Sound Investing

Latest Episodes:

10 important lessons from the 2020 Callan Periodic Tables Feb 06, 2020

Show notes

The new Callan Periodic Tables have been released and in this podcast Paul discusses 10 important lessons from the main table (2000-2019) and several other Callan tables he has not addressed before. Paul encourages listeners to review the tables (links below) and see how many important lessons you find, before you listen to the podcast. For those who find tables of numbers a good to learn, this is a “can’t miss” podcast. For a “numbers guy” like Paul, he says, “This was so much fun to record!"

The Callan Periodic Table of Investment Returns, now in its 20th year, graphically depicts annual returns for various asset classes, ranked from best to worst. Created by Jay Kloepfer in 1999, the table features well-known, industry-standard market indices as proxies for each asset class. As Kloepfer notes at Callan.com, “The enduring appeal of the table is its ability to be understood at a glance. And once you’ve seen and absorbed it, you can refer to it again and again. New insights still come to me even 20 years later!”

Classic Periodic Table 2020

December 2019 Monthly Periodic Table

Periodic Table Collection 2019

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How did Paul Merriman make 30% a year for 30 years? and 10 more Q&A's Jan 30, 2020

Show notes

Can an employee convince his company’s 401k trustees to make changes? It took 4 years for this one dedicated investor to do so and he won big. Hopefully, this story will inspire others to work this hard to change the financial futures for all 401k investors. 2:00
What is the lifetime cost of an expense ratio of .15% a year? The answer is surprising. 6:50
In what kind of investment did you earn 30% a year over 30 years? Paul has mentioned the good fortune of this investment but never before given details. 10:00
Is it true your portfolio fell from $16 million to about $12.8 million during the 10 years ending 2009? Paul refers to Table 1 and Table 2 of the fixed distribution page. 30:45
How do you build an Ultimate Buy & Hold Portfolio if you want to eliminate international equity funds? 35:18
What do you recommend when a company’s 401k retirement plans do not offer target-date funds? Can you still use a 2 Funds for Life approach? 37:30
Should we use a short-term bond fund for money we need for a downpayment on a house in 2-to-3 years? This couple is considering Fidelity’s Short Term Treasury Bond Index Fund (FUMBX). 40:05
Why Japan Is So Successful at Returning Lost Property? This is from one of Paul’s favorite weekly lists, "The Essential List" of BBC’s best articles from the week. CLICK HERE to read the article. 42:25
What market impact will It have if the U.S. produces at least a 3% growth in GDP? This will break a 13-year run of under 3% growth. The longest previous streak was 4 years, 1930-1933. 46:10
How are young workers facing the need to adjust their future income expectations as under-funded pensions are forced to reduce the pension commitments? Paul comments on the documentary “American Factory,” where workers are coping with the reality they are going to have to accept half the income for the same job. 47:55
What are the benchmarks and realities of returns we think we make? (Paul ends this podcast on a lighter note, discussing the recent sale of the 1968 Ford Mustang Bullitt GT driven by Steve McQueen in the 1968 movie “Bullitt.” The car was originally purchased for $3,500 in 1974 and just sold for $3.4 million.) 52:20

Paul answers questions from Bogleheads’ forum Jan 22, 2020

Show notes

Paul's recent podcast, The Real Secret to Long-Term Investment Success, elicited many comments and questions at the Bogleheads forum (you can read the threads of conversation here) and from regular Sound Investing listeners. The following are questions addressed on this podcast.

