Chris & Paul October 2025 Q&A: Best-in-Class ETFs, Equal-Weight vs. Cap-Weight, and How Much Small-Cap Value?

Watch YouTube video here.Paul Merriman and Chris Pedersen tackle your biggest questions—from simplifying portfolios and picking best-in-class ETFs to understanding equal-weighted funds, tax efficiency, and how much small-cap value to own. They dig into factor investing (size, value, quality, profitability, momentum), why reversion to the mean matters, and how to think like an owner—not a speculator. Plus: mentors, work-life balance, and the real risk investors face.Chapters00:00 – Intro & Mentors05:07 – Portfolio Simplification10:13 – Work-Life Balance11:39 – Which ETFs will outperform?20:15 – Importance of Quality22:45 – Equal-Weighted Funds26:14 – History: how long is enough?29:58 – Cost of public indexing33:30 – Equal-weight fund tax vs. ETF35:21 – How much small-cap value?39:47 – Why three EM ETFs?42:28 – “All Avantis” risk?49:45 – Technology sector history & mean reversion53:00 – Be an owner, not a speculator55:27 – OutroKey Takeaways“Best” ETF ≠ next year’s top performer—seek consistent factor exposure, low costs, broad holdings, and tax efficiency.Equal-weighting boosts small/value exposure but can increase turnover and tax drag; pairing large-cap blend with small-cap value can be more efficient.Decide small-cap value allocation by temperament (common range: 10–50% of equities when pairing with S&P 500/target date).Index approach vs. index label: DFA/Avantis are systematic and rules-based without telegraphing rebalances.Think like an owner: over decades, earnings—not sentiment—drive returns.Resources• Best-in-Class ETF Recommendations (2025): https://www.paulmerriman.com/best-in-class-etf-recommendations-2025#gsc.tab=0• Sound Investing Portfolios, Returns & Risks: https://www.paulmerriman.com/sound-investing-portfolios#gsc.tab=0• “Tune Out the Noise” (DFA Documentary): https://youtu.be/T98825bzcKw?si=kFMugnSSCn2E76sI

In this week’s episode, Paul Merriman shares lessons from a lifetime of investing—prompted by conversations with students, longtime collaborator Rich Buck, and questions from new investors about trust and risk.Paul dives deep into the data behind his favorite long-term strategies, including the equal-weighted S&P 500 and the classic Four-Fund Portfolio, comparing 25-year results across multiple time periods.He explains why no one can predict short-term returns, but how history can still guide your long-term strategy. Using decades of data, Paul shows how diversification across size and value has rewarded disciplined investors—even when recent performance has lagged.Referenced Tables & Data:40-Year Returns (1928–2024): S&P 500 best 12.5% / worst 8.9%25-Year Periods (1950–1974, 1975–1999, 2000–2025)Equal-Weighted S&P 500 (VADDX/RSP) vs. Cap-Weighted (VTSAX, S&P 500) DFA Small Cap Value (DFSVX and DFFVX)vs. Russell 2000 Small Cap Value (IWN)Four-Fund Portfolio (S&P 500, Large Cap Value, Small Cap Blend, Small Cap Value)Two-Fund Portfolio (S&P 500 + Small Cap Value)From 2000–2025, the S&P 500 compounded at 8.3%, while the equal-weighted version earned 9.9%, and small-cap value reached 11.1%. Paul explains why this premium persists and why patience—backed by data—is an investor’s greatest advantage.Full tables and charts available at PaulMerriman.com 

In this final episode of our four-part series, Paul Merriman compares three powerful approaches for a lifetime of investing:100% S&P 500: high-risk, high-reward growth.60/40 mix of S&P 500 and bonds: a defensive balance.100% U.S. Four-Fund strategy: large-cap blend, small-cap blend, large-cap value, small-cap value.Paul uses 55 years of data (1970–2024) to show how these portfolios performed during both accumulation and retirement distributions. Paul highlights the following critical tables from the Bootcamp series. Table B1 - Fine Tuning Table: S&P 500 Equity Portfolio Table B4 - Fine Tuning Table: US 4-Fund Equity PortfolioTable C4 - Fixed Contributions ($1,000/yr): US 4-Fund Equity PortfolioTable D4.4 - Fixed Distributions (Conservative-$40,000/yr): US 4-Fund Equity Portfolio  Table H2 – Sound Investing Portfolios (100% Equity)Table H2A – Sound Investing Portfolios (60/40)Table D1.4 – Fixed Distributions ($40k + inflation)Did diversification deliver higher returns without extra risk? Or was the classic S&P 500 enough?Get the numbers, the tables, and the takeaways to help you decide.

Paul Merriman continues our series on radical lifetime investment strategies—comparing an all-equity S&P 500 portfolio to a balanced 60% equity/40% bonds portfolio.After two episodes focused on the accumulation phase, this third installment shifts to retirement distributions:How much income could each portfolio provide?How did they hold up during major market crashes?What role did bonds play in protecting withdrawals during tough years?Using 55 years of historical data (1970–2024) and key tables B1H2H2AD1.4 Paul shows the real-world impact of these strategies when you’re living off your investments.Listen now to see why adding bonds can be a lifesaver in retirement—even if you love the growth potential of stocks.

