Sound Investing

This is the second presentation in the Boot Camp Series.Click for video.The first presentation (Stocks Vs. Bonds) will be available in the next two weeks.This presentation makes the case for diversifying a portfolio using multiple equity asset classes.Paul uses 4 set of tables to make his case:A1a:Ultimate Buy & Hold Equity Portfolio (50% US/50% Int'l) A2a:Alternative Equity Portfolio Tables (50% US/50% Int'l)A1b:Ultimate Buy & Hold Equity Portfolio (70% US/30% Int'l)A-2b: Alternative Equity Portfolio Tables (70% US/30% Int'l)Paul also mentions the recent video/podcast that addresses the Sound Investing Portfolios.https://www.youtube.com/watch?v=XGv0ZdZ8adkhttps://www.paulmerriman.com/2025-bootcamp-3-sound-investing-portfolios

In this Podcast, Paul, Chris, and Daryl describe the Sound Investing Portfolios and their background, rationale, construction, and performance.    00:00 - Intro02:00 - DFA Background05:47 - Portfolio Rationale11:45 - Allocations14:11 - Backtesting & Comparisons19:32 - Rewards of Diversification28:42 - Differing Good Times32:40 - 70/30 US/Int'l Portfolios35:05 - Which Funds?39:08 - Close   During the Podcast the following tables were referenced:✅ Table H1a - Sound Investing Portfolios: Asset Allocations (50% U.S. / 50% Int’l)✅ Table H2a - Sound Investing Portfolios: Comparative Data (50% U.S. / 50% Int’l)✅ Table H3a -  Sound Investing Portfolios: Annual Returns (50% U.S. / 50% Int’l)✅ Table H1b - Sound Investing Portfolios: Asset Allocations (70% U.S. / 30% Int’l)✅ Table H2b - Sound Investing Portfolios: Comparative Data (70% U.S. / 30% Int’l)✅ Table H3b - Sound Investing Portfolios: Annual Returns (70% U.S. / 30% Int’l)

Join Paul Merriman as he shares his journey from Wall Street to empowering individual investors. Discover the importance of data-driven investing and the historical advantages of small-cap value investing. Merriman discusses his insightful meeting with John Bogle, contrasting their investment philosophies. Explore the evolution of investment strategies from market timing to buy-and-hold approaches, and learn about the rise of ETFs. He emphasizes the critical role of education and disciplined investing for long-term success in navigating today's complex market.

Discover the impressive growth of a financial literacy initiative that has produced over 1,000 resources since 2012. Learn about the Boot Camp project designed to empower investors with essential financial knowledge. Explore effective investment strategies and the significance of tailored information for making informed decisions. Hear about a commitment to evidence-based education and community engagement, along with new Q&A sections to further enhance learning. Dive into a journey of financial enlightenment and smart investing!

In this first Q&A podcast of 2025, Paul, Daryl, and Chris discuss several listener questions and expand on Paul's rebuttal of Big ERN's recent criticisms of diversifying with small-cap value. 0:00 – Introduction 0:29  – Responding to Big ERN's critique 2:11 –  Small-cap value lumpsum vs. dollar-cost averaging 6:38 –  Daryl's take on SCV's premium persistence 8:46 –  Chris' take on SCV's premium persistence 15:50 –  Paul highlights the random timing of SCV vs. S&P500 returns 19:50 -- Are there good alternatives to Vanguard's Wellesley fund? 26:18 -- Does 2 Funds for Life mean no SCV in retirement? 29:35 -- Why not let Buffet manage our money in BRK.B? 33:52 -- What portfolio to get a 3.6% safe withdrawal rate in retirement? 38:53 -- Which accounts do we tap for our annual spending needs? 49:39 -- Why doesn't the Portfolio Configurator include REITs and emerging markets? 54:52 -- When will the Best-in-Class ETF recommendations be updated? These tables were referenced- Table G-1b - Fine Tuning Table: S&P 500 vs US SCV Equity Portfolio - Out-Performance Tell-Tale_Charts 2 Funds for Life PDF 2 Funds for Life on Amazon

There has been a lot of anti small cap value articles and podcasts over the last several years.   I have been asked many times whether I think the small cap value premium is a thing of the past.In this podcast I have addressed the most commonly discussed criticisms of small cap value.  During the presentation I reference a blog entitled, "Small-Cap Value Stocks: Diversification or Di-WORSE-fication?" The Early Retirement Now newsletter is written by Karsten Jeske, PhD, CFA. Here is a video of a friendly debate that Karsten and I had on the “Forget About Money” podcast. Listeners will learn that Karsten and I have very different beliefs about what returns best represent the small cap value premium.  I reference the real time  Morningstar performance results of DFFVX (2000 to present), DFSVX (1993 to present) and AVUV (2019 to present). During my discussion I reference Table G-1b, Fine Tuning Table: S&P 500 vs. US SCV Equity Porfolio - Out-Performance and Table H2a - Sound Investing Portfolios: Comparison Data I also referenced a Q&A response on Truth Teller Rob Berger regarding his personal take on small cap value in his own portfolio.   I also mention the interview with Jim Dahle at the 2024 Bogleheads Conference. https://www.youtube.com/watch?v=8C3KhRJCwCQ

Dive into the compelling reasons to embrace index funds, from their diversification and lower costs to their tax efficiency. Explore the unpredictable world of active management versus the reliability of index funds, emphasizing the importance of steady performance. Discover how the S&P 500 can offer robust long-term returns, debunking myths about its risks compared to riskier options like cryptocurrencies. This engaging discussion serves as a perfect guide for anyone, especially young investors, looking to secure their financial future.

