Sound Investing

This podcast is Part 5 OF AN 8 PART series ON THE MOST IMPORTANT INVESTMENT DECISIONS. The discussion addresses the distribution tables that use a Fixed Distribution Strategy of 3, 4, 5 and 6 percent plus annual increases for inflation.  One set of distributions uses the S&P 500 as the equity position while the other uses the U.S. 4-Fund Portfolio (25% each of S&P 500, Large Cap Value, Small Cap Blend and Small Cap Value).The podcast references information on 8 different distributions tables:Table D1.3 Fixed Distributions: S&P Equity Portfolio-initial distribution $30,000 Table D1.4 Fixed Distributions: The same but initial distribution $40,000 Table D1.5 Fixed Distributions: The same but initial distribution $50,000 Table D1.6 Fixed Distributions: The same but initial distribution $60,000 Table D9.3 Fixed Distributions: U.S. 4-Fund Portfolio-initial distribution $30,000 Table D9.4 Fixed Distributions: The same but Initial distribution $40,000  Table D9.5 Fixed Distributions: The same but initial distribution $50,000  Table D9.6 Fixed Distributions: The same but initial distribution $60,000 Also mentioned:  Sound Investing Portfolios ACCESS ALL FIXED Distributions strategies for both 50/50 and 70/30 U.S AND INTERNATIONAL Sound Investing Portfolios

This podcast is the 4th in a series of our series to help do it yourself investors build a lifetime investment strategy.   The  presentation uses the following tables: ⁠Table C1 - Fixed Contributions: S&P 500 Equity Portfolio⁠   ⁠Table C14 - Fixed Contributions: US 2-Fund Equity Portfolio⁠ ⁠ Table C11 - Fixed Contributions: US All Value Equity Portfolio⁠  ⁠ Table C8 - Fixed Contributions: WW 4-Fund Equity Portfolio (50% US/50% Int'l) Topics of discussion How the Fixed Contribution Tables are constructed How to use the tables to select the best equity portfolio How the addition of fixed income will impact the accumulation period The importance of using a combination of more than one equity asset class The long term impact of every additional 10% equity The importance of young investors maintaining good behavior Why declining markets helps during early years of investing

This podcast is the third in a series of seven podcasts that are designed to help do it yourself investors learn how to maximize their return, minimize their risk and increase their peace of mind.  It will be beneficial to listen to The Ultimate Buy and Hold  and Sound Investing Portfolios: The History of Risk and Return (link)  podcasts before listening to this podcast.In this podcast Paul discusses why the Fine Tuning Your Asset Allocation Tables were built and how they can be used to build a portfolio that combines the appropriate equity portfolio for growth with the appropriate amount of bonds to stabilize the portfolio during severe market declines.  While the following link includes Fine Tuning Tables for  all 9 portfolios his discussion focuses on tables B1, B11 and B14.The discussion guides the listener through several very important lessons on each table: The increase of return with additional percentages of equities The higher short and longer term losses likely with adding more equities The much higher  returns and slightly higher risks of portfolios adding value and small cap asset classes. In the discussion Paul references Table H2 for the returns of a $10,000 investment for all 9 portfolios.In the coming podcasts the returns of the 9 Fine Tuning Tables will be used to discover the impact of dollar cost averaging into the portfolios, as well as taking out money to live on in retirement.

In this presentation Paul explores the risk and returns of 8 Sound Investing Portfolios and the S&P 500 for the period 1970 to 2022.   He references 2 sets of tables for portfolios built with all U.S. equity asset classes as well as worldwide portfolios that are 50% each U.S. and international  and 70% U.S. and 30% international.The goal is to help DIY investors understand the likely returns of these portfolios in the good times as well as what to expect when they are out of favor.For those who did not listen to the Ultimate Buy & Hold 2023 Update podcast or view the video it is suggested they do that before listening to this podcast.  For those who have the ability to watch the video it should be easier to follow the numbers.  Plus on the video Chris Pedersen and Daryl Bahls join Paul in the discussion. The tables referenced in the podcast can be found at the following links: https://paulmerriman.com/wp-content/uploads/2022/12/Tell-Tale-Charts-US-SCV-Sep-2021-upd.pdf https://paulmerriman.com/wp-content/uploads/2023/04/7-Sound-Investing-Portfolios-50-50-2023.pdf  https://paulmerriman.com/wp-content/uploads/2023/04/17-Sound-Investing-Portfolios-70-30-2022.pdf

