In this podcast, you’ll learn about the long-term impact of using regular Fixed Contributions and our updated Tables for 2022. For young investors, this can mean adding millions to your retirement. Before listening to this podcast, Paul suggests you review the YouTube 2022 updates on The Ultimate Buy and Hold, Fine Tuning Your Asset Allocation, and No-Nonsense Portfolios.

There are 9 Tables that investors can use to compare the long-term results of using each of these different equity combinations, with the addition of bonds for more conservative investors. The purpose of the tables and this podcast is to help young investors understand the long-term impact of a small monthly investment along with 3% annual increases. The corresponding Fine Tuning Tables are used for return calculations. Paul compares the decade returns of the S&P 500 only with a 50/50 split between the S&P 500 and small-cap value.

Doubling in value: Paul highlights the extra risk of having all the money in one asset class. In the 10 years ending 2009, the S&P 500 declines in value, even including additional investments. Meanwhile, the more diversified 50/50 S&P/SCV doubled in value for the same period. In fact, almost every other portfolio doubled over that 10 year period.

The sequence of return can mean a $1.5 million difference. Paul shows another situation (Tables C8 and C9) where two portfolios had almost the same compound rate of return, but one beats the other by about $1.5 million. It points to how important the sequence of return is. Use The Merriman Lifetime Investment Calculator to test different beginning dates to see the impact of different sequences of return.

Interestingly, the annual result of regularly adding new money seldom leaves the portfolio with less value than the previous year. For example, in the case of the S&P 500, there were only 7 years out of 52 that the following year wasn’t higher than the last. In the case of the 50/50 S&P/SCV, there were only 5 years that the following year wasn’t higher.

Hopefully, this knowledge will help you consider building different portfolio combinations with unique parts of your long-term investments. For example, you could segregate one smaller account that is all small-cap value for the entire period, another in the U.S. 4 Fund Portfolio, and yet another in a Worldwide 4 Fund Portfolio.

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