Paul, Daryl, and Chris discuss the risks of investing and life. Paul starts with an introduction and admission of his challenges managing risks related to diet and health.  He then gets Chris and Daryl to chime in with their definitions and perspectives on risk.  Daryl then shares a framework for evaluating risk from his days as a systems engineer.  The framework looks at risks in two dimensions: likelihood and impact (or severity).  He describes how the framework can help prioritize which risks to mitigate and gives examples of how some financial risks might be reduced in both dimensions.  Chris is reminded of the book "Die with Zero," and mentions how risks extend beyond finances to experiences. Paul, Chris, and Daryl then discuss some of their challenges in managing the risks of their own portfolio allocations and how their behaviors differ from what might be considered ideal. This leads to discussing the dangers of learning the wrong lessons with examples from inside and outside the personal finance world. Paul reads from the Jonathan Clements article that inspired this podcast: "The Risks We Miss."  Paul then closes out the podcast. Outtakes include Paul and Chris discussing how the Best-in-Class ETFs can help mitigate risk, and what Daryl wants for Christmas. Watch video here- https://youtu.be/veXXh-YVYKU

While I was at the Bogleheads conference in Minneapolis earlier this year, I had a lengthy interview with Paula Pant.  I enjoyed the interview and found lots of questions and comments under the YouTube presentation that I wanted to answer.  While I wrote short comments on the site, I decided many of the questions were worthy of more discussion.Here is a link to the YouTube interview and podcast: #1.  “Most of my holdings are in cash as I cashed out last time the market went down.  How do I stay invested and think long-term to help me ride out the ups and downs of the market?”  02:17 #2.  “I’m just beginning my investment journey and planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns.”   https://rethinking65.com/the-preference-for-dividend-paying-stocks-is-irrational/ 10:41  #3. "What Fidelity Funds do you recommend to build your 4 Fund Portfolio?"   15:00 #4.  "How often do you recommend rebalancing the 4 Fund Portfolio?" 17:02 #5  "Nobody knows what’s going to happen next so we should practice some humility and CHOOSE a strategy with a long-term edge."  What is the edge and what else do you need to know dividend stocks k? 21:02 #6.  "I”m not looking to beat the S&P 500…I’m more than happy with the returns I get from it.”  Does that mean it’s right for you? 24:36 #7.  In response to Paul's recommendation of the 4 Fund Portfolio this is what one viewer said, “For what it's worth, backtesting shows his proposed fund portfolio does not do better than VTI or VOO.”  Paul responds. 28:32 #8.  "The only small cap value available in my 401k is DFSVX which has an expense ratio of .30%.  Is this expense ratio too high? 32:32 #9. "Can you give ETF recommendations for all of the equity asset classes?"   Here are the Best In Class recommendations. 35:23 #10. "How do you fund a Roth IRA when a child doesn’t have earned income?" #11.  Please recommend more information on how I might adjust my 401k. We're talking millions and 2 funds for life. 36:37 #11 "Would you accomplish similar performance results by setting up a strategy using sector diversification instead of asset class diversification?" 40:01 #12  "I’m helping my 17 year old daughter with her Roth IRA.  What do you think about shooting for an all equity 40/30/30 portfolio of US small cap value/S&P 500/Total International market?” 42:23 #13. “This guy has been pushing small cap value  and underperforming for years.  Sorry, no thanks." 44:25

The podcast is dedicated to answering questions about:  Target date funds:  “Do you think someone that simply maxes out their retirement accounts with target date funds and total market funds will be “fine”? Selecting a distribution strategy:  What advice can you give to a DIY investor who is trying to decide what to do about how they access their money to live on and how much to take out? Buy and Hold vs. market timing:  I believe in buy and holding  index funds, with low expenses. I don’t think I need to pay an investment advisor to help me do that.  I see the Merriman Wealth Management firm offers buy and hold and market timing services and charges AUM fees.  This is very different from what you suggest on your Foundation website.  What is your relationship with the Merriman firm and what are your beliefs about market timing? All small cap value portfolio:  Do you know investors who are investing 100% of their portfolios in small cap value?  It seems like it might be a smart thing to do with very long term investments for a very young person. Time to start market timing:   I am thinking about using timing with a large amount of new money.  Who do you use for the market timing aspect of your portfolio management?   Flexible vs. fixed distribution strategies:  "I believe you expect that a flexible withdrawal strategy will pay out more money to live on, as well as leave more money to heirs.  Bill Bengen seems to believe that this strategy is not sustainable over the long term even if a person had enough money to accept lower annual withdrawal amounts in market draw downs.  Flexible withdrawal strategies make sense to me but there isn’t much writt en about them.  What am I missing?” The answer to this question includes 4 distribution tables:   Table D1.4 - Fixed Distributions: S&P 500 Equity Portfolio - Conservative ($40,000/yr) Table F1.4 - Flexible Distributions (Conservative-4.0%/yr): S&P 500 Equity Portfolio Table D4.4 - Fixed Distributions (Conservative-$40,000/yr): US 4-Fund Equity Portfolio  Table F4.4 - Flexible Distributions (Conservative-4.0%/yr): US 4-Fund Equity Portfolio  Finally Paul reads four Ben Carlson quotes about the nature of bull and bear markets.  Paul makes reference to a table of annual Price to Earning (P/E)ratios starting in 1871 and another comparing the S&P 500 Price to Book Value from 2000 to 2024.