pedersen, Director of Research and author of 2 Funds for Life — A quest for simple & effective investing strategies, and Daryl Bahls, Director of Analytics. Topics: What’s on the trio’s to-do list over the next few months? Chris will update the Best-In-Class recommendations. Daryl will update all of the important tables, including: Ultimate Buy and Hold, Fine Tuning Your Asset Allocation, Accumulation and Distributions and the No Nonsense portfolio tables. [Currently found at: https://paulmerriman.com/best-advice/]. Also, Paul will create a new presentation with a discussion of the "White Coat Investor" article, “150 Portfolios Better Than Yours.” Review of 2021 returns. How Chris selects the best ETFs. The two layers of unnecessary costs when hiring an advisor who recommends actively-managed funds. How to decide between an inexpensive index fund in a less-productive asset class and a more-expensive fund in a more-productive asset class. In this case, VSCIX (small cap index) and GSSIX (a small cap value fund). How to invest a $200,000 inherited IRA when the proceeds won’t be used by the present owners in their lifetime. An investor asks if it’s OK to invest in a group of asset-class funds that are not the same as the recommended portfolios on our website. Spoiler alert: Investor puts together a reasonable portfolio. How to invest a big hunk of money when the market looks like it is going to go down or should go down or might go down… who knows? Does Chris’ evaluation include leveraged ETFs? Are they worth considering? What to do about large positions in a company that is your employer?
2021 investment results you should know
43:23In this review of 2021 investment results, Paul shares 10 lessons he thinks will be of interest to you following our advice. 1. How many up and down days did the market produce and how that compares to longer-term profitable vs. losing periods? 2. The market reached 70 new highs during the year. Is that good news or bad? 3. The biggest drawdown for the year was 5.1%. How does that compare to past years? 4. Commodities, oil and Bitcoin were among the big winners in 2021. But why do the reported returns of the S&P and other equity asset classes understate their actual returns? 5. Paul focuses on a short report from Dimensional Funds: When It’s Value vs. Growth, History is on Value’s Side https://www.dimensional.com/us-en/insights/when-its-value-versus-growth-history-is-on-values-side. This study highlights the high volatility in the difference between these two asset classes. Bottom line average advantage to value is more than 5%. 6. Sometimes investing results can be hard to explain. Paul reviews the 2021 small and large value and growth returns in U.S., international and emerging markets. Investors may be surprised to see the huge differences from what might be considered similar asset classes. 7. In our Best In Class ETF recommendations our Director of Research, Chris Pedersen, works hard to identify the ETFs that should be among the best. Paul reviews the results of his recommendations compared to the returns of the average ETF in each equity asset class. 8. Many investors struggle to make the decision Best In Class ETFs or all Vanguard all the time. Paul compares the returns of the BIC ETFs portfolios (U.S. 4 Fund, Worldwide 4 Fund and Worldwide All Value and more) to similar portfolios with Vanguard ETFs. Paul also compares BIC with similar DFA portfolios. Investors have to decide whether those differences will be similar in the future or 2021 was an aberration. 9. Many investors have chosen the Total Stock Market over the S&P 500. Paul discusses the reasons their historic returns are almost the same and why the S&P 500 way outperformed the TMI in 2021. 10. While equity is considered the gas for growth in a portfolio, bonds are considered the brakes. Paul explains why he doesn’t recommend international bonds to stabilize a portfolio and why international bonds lost more money than U.S. bonds in 2021.
How to teach a teenager to invest
53:25If you know anyone in their teens, you can make a significant difference in his or her life. We know that the earlier a person gets started saving and soundly investing, the more they will have for retirement and to leave to others. As a group, teenagers are at a phase where they are seeking independence, moving from childhood to adulthood, and are eager to exercise their freedom, which comes with increasing self-responsibility. Therefore, the best way to teach them about investing is to involve them in selecting and opening a long-term investment account. In this video/podcast discussion Paul suggests the young investor find a partner (parent, grandparent, uncle, aunt, godparent, etc.) to match $50 a year for 10 years. (This could be done with $10) and what that will mean to them over the years. This presentation includes a set of 24 tables that can be used to investigate many of the choices the investor has (see pdf below). Watch this as a video. For information on Custodial Roth IRAs include a link to Schwab Custodial IRA https://www.schwab.com/ira/custodial-ira?src=SEM&ef_id=CjwKCAiA8bqOBhANEiwA-sIlN2MT3u5rQ88ibNnybVheXC-EFqyvlmYK1VsOqo8E_ofYodnmseoaYBoCBDEQAvD_BwE:G:s&s_kwcid=AL!5158!3!495093339246!p!!g!!custodial%20ira%20charles%20schwab!651813075!33944985558&keywordid=kwd-194438821700&gclid=CjwKCAiA8bqOBhANEiwA-sIlN2MT3u5rQ88ibNnybVheXC-EFqyvlmYK1VsOqo8E_ofYodnmseoaYBoCBDEQAvD_BwE and Fidelity Custodial IRA https://www.fidelity.com/learning-center/personal-finance/retirement/turbocharge-childs-retirement https://paulmerriman.com/wp-content/uploads/2022/01/100-per-year.pdf
Part 2- Strategic Planning for Investing in Every Stage of Life
1:01:07Jacek Lempart, the Belguim-based host of System Trader “The craft of investing,” interviews Paul Merriman in this extraordinary in-depth conversation, unlike others you may have heard. It has been divided into two parts. You’ll learn: Who’s Paul, and what’s the story of his careers? How have markets changed over the years? Why is Paul a big fan of academic/scientific knowledge? What should we do to feel satisfied and have a happy life? How to adjust strategy so that it has an appropriate level of risk? Where’s the border between passive and active investing? A systematic approach to investing vs. discretionary The philosophy behind the Ultimate Buy & Hold portfolio? What does Paul think about holding a bit of cryptocurrency as another asset class? Gold and commodities
