Sound Investing

In this special episode, Paul Merriman reflects on six decades of financial evolution, sparked by his son's 60th birthday. He draws fascinating comparisons between life and investing in 1965 and today, offering invaluable insights for every investor.What You'll Learn:A Look Back at 1965: Paul revisits societal norms, income levels, and the investing landscape of 60 years ago, including startling facts about mutual fund loads and stock commissions.The Evolution of Investing: Understand the monumental shift from individual stock picking to the dominance of mutual funds and the revolutionary impact of index funds since their inception.Market Returns & Bear Markets: Gain perspective on historical S&P 500 returns, including adjustments for inflation, and a review of major bear markets over the past decades.The Power of Low Costs: Discover how investment costs, from loads to commissions, have drastically reduced, making it easier and more affordable for today's investors.Modern Investment Tools: Paul highlights the advent of crucial financial tools like IRAs, 401(k)s, and target-date funds that weren't available in 1965, empowering today's investors.Academic-Driven Investing: Explore the rise of academic influence in investing, with a focus on firms like Vanguard, DFA, and Avantis, and why their approach offers a trustworthy path to your financial future.The Role of AI in Your Financial Journey: Paul shares his perspective on how Artificial Intelligence can empower investors to make informed decisions and find reliable financial guidance.Top Financial Education Resources: Learn about the highly recommended (and free!) "Rebel Finance School" by Alan and Katie Donoghan for new investors, and explore how to access financial literacy programs like iGrad.The Importance of Financial Literacy: Paul emphasizes that financial literacy is often overlooked in traditional education and is essential for building a robust portfolio that will support you for a lifetime.DIY Investing Philosophy: Paul reaffirms his core mission as a teacher, empowering listeners to "do it yourself" and build their financial future with confidence.Truth Tellers: Paul asked our listeners for recommendations for Truth Tellers as well as providing the list of our Truth Tellers in the show notes.Our Truth TellersWilliam J. BernsteinBen Carlson, CFA Jonathan Clements, Financial Writer/AuthorLarry Swedroe, Author, Speaker, Chief Research Officer Dr. James Dahle, MD and the founder of The White Coat Investor Morningstar – Christine Benz and John Rekenthaler, Financial Writers Stan The Annuity Man, Annuity ExpertGeorge Sisti, Certified Financial Planner® Rob Berger, podcaster, writer and author Tim Ranzetta, ngpf.orgTwo CentsTom Cock and Don McDonald VestoryBen FelixDon't miss this insightful episode filled with historical context, practical advice, and forward-looking strategies for your wealth-building journey.

Today I’ve got a lot to share: my recent trip to Western, new educational tables from Daryl Bahls, a must-read article by Ben Carlson, a fantastic free resource called Rebel Finance, and some takeaways from the latest Bogleheads meeting. Last week, I spent two full days at Western, meeting with students, faculty, and staff. I gave presentations to graduating seniors, a personal finance class, and the Financial Management Association Club. These students were eager to learn about building a strong financial future, and it was inspiring to see so much enthusiasm.To get students excited, I sponsored a $1,000 drawing—no strings attached. If the winner wanted, I offered to personally help them set up a Roth IRA and invest the money for long-term growth. The goal was to show how even a single investment can grow over a lifetime.That brings me to two new tables created by Daryl Bahls. These tables make the power of compound growth real. The first table shows what happens if you invest $1,000 at age 22 in a Roth IRA and let it grow at 8%, 10%, or 12% annually. At 8%, that $1,000 could become $30,000 after 45 years—and even more when you factor in distributions and inheritance. At 12%, the total benefit can reach over $3 million! The second table looks at saving $100 a month for 45 years. With steady returns, this strategy can result in a retirement nest egg of hundreds of thousands—even millions—of dollars, plus generational wealth for your heirs.A key lesson: with lump sum investing, the sequence of returns doesn’t matter much. But with regular monthly investing, buying more shares when prices are low can significantly boost your long-term results. This is especially true in volatile markets like small-cap value stocks.Of course, many people face hurdles getting started—thinking it’s too complex, not having enough money, or fearing loss. My advice is: start small, stay consistent, and use the resources available to you.Speaking of resources, I want to highlight Rebel Finance, a free 10-week course led by Alan and Katie, a couple who retired early and now teach others how to manage money and invest. Their sessions are interactive, practical, and archived on YouTube. If you—or someone you know—needs a supportive, step-by-step introduction to personal finance, Rebel Finance is a fantastic place to start.I want to highlight the Merriman Financial Literacy Program at Western. This initiative is close to my heart and is designed to give every student—regardless of their background—the tools and knowledge they need to make smart financial decisions for life. Thanks to the program, all graduating students at Western receive free access to iGrad, a comprehensive suite of financial education tools and courses. I also want to mention Ben Carlson’s article, “On the Inevitability of Bear Markets.” Carlson shows that bear markets are unavoidable—there’s a 77% chance you’ll experience one in any 5-year period, and a 95% chance over 10 years. But the longer you stay invested, the greater your odds for positive returns. Historically, holding the S&P 500 for 20 years has always resulted in gains.Finally, I had the pleasure of attending a Bogleheads local chapter dinner. It was inspiring to meet others interested in index investing and financial education. We shared ideas, discussed financial planning tools, and talked about helping our families build wealth. I’ll also be speaking at the Bogleheads Conference in October—check the show notes for details.Before I sign off, a quick note: AI is changing how we learn and teach about investing. I’m using it to organize my thoughts and create better presentations. If you have thoughts or experiences using AI in your financial journey, I’d love to hear from you.Thank you for listening! If you found today’s episode helpful, please like, subscribe, and share it with someone who could benefit. Your support helps us reach more people and make a bigger impact. Good fortune, and happy investing!