Each year Paul (with the many hours of dedicated work from Director of Analytics Daryl Bahls ) updates and  reviews the latest returns and important lessons from the Ultimate Buy and Hold Portfolio.In this review he references a series of tables including:Table A1-Ultimate Buy & Hold Equity Portfolio (50% US/50% Int’l)Table A2 - Alternative Equity Portfolio Tables (50% US/50% Int’l)Table A101 - Ultimate Buy & Hold Equity Portfolio (70% US/30% Int’l)Table A102 - Alternative Equity Portfolio Tables (70% US/30% Int’l)Table B14A - Fine Tuning Table S&P 500 vs.  US SCV PortfolioFor those listening to this podcast it will likely be useful to review the tables before hearing Paul’s comments.Topics include: Why these tables are important to do it yourself investors. The random returns of the S&P 500. The huge impact of small changes in returns. The unexpected low risk of adding risky asset classes. The impact of rebalancing annually vs. monthly. How several low risk 2 fund portfolios outperform  the 10 fund Ultimate Buy & Hold Portfolio. How likely the future will be like the past. The 2023 Ultimate Buy and Hold video will be coming out later today on YouTube, you can find it here- https://paulmerriman.com/youtube

“Three Keys to Long Term Investment Success” was my presentation at the 9th Annual Retiremeet America Conference.  For those who wish to watch other presenters here is a link to the entire almost 6 hour video. 0:00 Welcome from Tom Cock and Don McDonald 13:17 "Financial Fysics" with Don McDonald 46:16 "Paying for Retirement" with Tom Cock 1:15:00 "The Value of a Financial Plan" with Jason Gentile 1:46:00 "Getting Medicare Right" with Kevin Peterson 2:15:00 "Planning for Long-Term Care" with Barbara Devereaux 2:41:48 "Saving on Taxes in Retirement" with Diana Bacon 3:17:00 "Critical Investing in Retirement" with Paul Merriman 3:49:00 Investing Q&A with Tom Cock and Paul Merriman 4:22:00 "Charitable Giving" with Tayor Cock and Stacie Nemetz 4:30:42 "Navigating Turbulent Markets" with Apollo Lupescu 5:23:00 "What's Next?" with Rebecca Chrichton I would like to encourage our subscribers to also view the presentation by Apollo Lupescu, Vice President at Dimensional Fund Advisors, on “Navigating Turbulent Markets.”

In the coming weeks we will be posting the updated history of equity and fixed income returns for the last  53 and 95 years.  These returns will be used to study the impact of investing in combinations of equity asset classes as well as assuming they are being used in the accumulation and distribution periods of an investor's life.  We must ask the question:  How meaningful are these historical returns?  Ben Carlson, one of our Truth Tellers, has written several articles on the topic. https://awealthofcommonsense.com/2023/03/backtests-are-unemotional-humans-are-not/ https://awealthofcommonsense.com/2017/01/10-things-you-cant-learn-from-a-backtest/