What does Paul think of the factor funds at Vanguard? 4:10
What impact do momentum, quality, and volatility have on your recommendations? I suggest listeners check out Chris Pedersen's article and recommendations. 22:16
Where can I see long-term real-time results of the small-cap value asset class? 24:28
John Bogle said that there was no way for a small investor to invest in small-cap value in the 30s. Where can a small investor capture the results of the past? 31:08
If I add small-cap value to my portfolio how much will my risk go up? 34:40
Is there a similar portfolio to the 4-fund combo that includes international developed markets and emerging markets? 40:54
What are the historical trading costs and inefficiencies when trading small-cap value stocks? Are they taken into consideration in your studies? 42:52
Are there some "real life returns" that came close to what Paul claims the historical return has been? 46:35
“What has been your biggest mistake?” Rick Ferri asked Paul in an interview for an upcoming Bogleheads podcast (which will be replayed on Sound Investing). Paul speaks about one of the most common investor mistakes and mentions this video in his answer. 49:00
Will Paul likely go to his grave with small-cap value not living up to his expectations? Paul tells investor to be patient and they will receive the premium for investing in small-cap value. 56:53

90 Years of Evidence Shows Investor Patience Leads to Better Returns

The real secret to long-term investment success Jan 15, 2020

Show notes

What’s the toughest challenge for many investors? Staying the course for the long term. In this podcast, Paul discusses what he considers "the most useful information for investors.” While adding new insights to his Ultimate Buy and Hold Strategy, Fine Tuning Your Asset Allocation and Distributions in Retirement articles and podcasts, Paul explores nine decades of returns for six asset classes that academics have studied for over 50 years. It turns out that the end result of the returns has been exactly what the academics predicted, but the trip was not an easy one for investors. See and download the Tables referenced here. Paul hopes that in understanding this, all investors — especially young investors — will see that the strategy with the most predictable returns is also the one with the best predictable returns, and maintain the focus and confidence to make it through the normal ups and downs of the market without giving up.

Best in Class 2019 Returns plus 12 Q & A Jan 08, 2020

Show notes

Paul discusses the comparative returns from the Vanguard, DFA and Best-In-Class Portfolios for 2019. He also responds to 12 questions from listeners and readers of paulmerriman.com’s podcasts, articles, videos, books and recommendations for mutual funds, ETFs, 401k’s, the Ultimate Buy-and-Hold Portfolio and more. To learn more about comparative returns, take a look at the 2-4 Fund Combo Returns 1928-2018.

12 Q&A

1. How does the new Fidelity Small-Cap Value (FISVX) compare to our IJS and SLYV? 10:24

2. What’s a good Vanguard Small-Cap Value Fund for a 66-year-old investor? 15:00

3. Do you really recommend large and small-cap growth funds? 18:30

4. Why are you so high on DFA funds? 21:00

5. What’s your plan for helping kids with their IRAs? 26:44

6. When will you be updating the S&P 500 Fine-Tuning Table? 31:49

7. What does a long-time client of Paul’s old firm have to say? 33:50

8. Where can an investor find historical data on stock and bond returns? 38:23

9. What about supplying transcripts of your podcasts? 41:36

10. Which is better: VTWW or FISVX small-cap value funds? 47:54

11. How do Vanguard Value Index and Vanguard Equity Index funds compare? 50:54

12. How much would $20,000 become in 45 years if I invest it in small-cap value? 53:04

Thoughts on 2020 and Q&A from Paul’s Listeners & Readers Jan 02, 2020

Show notes

In this podcast, Paul shares his thoughts for the coming year and answers investor questions.

The S&P 500 has made 5% more than the portfolio you recommend. Should I put it all in the S&P? 14:50
What do you think of the new Avantis ETFs?27:05
What do you think about structured notes? In the answer I make reference to an article by Larry Swedroe: 31:34 https://alphaarchitect.com/2019/08/22/structured-notes-the-exploitation-of-retail-investors/
Can whole life insurance cash value be considered the same as bonds? 37:59
I am 27 with a wife and 2 year old daughter. What should I do with $150,000? 41:45
I want to live on $2 million in retirement. What dividend funds do you recommend? 48:16
What do I do if my 401k does not offer target date funds? 53:31
For a young investor do you prefer your portfolio 7 (well diversified) or portfolio 8 (all value). 58:33

This is the link to the recommended portfolios: https://paulmerriman.com/best-in-class-recommended-portfolios-2019/

Could this be the #1 reason to use index funds? Dec 26, 2019

Show notes

Sign up for our bimonthly newsletter at PaulMerriman.com and join 30,000 savvy investors who value free financial education. You can download a free pdf copy of We’re Talking Millions! 12 Ways to Supercharge Your Retirement at https://paulmerriman.com/wp-content/uploads/2021/01/Were-Talking-Millions.pdf We ask that you share it with family and friends!

