130 | The Ultimate Buy and Hold Portfolio Strategy

Most investors settle for market returns—but what if deliberately tilting your portfolio toward historically undervalued, overlooked companies could tilt the odds in your favor? Brad and Jonathan sit down with investment educator Paul Merriman to explore his "ultimate buy-and-hold portfolio" approach and how it differs from the single-fund simplicity championed by J.L. Collins and the Bogleheads. The conversation unpacks small-cap value investing, the emotional discipline required to stay the course during downturns, and why owning everything guarantees you capture the top performers.

Chapters

• Introduction to Paul Merriman [00:01:27]
  Background as a stockbroker and investment advisor; transition from traditional brokerage to teaching DIY investment strategies.

• Paul's Investment Philosophy [00:06:07]
  Emphasis on simplicity and client empowerment; understanding emotional challenges in investing.

• The Importance of Understanding Risk [00:09:25]
  Identifying personal risk tolerance to align with investment strategies; the critical emotional hurdle is staying the course.

• Dollar Cost Averaging Explained [00:15:14]
  Benefits of regularly investing fixed amounts, especially during market downturns; historical examples showing improved returns.

• Defining Value and Growth [00:19:11]
  Differences between value and growth stocks; value stocks' historical performance and the benefits of investing in out-of-favor companies.

• Merriman's Ultimate Buy and Hold Portfolio [00:32:55]
  Discussion of a diversified portfolio strategy incorporating small-cap value and other asset classes; comparison with traditional single-fund strategies emphasizing broader allocation.

• Conclusion and Key Takeaways [01:12:00]
  Recap of Merriman's strategies, including the importance of decision-making and staying informed; encouragement to consider diversification and small-cap value for enhanced returns.

Key Takeaways

• Review your current investment portfolio for diversification [00:36:14]
• Implement dollar cost averaging into your investment strategy [00:15:14]
• Evaluate target date funds based on their glide path, focusing on those that limit bond exposure in younger age brackets [00:52:23]
• Understand your risk tolerance to align with investment strategies
• Small-cap value has historically been a top-performing asset class

Notable Quotes

• "Investing is easier, cheaper, and more diversified than ever." — Paul Merriman [00:12:41]
• "Always prepare for the worst while hoping for the best outcome." — Paul Merriman [00:31:15]
• "Keeping it simple often yields better returns than complexity." — Paul Merriman [00:49:23]
• "Owning all guarantees access to the top performing 4%." — Paul Merriman [00:42:00]
• "Investing regularly during downturns can enhance long-term gains." — Paul Merriman [00:15:14]

Resources

• Paul Merriman's Website [01:12:16]
• Your Money and Your Brain by Jason Zweig [01:10:03]

Terminology

• Small Cap Value [00:19:11]: Stocks of relatively small companies that are trading at a price lower than their intrinsic value.
• Dollar Cost Averaging [00:15:14]: Investing a fixed amount regularly to reduce overall impact of market volatility.
• Target Date Fund [00:52:01]: A mutual fund that automatically adjusts its asset allocation according to the target retirement date.

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▶ Listen Next: Ep. 136 — How to Fund Your Child's Roth IRA and Other Tax Strategies | Essential Listening

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