Sound Investing

Latest Episodes:

Fine Tuning Your Asset Allocation 2024 Update Mar 13, 2024

Show notes

In the previous three podcasts we have addressed the long term decision between investing in stocks vs. bonds, what equity asset classes you might use in building your equity portfolio and how to combine the different equity asset classes to build the best portfolio for your different investments.

The purpose of each of the Boot Camp Series is to address some of the most important investment decisions. In this podcast I discuss the question of how much fixed income an investor should hold in their portfolio.

There are 9 Fine Tuning Your Asset Allocation Tables. Each one assumes the use of one of the nine Sound Investment equity portfolios. Paul focuses on two of them and expects that those who are interested will be able to view the rest of the tables on their own.

The two tables use the S&P 500 (Table B1) and the U.S. 2-Fund (50/50 S&P and Small Cap Value) (Table B9). Each of these tables represents the annual returns of 11 combinations of equities and bonds. The goal is for investors to find the combination of equities and bonds for their risk limits and and return expectations.

Paul will be monitoring the YouTube video and will respond to questions there. Disclosures Data Disclosure Notice - Funds (1970-Present )

Data Disclosure Notice - Indexes (1928-Present)

Sound Investing Portfolios: 2024 Update Mar 06, 2024

Show notes

In this podcast Paul addresses the construction, returns and risks of the Sound Investing Portfolios.

Table H1a lists the 9 Sound Investing Portfolios and includes percentages of each of the asset classes included in each portfolio.Table

H2a lists the risk and return data for each portfolio. The table compares profitable years, unprofitable years, decade returns and total return of a $10,000 investment.

Table H3a lists the portfolios annual return for each year for the period 1970-2023.

Paul encourages listeners to pose questions regarding the Sound Investing Portfolios. Send questions to paul@paulmerriman.com.

The Ultimate Buy and Hold Portfolio 2024 Update Feb 28, 2024

Show notes

Paul recommends new listeners listen to the previous podcast on ⁠Equities vs. Bonds⁠ prior to this podcast.

The purpose of this annual update is to remind investors of the power of equity asset class diversification. Paul makes the case for the 10 equity asset class portfolio that he introduced over 25 years ago. During the presentation he uses Tables A1a and A2a. A1a shows the series of portfolios, starting with the S&P 500 on its own, and then the results of adding 9 other asset classes one at a time.

In A2a Paul reviews the Ultimate Buy and Hold results to 7 other portfolios that investors may select for better returns with fewer funds and similar volatility.

In both cases he shows the results with both annual and monthly rebalancing.

On the next podcast Paul will dig into the important differences of the risk and return for all 9 portfolios, including the S&P 500 as the single holding.

Stocks vs. Bonds: The $10 Million Decision Feb 21, 2024

Show notes

This podcast is the first in the series of 8 to 10 podcasts, videos and articles that will be found under Bootcamp and Best advice.

In this podcast Paul discusses the biggest investment decision of an investor's lifetime: Invest in stocks or bonds. He reviews the long term risk and return for both important asset classes. In each case there is a set of 3 tables that reflect the returns from 1928 to 2023. In Tables J1a and J2a he compares the annualized return for the entire period as well as for all the 15 and 40 year periods. His discussion includes the impact of inflation as well as rebalancing. He also encourages those who have not read "We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement” to download the free pdf.

Chris Pedersen answers your questions: Best in Class, 2 Funds for Life and more! Feb 14, 2024

Show notes

Join Paul and Chris for this podcast/video they recorded. During the conversation Paul mentions Chris’ free copy of “2 Funds for Life” and a fascinating interview with Professor Scott Cederburg on Rational Reminder. Cederburg is an advocate for a lifetime portfolio of all equities.

The following are the topics and questions they discussed:

What does an investor do if a small cap value fund is not available in their 401(K)? Does a small cap blend fund, that is available, have the same impact as small cap value?
How do you choose between investing in a higher expense ratio ETF (say Avantis) compared to investing in a low expense ratio small cap value index fund? Would the decision be as simple as going with the lower expense ratio fund?
How do taxes impact your recommendations whether the asset class is held in taxable or tax advantaged accounts? Specifically, the S&P 500 fund that has little to no annual taxes vs small cap value which is less tax efficient.
Are you tempted to invest in individual stocks or actively managed funds?
Since small cap value funds can have long periods of underperformance, does that suggest those approaching retirement should avoid small cap value funds?
How did you react to the March 2020 Market Meltdown and other past major market declines? Did you try to take advantage of the declines as a buying opportunity?
What about combining 25% each small cap value and S&P 500 fund with 50% target date fund?
What’s the best way to move from your present holdings to a 2 Funds for Life Portfolio?
Where do I find information on how you make your selection of Best In Class ETFs? Here is the page that has links to the articles, podcasts and video. Plus here is a link to Chris’ AAII article on the topic.
I’m setting up a 50/50 small cap value/target date fund. Would it help to add international small cap value?
How about using two small cap value ETFs? DFA and Avantis each have similar ETFs but different portfolios.
What is the status of Chris’ new white paper on 2 Funds for Life?

10 Investment Decisions “Guaranteed” to Improve Your Financial Future Feb 07, 2024

Show notes

Paul looks at the guaranteed advantages of 10 different investment decisions. He also challenges one of the oldest claims about our expectations for returns.