Paul was planning a traditional "Happy Holidays!" podcast but woke up to information that set his hair on fire. While he has been writing articles about index funds for decades, the most read is “30 reasons to fall in love with index funds”. While the most common advantages are low expenses, low turnover, massive diversification, Paul suggests the #1 reason may be staying as far away as you possibly can from commission-based sales people, con artists and other conflicts of interest typically not associated with index fund providers.

Many do-it-yourself investors rely of services that have a large presence on the internet. A wonderful aspect of the internet is the ability to do meaningful due diligence on the reputations of those offering their "special ways" to perform better than index funds. But can you depend on the information you find on the internet?

Paul discusses the services of “search engine suppression consultants.” These very clever people are wizards at making bad information disappear. In fact, in many cases their fees are not earned until all the damaging information is totally eliminated. He reads an example of one such article that claims to address the pros and cons of a well-known investment manager. The pros are strong convincing points, while the cons are almost the mistakes that we would expect would be found in any firm.

Paul also addresses the outrageous life-changing fees teachers are being charged and the work of an unscrupulous sales person who holds himself out as a friend of his community.

The bottom line: None of these bad investments would be available through those who supply very low-cost index funds. The low costs eliminate almost any chance to misuse the investor.

Strategy update: How to turn $3000 into $50 million Dec 18, 2019

Show notes

Four years ago we wrote one of our most popular articles, "How To Turn $3000 into $50 million." This article, originally published at MarketWatch, has had over 500 comments and many of them were calling the strategy crazy. In this podcast Paul offers at least 10 solid lessons about this strategy, as well as discussing the first 4 years of returns. Lessons include return numbers that will help investors understand the unexpected path they are likely to travel with this strategy. Investors may be surprised to find that some investors in the strategy have earned a 24% compound rate of return over the first 4 years.

For more articles and podcasts on this strategy, click here.

The Ultimate Buy & Hold vs. 2 Funds for Life Dec 11, 2019

Show notes

The most common question Paul receives these days is, "What is the best investment approach, The Ultimate Buy-and-Hold strategy or 2 Funds for Life?” The potential long-term returns of these two strategies may be very similar but they will take very different paths. The Ultimate Buy-and-Hold requires a lot more attention but offers substantially less risk than 2 Funds for Life. 2FFL is available in 2 levels of risk: one for investors who want to take a little additional risk early in the process and much more nearing retirement, and another who are comfortable with lots of risk early on and less at retirement. This discussion concludes that the Ultimate Buy-and-Hold strategy is likely to be more appealing to those 50 and over, while 2FFL is more appealing to investors starting in their 20s and 30s.

Access the Ultimate Buy-and-Hold strategy: https://paulmerriman.com/the-ultimate-buy-and-hold-strategy-2019/

Access the 2 Funds for Life strategy: https://paulmerriman.com/2-funds-for-life/

To stay apprised of Paul’s updates on these strategies and much more, subscribe to our free twice-a-month newsletter at https://paulmerriman.com/

What are the odds we are going to have a bear market in the coming year? Dec 04, 2019

Show notes

In this interview with Ken Roberts, of Ken’s Bulls and Bears, the conversation covered many bear market-related topics such as:

How big a loss should an investor expect to suffer?
What should investors do to prepare for a significant decline?
What should investors do to prepare for a significant decline?
How have you prepared your own portfolio?
Is market timing a smart way to manage the risk of a bear market?

You may also want to read Paul’s recent MarketWatch article, 8 Steps You Can Take Now to Prepare for a Bear Market

If you enjoy Paul’s podcasts, visit his website for free articles, recommendations for mutual funds, ETFs, 401Ks, two funds for life strategies, videos, free books and more: PaulMerriman.com

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