Part 1 - Strategic Planning for Investing in Every Stage of Life
1:07:46Jacek Lempart, the Belguim-based host of System Trader “The craft of investing,” interviews Paul Merriman in this extraordinary in-depth conversation, unlike others you may have heard. It has been divided into two parts.. You’ll learn: · Who’s Paul, and what’s the story of his careers? · How have markets changed over the years? · Why is Paul a big fan of academic/scientific knowledge? · What should we do to feel satisfied and have a happy life? · How to adjust strategy so that it has an appropriate level of risk? · Where’s the border between passive and active investing? · A systematic approach to investing vs. discretionary · The philosophy behind the Ultimate Buy & Hold portfolio? · What does Paul think about holding a bit of cryptocurrency as another asset class? · Gold and commodities
The Only Way to Guarantee Your Fair Share of Stock Market Returns
47:17In this podcast, Paul makes the case for a multimillion dollar payoff if you decide to be a good Do-It-Yourself investor and do the necessary work. He considers this podcast one of his most important. Using our Fine Tuning Tables and The Merriman Lifetime Investment Calculator, he shows 3 simple ways a conservative well-diversified portfolio, with a retirement portfolio worth only $500,000, would have produced an additional $2,000,000 over 30 years of retirement. To make his points, Paul references: - S&P 500 FTYAA Table - The U.S. 4-Fund FTYAA Table - These sample calculations from our Calculator - The 90-year study (Table 1) that evidences that investor patience leads to better returns. This podcast was recorded Dec. 12, 2021 by Paul in Mexico, as he and his wife, Zan, having sold their home in San Miguel de Allende, were in the last days of moving. Watch Craig's short video "Understand the effect of 1% using our Lifetime Investment Calculator" that goes along with this podcast.
The Evidence (Part 2) 12 Simple Ways Can Supercharge Your Retirement
56:50This is a continuation of the conversation between Paul, Craig Appl, and Chris Pedersen who evaluated the evidence for We’re Talking Millions! using The Merriman Financial Education Foundation Lifetime Investment Calculator, Portfolio Visualizer, and Two Funds for Life back test. This part builds on Part 1, so we recommend that you view Part 1 before this. Download your free PDF copy of the book now to follow along. You can access the Lifetime Investment Calculator at this link, Part 1 reviewed steps 1 – 5 and Part 2 continues with steps 6-12. Save some money instead of spending it all. Start saving sooner instead of later. Invest your savings in stocks instead of bonds and cash. Invest in many stocks instead of only a few. Keep your expenses low. Choose index funds instead of actively managed funds. Include small-company stocks in your portfolio. Include values tocks in your portfolio. Don’t try to “time” the market or outwit it. Invest using dollar-cost averaging instead of waiting for the right time to invest. Keep your taxes low. Do all this in one simple step: Invest in a target date retirement fund.
The Evidence (Part 1) 12 Simple Ways Can Supercharge Your Retirement
59:08About a year ago, we released the book, We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement. A few people have challenged the idea that each of the 12 simple steps, outlined in the book, can net you an additional million dollars. Paul, Craig Appl, and Chris Pedersen evaluate the evidence using The Merriman Financial Education Foundation Lifetime Investment Calculator, Portfolio Visualizer, and Two Funds for Life back tests in this two-part video series. Download your free PDF copy of the book now to follow along. You can access the Lifetime Investment Calculator at this link and the accompanying YouTube video here. Part 1 reviews steps 1 – 5 Save some money instead of spending it all. Start saving sooner instead of later. Invest your savings in stocks instead of bonds and cash. Invest in many stocks instead of only a few. Keep your expenses low.
Is it time to sell?
23:46An investment advisor and long time podcast listener recently wrote to Paul: “By any stretch of the imagination this market (S&P 500) is expensive. Back in 1987 you took your clients to cash or very near cash. Do you feel that that today is the same situation? I’ve never market timed in my career, but today fells like the time to do it if there ever was a time.” Paul discusses what really happened in 1987. He follows that with sharing parts of two blogs by Ben Carlson, CFA and author of the blog, “A Wealth of Common Sense.” Paul also shares the latest predictions for 2022 from two of the most respected financial institutions in America. Hopefully, it will help investors deal with the question: is it time to sell? Happy Thanksgiving! Ben Carlson’s articles referenced in this podcast: "Two Things That Are Both True” "Perma Arguments”
Proof that this simple investment strategy works
56:50In this lively conversation, Paul Merriman and Daryl Bahls interview Chris Pedersen – author of 2 Funds for Life – A quest for simple & effective investing strategies (Oct. 2021) and creator of the 2 Funds for Life strategies – about the simplicity and effectiveness of these strategies and the data that supports them. Below is a link to start reading the book for free. Questions discussed: · How did you get the title of “financial wizard”? · Is the book for young people? · What are some of the questions the book answers, and why should investors care about them? · What's a target-date fund, and why is it the foundation of the 2 Funds for Life strategies? · What's the gist of the 2 Funds for Life approach? · Why is small-cap value the best choice second fund for accumulators and retirees? · Is a target-date fund on its own enough? How much more money did the 2 Fund for Life strategies make in the past? · Why does the book focus on "real" (after removing inflation) instead of "nominal" (including inflation) results? · How much deeper were the drawdowns (losses) for 2 Fund for Life strategies compared to a target-date fund? · Are 2 Fund for Life strategies more resilient after major market declines? · Why might investors need or want some of the deeper details in the book? START READING THE BOOK FOR FREE at our website: https://paulmerriman.com/2-funds-for-life-book/