During the presentation he discusses the important differences between investment success and investor success. He encourages all listeners to get the free pdf of Paul Heys book, “Spending Your Way to Wealth(s).”

11 Q&A- Finding an advisor, educating kids, robo-advising, changing asset allocation and more Jan 31, 2024

Show notes

In the process of looking for a document I came across a group of questions that had been hidden away in my saved documents.

The good news is the list included some great questions. The bad news is I'm not sure which presentation generated the questions.

1. What are the best investments to make and what milestones should an investor reach?

2. Do you recommend a solo 401k or SEP IRA for a single employee LLC that will never have employees? Recommended reading from Truth-Teller Jim Dahle- https://www.whitecoatinvestor.com/sep-ira-vs-solo-401k/

3. How much more do you think Avantis Small Cap Value (AVUV), which has higher fees, will make than Fidelity Small Cap Value Index (FISVX)?

4. I have $1.5 million in cash and a total portfolio value of $5.8 million. My asset allocation is 43% equities and 57% bonds. I have Social Security and other income of $90,000. Should I change my balance to 60% equities and 40% bonds?

5. If you only need a 2% withdrawal rate, what would be the right asset allocation for a someone really investing for my survivors? How about 90% equities and 10% bonds?

6. Is there a time or value of investments that someone should get a trusted advisor? If so, how do you find them? Several sources mentioned: https://www.garrettplanningnetwork.com/about/contact/ and https://adviceonlynetwork.com/

7. What changes can a 50-something make to boost their 401k returns?

8. What are your thoughts on robo advisors/investing?

9. What is your advice for a parent who wants to persuade their adult children to educate themselves about investing? After you listen to the answer please send me an email to paul@paulmerriman.com about what steps you would take? Please include your phone number.

10. Will the program be recorded? Of course I don’t know as I don’t know where the list came from. If you know, please let me know.

11. What should I do with penny stocks that are down 89 to 90 percent?

The #1 Reason most investors fail! Jan 24, 2024

Show notes

In this podcast Paul discusses ten million dollar mistakes investors make, along with the mistake that is the biggest reason he believes most investors fail to achieve the return they deserve. As part of his presentation he references the following two tables.

Table 1 and Table 2.

D1.3

D1.4

Paul reminds listeners to forward copies of our 3 free books.

Configurators, Returns and Risks, and 2 Thumbs Up Movie Review Jan 17, 2024

Show notes

Paul, Chris, and Daryl are back together for the first time in 2024. The podcast starts with Chris demonstrating a new and improved Portfolio Configurator, which adds the 2 Funds for Life portfolios. Now, investors can see how the equity portion of Sound Investing Portfolios, like the Ultimate Buy and Hold or Four Fund Combos, compare to various 2 Funds for Life approaches.

Next, they discuss the question "Which backtested portfolio has the highest return per unit of risk, and shouldn't we all be using that one?" Daryl uses Table H2, and Chris uses the 2 Funds for Life Fine Tuning Table to point out various ways investors might define risk and try to find the portfolio with the best return per unit of risk.

The podcast closes with some thoughts on 2024, and requests for feedback on the new Portfolio Configurator. Chris, Daryl and Paul also comment on the new documentary, “Turn Off the Noise.” This documentary is available free through the end of the month.

The Most Important Advice I know Jan 10, 2024

Show notes

Trust is the key for most investors to stay the course for the long term. I formed a lasting trust in the academic work of Drs. Fama and French when I attended a 2 or 3 day workshop at Dimensional Fund Advisors in 1994.
That trust led our firm to use the DFA funds since the mid 90s. While I believe there are a lot of people who find our long term studies helpful, I’m not sure that all of those people understand that almost all of our studies that go back to 1928 are based on the work of the academics who are associated with DFA.
If you don’t immediately feel better about the source of our data, I think you will feel better if you watch the new documentary, “Turn Off the Noise.” I sent it to Daryl and he responded, “Spectacular!” I sent it to Chris and his response was, “We stand on tall shoulders.”
You can watch the documentary at no cost by going here. You will be asked to fill in a few pieces of information and use the Access Code: RATIONAL This offer only extends through January 31, 2024
Then I would like you to watch a wonderful interview of Errol Morris, an Academy Award-winning film director and author. The following are the notes from interviewers Ben Felix and Cameron Passmore.
In today’s episode, Errol Morris, Academy Award-winning film director and author, joins us to talk about his recently released documentary called Tune Out the Noise. The documentary focuses on the revolution that's happened in the financial system, how the markets work, and why the advancements made are so vital. Errol is an acclaimed figure in film and literature, boasting an impressive array of accolades, notably securing an Oscar for his renowned documentary The Fog of War.

His work spans various arenas, encompassing short films for prestigious events and many charitable and political organizations. In our conversation, we delve into the significance of storytelling in communicating complex subjects, the power of serendipity, the evolution of finance, and the enigmatic nature of truth. We discuss the necessity of storytelling, the unexpected occurrences that influenced finance, the importance of empirical data in understanding truth, the central story of Tune Out the Noise, and much more. He also provides insights into the amazing economists, many of whom are past guests, who helped shape the financial landscape. Discover how chance, humility, and the pursuit of truth intertwine in this captivating episode, where the intriguing art of storytelling converges with the complexities of the financial world. Tune in now!

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