March 1 through March 4, I attended the White Coat Investor Conference (WCICON 2023).  On the 2nd, I made a 2 hour presentation focused on "How to Create and Execute a Lifetime Investment Strategy".  I was thrilled with the turnout and positive feedback.  I also received many questions in the following days.  The following are some of the many questions.  More to come in the future.  It was a wonderful conference.  I want to thank Katie and Jim Dahle for putting on one of the best conferences I have ever attended. Here are the questions addressed on this podcast: 3:40   1.  Why do value companies make more money than growth companies?  The answer includes comments from a 1997 article by Eugene Fama and Kenneth French.  Rethinking Stock Returns https://www.chicagobooth.edu/review/rethinking-stock-returns 14:55  2.  How much small cap value should I add to my target date fund? 19:30  3.  How much small cap value should I combine with my Vanguard Total Market Fund?  In this article Table B14A is referenced.  https://paulmerriman.com/wp-content/uploads/2022/04/SCV-vs-SP500-Fine-Tuning-Table-2022-v0.2.pdf 22:19  4.  What is the difference between the expected long term returns of the S&P 500 (VOO) and the Total Stock Market (VTI)? 25:40  5.  There are a lot of different small cap value funds.  Which one do you recommend at Vanguard? 28:45  6.  Should I put small cap value in my taxable, Roth IRA or 401k?  Larry Swedroe’s, “Your Complete Guide to a Successful & Secure Retirement” is recommended as  a great source of important investment advice.  33:25  7.  What do you think of being all equity all the time?  I mean for the rest of my life. 38:54  8.  I’m 38 and a fairly aggressive investor.  I want to build a do it yourself custom target date fund. While I did not mention our custom ETF Allocation Calculator listeners should check it out. https://paulmerriman.com/custom-etf-allocation-calculator/ 45:55  9.  You have portfolios that are all small cap value and another that is a combination of small and large cap value.  The returns for all small cap value are almost one percent higher.  Why not just use an all small cap value portfolio?  Sound Investing Quilt Charts   49:30  10.  What strategy would you recommend with 5 to 7 years until retirement? More of the WCI questions will be answered in the coming weeks.

In this episode, Paddy has a great chat with Paul Merriman from The Merriman Financial Education Foundation in the USA. The foundation is dedicated to providing financial education to those of all ages. Paul shares his wealth of knowledge from decades of experience from starting his own Merriman Wealth Management after retiring to setting up his foundation. Key topics covered: Investing successfully Equity asset classes Emotions of Investing Hardest thing about investing Maths of investing Follow the history

The following questions were sent to Paul during the 90 minute video presented to Western Washington University alumni on February 10, 2023. 2:38 1. How much more do you get with AVUV which has higher fees than FISVX which is super low cost? Check out:  BOGLEHEADS.ORG/REBALANCING Check out:  whitecoatinvestor.com/portfolio-rebalancing-spreadsheet/ 11:20 2. What are your thoughts on robo advisors and investing? Check out:  whitecoatinvestor.com/top-robo-advisors/// 17:57 3.  I have over $5 million and need very little to live on.  I am 43% equities and 57% bonds.  Is now the time to add more equities to a 60/40 asset allocation.  Check out:  https://paulmerriman.com/fine-tuning-your-asset-allocation/  You will find article, podcast and tables on the page 22:25 4.  I only need to take out 2% a year to meet my cash needs.  Most of my investments will eventually go to children and charities.  Is an 80% or 90% equities position appropriate?  Check Out:  https://paulmerriman.com/2021-fixed-distributions/   For article, tables and podcast 27:00 5.  What are the conditions (time/wealth) that suggest hiring an advisor?  How do you find one? Check out:  https://paulmerriman.com/wp-content/uploads/2013/03/get-smart-or-get-screwed-how-to-select-the-best-and-get-the-most-from-your-financial-advisor1.pdf 31:57 6.  What changes should a 50-something make to boost the returns of a 401k? 35:20 7.  What is your advice for a parent to persuade their adult children to educate themselves about investing? 42:22 8.  What do you mean by rebalancing and what are the tools and strategies you can use to do the rebalancing? 49:36 9.  What do I do with penny stocks that are down 80% to 90%? 51:10 10 What are the relative tax implications of the Total Market Index and small cap value, REITS and large cap value? 56:00 11.  What are the returns of combining U.S. large cap value, U.S. small cap blend, international large cap blend and international small cap value? Check out:  https://paulmerriman.com/wp-content/uploads/2022/06/Sound-Investing-Portfolios.pdf 58:30 12. The Fidelity Target Date Funds have very high expenses.  Should I still use them even though the expenses are higher? 1:01 13. Do you recommend a solo 401k or SEP IRA for a single employer who will never have any employees?  Check out: solo401k.com