In this episode, Paul Merriman details his upcoming presentations at Western Washington University, where he will be connecting with students, professors, and staff about the critical importance of personal finance education. Paul also gives practical investing advice, including a hands-on guide to using Morningstar’s chart and comparison tools to analyze mutual funds and ETFs.Special Feature: Free Online Financial Literacy CoursePaul spotlights a fantastic, free multi-week financial literacy course led by Alan and Katie Donoghan—nationally recognized educators from the UK. This course is perfect for first-time investors of any age, as well as anyone looking to build a solid foundation in personal finance.Course Dates:The next session starts 2 June 2025 at 8pm UK time. Sessions run weekly throughout the summer.What’s included: Engaging lessons on investing basics, budgeting, mortgages, and money management—delivered in a fun, approachable style.Format: Live online sessions (with replays on YouTube), each followed by an expert Q&A.Who’s it for: Anyone—from college students to adults in their 40s or 50s—looking to take control of their financial future.Previous students give rave reviews: Over 15,000 people have enrolled, with glowing testimonials from participants who now feel confident and empowered about their finances.How to join: Register here for free and find the intro video and full schedule. All sessions are accessible worldwide.Morningstar Tools & Tables Referenced:Paul walks listeners through using Morningstar’s chart and comparison features, specifically referencing the following funds and time periods:VFINX (Vanguard 500 Index Fund):Time period: From August 31, 1976 to May 23, 2025Used to illustrate long-term S&P 500 performanceTESIX (Franklin Mutual Shares Fund):Time period: From August 31, 1976 to May 23, 2025Compared side-by-side with VFINX to show how a value fund performed versus the S&P 500 over nearly 50 yearsDFLVX (DFA US Large Cap Value Fund):Time period: From 1993 to 2025Compared with TESIX and VVIAX for large cap value performanceVVIAX (Vanguard Value Index Fund):Time period: From 1993 to 2025Used for comparison with DFLVX and TESIXDFSVX (DFA US Small Cap Value Fund):Time period: From 2000 to 2025Compared with TESIX for small cap vs large cap value performanceAVUV (Avantis US Small Cap Value ETF):Time period: From 2021 to presentCompared with DFLVX and VVIAX for recent small cap value performanceHow Paul Uses Morningstar:On Morningstar, Paul suggests:Navigating to the “Chart” tab for each fundSelecting “Max” to see the longest available performance historyEntering ticker symbols (like VFINX, TESIX, DFLVX, VVIAX, DFSVX, AVUV) in the “Compare” box to view multiple funds together- make sure any funds being compared to the primary fund have a track record from a date at least as long as the primary fundUsing Morningstar’s Chart and Compare tools:Compare VFINX vs TESIX (1976–2025)Compare DFLVX, VVIAX, and TESIX (1993–2025)Compare DFSVX vs TESIX (2000–2025)Compare AVUV vs DFLVX and VVIAX (2021–present)PDF showing the above comparisons