At FinCon, Chuck Gaffe- moneylifeshow.com sat down with Paul for a wide-ranging conversation about investing and financial independence.Paul shared insights on the rise of index funds, the FIRE movement’s “one-fund-for-life” approach, and how small portfolio adjustments can boost long-term returns. He also discussed timeless investing principles like staying the course, understanding risk, keeping costs low, and diversifying wisely.At FinCon, Paul reflected on everything from the rise of index funds to the FIRE movement’s “one-fund-for-life” strategy. His message was clear: while simple investing solutions can work, small, thoughtful adjustments—like adding different asset classes—can meaningfully improve long-term returns.Paul also emphasized timeless investing principles:Stay the course. Don’t bail when markets turn volatile.Understand your risk. Know how much you can afford to lose before the storm comes.Avoid unnecessary costs. A fraction of a percent in fees can add up to millions over a lifetime.Diversify wisely. A broad mix of assets offers protection and opportunity across market cycles.Whether discussing crypto, ETFs vs. mutual funds, or portfolio allocation strategies, Paul’s advice always comes back to one goal: helping investors achieve financial independence with confidence and peace of mind.You can explore his free resources, podcasts, and articles at paulmerriman.com

In Part 2 of this 4-part series, Paul Merriman compares the accumulation results of the U.S. 4-Fund Portfolio against the S&P 500, using both all-equity and 60/40 strategies.Paul analyzes five decades of data, showing how diversification affects returns, volatility, and long-term wealth creation. Paul also highlights the tables you’ll want to download and follow along with as he explains the numbers:Table B1: Fine-Tuning Table – S&P 500Table B4: Fine-Tuning Table – U.S. 4-Fund PortfolioTable H2a: Sound Investing Portfolios – 100% EquitiesTable H2: Sound Investing Portfolios – 60/40 PortfoliosTable C1 & C4: Fixed Contributions for Accumulation AnalysisNext week: We'll look at the distributions in retirement using the S&P 500 in both the 100% equity and 60% equities/ 40% bonds.

This is the first of a series of 4 podcasts focused on the decision to have all of your investments be all equities vs. a balanced portfolio of equities and fixed income.  In this presentation Paul uses the S&P 500 in  both the all equity and the 60/40 stock/bond portfolio.  He uses the following tables during his presentation.Table B1 Fine Tuning Table: S&P 500 Equity PortfolioTable H2a Sound Investing Portfolios (these portfolios are all 100% equities)Table H2 Sound Investing Portfolios (these portfolios are all 60% equities/40% fixed income) (NEW)Table C1 Fixed Contributions ($1,000/yr: S&P 500 Equity PortfolioIn the next presentation he does the same analysis using the U.S. 4 Fund and Worldwide 4 Fund Portfolios for the equity portion of the portfolio.

Paul starts this letter beginning with a letter from a listener. The letter ends with the reason why our work has had more impact than John Bogle and Benjamin Felix (Both Truth Tellers).  The rest of the podcast is focused on a recent article- ⁠The Evolution of Financial Advice, by Ben Carlson.  The focus is on the math, history and psychology of investing.Paul concludes that most steps to successful investoring are well documented.  But two areas are still open for fine tuning:  Portfolio construction and fund selection. To help in that Paul recommends three Boot Camp Presentations:  Fine Tuning Your Asset Allocation, Fixed Contributions and Fixed Distributions.

On this podcast, Paul Merriman dives into three big investor questions: Why would anyone add bonds to their portfolio—even in retirement? How has the Ultimate Buy and Hold Portfolio performed in 2025? And how much Small Cap Value should an investor add to VTSAX? Along the way, Paul explains why diversification and balance matter just as much as chasing higher returns.During the podcast Paul references ⁠Table G-1b, Fine Tuning Table: S&P 500 vs. US SCV Equity Porfolio - Out-Performance⁠ and ⁠Table H2a - Sound Investing Portfolios: Comparison Data ⁠, Quilt Chart K1a. He also points to Chris Pedersen’s Best In Class ETF Recommendations and his 2 Funds for Life returns table. These resources provide valuable context for comparing U.S. vs. international returns, equity vs. bond allocations, and how small-cap value can enhance a long-term strategy.

Paul Merriman is looking ahead to the 2025 Bogleheads Conference (October 17–19), one of the premier gatherings for long-term investors. The lineup includes Vanguard CEO Salim Ramji, Christine Benz, Bill Bernstein, Rick Ferri, Alan Roth, Jim Dahle, and more. Paul will be there for all three days to connect with listeners, share new projects, and learn from some of the best minds in the field. Even if you can’t make it, all sessions will be available later on the Bogleheads YouTube channel.In this episode of Sound Investing, Paul also revisits key lessons on building lasting portfolios. He explains why small-cap value has historically outperformed the S&P 500, how the Four-Fund Strategy makes diversification simple and effective, and why tax-efficient investing matters for 401(k)s, IRAs, Roths, and taxable accounts. He also highlights the importance of financial education for young people, pointing to NGPF.org’s Question of the Day as a powerful way to spark conversations about money. And, of course, Paul shares a reminder about the risks of hype-driven assets through the story of Bitcoin Pizza Day.To close, Paul adds a lighter touch by reading a poem about cryptocurrency—written in the playful rhythm of The Music Man.