Prior to discussing his topic of the day, Paul shares his thoughts on a recent podcast featuring Truth Tellers Tom Cock and Don McDonald, joined by Weston Wellington from Dimensional Fund Advisors. Weston weighs in on some of the most critical issues facing investors right now.Here are the topics on the podcast with Tom Cock and Don McDonald-0:53 Weston Wellington on volatility and market uncertainty2:47 Why volatility is the “price we pay to play”3:32 The media’s role in investor anxiety4:57 Should investors act on daily financial advice?6:15 Portfolio changes should reflect personal changes, not headlines7:24 Spam vs. Motorola: A lesson in stock picking9:44 Dimensional’s stance on individual stock ownership10:02 Diversification as “the closest thing to a free lunch”11:07 Are alternative investments the new magic bullet?12:43 Mutual funds vs. ETFs—what works best and when15:27 Industry evolution: from 8% loads to indexing dominance18:29 Where Dimensional fits in the modern fund landscape21:01 AI vs. “aggregated intelligence” in managing portfolios24:04 How regular people can find real financial advice25:34 The key to success: Temperament, not timing26:44 Weston’s side gig as a roving birthday singer27:58 Why Weston hasn’t been invited lately (and he's lonely)Next, Paul highlights a recent article by another Truth Teller, Ben Carlson. In “60/40 Portfolio Corrections, Bear Markets and Recoveries,” Ben breaks down the differences in returns during bear markets and the bounce-back that follows. Inspired by this, Paul explores a question that doesn’t get much attention: What’s the impact on a portfolio when you apply a 4% fixed withdrawal rate to the nine Sound Investing equity portfolios, each with a 60/40 equity-to-fixed income split? The results may surprise you!Paul notes there’s more to come on this topic, as these findings could have a real impact on how investors choose their retirement portfolios.As promised, here are the links to the Sound Investing Portfolios:50% U.S. / 50% International70% U.S. / 30% International

Being a do-it-yourself investor can be both rewarding and challenging. In this episode, we explore the essential mindset and strategies needed to succeed in the long term. Drawing from academic research, historical data, and decades of experience, this episode covers:Why short-term returns are often just noise and how to focus on the bigger picture.The importance of a 20-30 year horizon for small-cap value investments.How to avoid emotional decision-making and set realistic expectations.Insights into the performance of small-cap value vs. the S&P 500 over 25+ years.The role of faith, patience, and discipline in building a successful investment portfolio.Paul also provides a step-by-step guide to help investors analyze the numbers referenced in this episode. Follow these steps to compare small-cap value funds and the S&P 500:Steps to Analyze Performance on Morningstar:Open morningstar.com.Enter DFFVX in the search box at the top of the page.Open the Chart option located next to the Quote.Select MAX next to the Start Date to view the full performance history.One by one, enter the following ticker symbols into the Fund Chart Compare search box and hit return after each:This process allows you to visualize and compare the performance of these funds over time and gain a deeper understanding of the data discussed in this podcast.Whether you're 25 or 81, this episode is packed with actionable insights and encouragement to help you stay the course and achieve your financial goals. Listen now for expert advice and a fresh perspective on long-term investing!Links that Paul uses in this podcast-Bootcamp #1 - Biggest Decision of All: Stocks vs. BondsAvantis Quilt Chart

Discover the clash between market timing and buy-and-hold investing strategies. The discussion dives into Warren Buffett's decisions and the emotional struggles investors face. Learn why timing the market can lead to costly mistakes and how emotional choices can derail investments. Uncover ten compelling reasons market timing fails for most, while buy-and-hold emerges as the less stressful, more rewarding option. This insightful dialogue emphasizes discipline, patience, and the peace of mind that comes with a long-term commitment.

Paul Merriman, a financial literacy advocate and founder of The Merriman Financial Education Foundation, shares insights on the significance of financial education, especially for the youth. He discusses innovative initiatives, including a program at Western Washington University that introduces vital online resources for students. Paul emphasizes the importance of self-education to empower individuals in making informed investment decisions. He also showcases collaborative efforts among organizations to enhance financial literacy across different generations, advocating for a financially educated future.

Watch video hereThis updated discussion of the Ultimate Buy and Hold Portfolio highlights the advantages of equity asset allocation and worldwide diversification. The presentation was presented to members of the Washington State Society of CPAs. At the end of the presentation Paul adds his list of 15 million dollar decisions that all investors will make in their lifetime.

Join Rick Ferri, a leading expert in low-cost investing and host of the Bogleheads on Investing, along with Paul Merriman, founder of the Financial Education Foundation. They dive into essential topics like the pros and cons of small-cap value versus total market funds. Discover the significance of asset allocation, the challenges of target date funds, and the value of including international equities in a portfolio. They also share insights on maintaining a disciplined investment strategy amidst market volatility and the importance of informed decision-making for young investors.

In this riveting debate, economist Karsten Jeske, known for his straightforward investment strategies, faces off against veteran Paul Merriman. They hash out the merits of small cap value investing versus simpler index approaches like 'VTSAX and chill.' Merriman touts small cap value’s historical outperformance, while Jeske warns that its advantage may fade in today’s efficient market. The stakes are high—potentially millions for retirement as they unravel topics like diversification, investment complexity, and the importance of understanding risk in financial planning.