Sound Investing

How can you best combine equity asset classes to build portfolios for the long term? This is one of the seven most important topics we focus on at The Merriman Financial Education Foundation.  Paul Merriman is joined by Daryl Bahls, Director of Analytics and Chris Pedersen, Director of Research to discuss their personal favorite portfolio, and suggested exposure to fixed income, for three different groups of investors — first time, pre-retirees and retirees. Chris also brings us up to date on changes in the Best-in-Class ETF recommendations. (https://paulmerriman.com/best-in-class-etf-recommendations) Resource: See the Fine Tuning Tables, built to show 8 different combinations plus the S&P 500 as the benchmark: https://paulmerriman.com/fine-tuning-your-asset-allocation/ This podcast is part of the educational offerings from The Merriman Financial Education Foundation, a registered 501(c)3.  If you found value in this broadcast, here are five ways to support the mission of our foundation: 1)   For videos: Hit the thumbs up, subscribe, leave a comment, and share the link with your social media and friends. For podcasts: Leave a review on your player of choice. 2)  Sign up for our twice-a-month newsletter at PaulMerriman.com and join 30,000+ savvy investors who value free financial education, and receive a free pdf copy of We’re Talking Millions! 12 Ways to Supercharge Your Retirement. We ask that you share it with family and friends! 3)   Use our M1 Finance affiliate link to set up a brokerage account and use our portfolio suggestions. If you fund your account with a minimum of $1,000, our foundation will receive a one-time affiliate fee — at no cost to you — which helps support our financial education projects. 4)   Buy our latest books, We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement and 2 Funds for Life: A quest for simple & effective investing strategies, the profits from which help support our work. 5)   Make a tax-deductible donation to the Foundation to support our mission of providing financial education to investors at all stages of life.  Thank you!

Paul begins this podcast by reviewing long-term returns of the 4 major equity asset classes for the 94 years ending 2021, before moving on to the focus of the podcast: our quilt charts.  The most useful single table, of all the tables created by Daryl Bahls, Director of Analytics for The Merriman Financial Education Foundation, is entitled, “U.S. 4 Asset Classes and 4-Fund Combo Relative Performance Rankings (1928-2019).  The table offers many important lessons to give investors an improved set of return expectations. The brightly colored years, including each year’s return, make it easy to see the highly random sequence of returns. It becomes very obvious how long the unexpected can continue.  And, most importantly, it shows the dependability of the 4-Fund Combo.  Since the S&P is considered the benchmark for investors, it is helpful to compare results over longer periods of time.  Those results are shown on the table entitled, “Annualized Asset Class Nominal Returns by Decade: 1930-2019.”  While past returns are no guarantee of future returns, the case for higher rates of return with similar-to-lower-risk is a high probability.

What are the best practices for building retirement savings and ensuring those savings last throughout retirement?  Christine Benz, director of personal finance at Morningstar, Roger Young, CFP with T. Rowe Price, and Paul Merriman, president of The Merriman Financial Education Foundation, introduce you to the latest research and strategies to increase your odds of enjoying a financially secure retirement.  Enjoy this panel discussion from the AAII Conference 360 in October 2021, moderated by Charles Rotblut, vice president and financial analyst at AAII. American Association of Individual Investors: https://www.aaii.com/ Christine Benz: article archives: https://www.morningstar.com/articles/author/30-christine-benz.aspx; co-host of podcast, “The Long View”: https://www.morningstar.com/podcasts/the-long-view; author: https://www.amazon.com/Christine-Benz/e/B002PICOLS%3Fref=dbs_a_mng_rwt_scns_share Roger Young: https://www.troweprice.com/personal-investing/resources/insights/building-confidence-toward-your-retirement.html Paul Merriman, The Merriman Financial Education Foundation: https://paulmerriman.com/ This broadcast is part of the educational offerings from The Merriman Financial Education Foundation, a registered 501(c)3.  If you found value in this information, here are five ways to support the our foundation: 1)    Hit the thumbs up, subscribe, leave a comment, and share the link with your social media and friends. 2)    Sign up for our twice-a-month newsletter at PaulMerriman.com and receive a free pdf copy of We’re Talking Millions! 12 Ways to Supercharge Your Retirement. We ask that you share it with family, friends, associates and teachers! 3)    Use our M1 Finance affiliate link to set up a brokerage account and use our portfolio suggestions. If you fund your account with a minimum of $1,000, our foundation will receive a one-time affiliate fee — at no cost to you — which helps support our financial education projects. 4)    Buy our latest books, We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement and 2 Funds for Life: A quest for simple & effective investing strategies, the profits from which help support our work. 5)   Make a tax-deductible donation to support our Foundation’s mission of providing financial education to investors at all stages of life.  Thank you!

Flexible Distributions in retirement — which Paul considers one of the greatest financial luxuries for a retiree — are discussed in this podcast updated for 2022. He helps investors see the relationship between how much is taken out for distributions, the balance of equity and fixed income asset classes, and whether distributions are adjusted for inflation or driven solely on percentage of assets in the account. He also highlights the extra protection of broader diversification of stocks and asset classes.  Paul references Fine Tuning Tables  (B1, B7, B8 and B9), as well as many of the tables from the series of Flexible Distribution Tables (E1.3-E1.6, E7.3-E7.6, E8.3-E8.6, and E9.3-E9.6). Pau’s previous podcast examined Fixed Distributions, a strategy designed for investors who retire with “enough.” This podcast is part of the educational offerings from The Merriman Financial Education Foundation, a registered 501(c)3.  If you found value in this podcast, here are five ways to support the podcast and our foundation: 1)   Leave a podcast review on your player of choice. 2)  Sign up for our twice-a-month newsletter at PaulMerriman.com and join 30,000+ savvy investors who value free financial education, and receive a free pdf copy of We’re Talking Millions! 12 Ways to Supercharge Your Retirement. We ask that you share it with family and friends! 3)   Use our M1 Finance affiliate link to set up a brokerage account and use our portfolio suggestions. If you fund your account with a minimum of $1,000, our foundation will receive a one-time affiliate fee — at no cost to you — which helps support our financial education projects. 4)   Buy our latest books, We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement and 2 Funds for Life: A quest for simple & effective investing strategies, the profits from which help support our work. 5)   Consider making a tax-deductible donation to the Foundation to support our mission to provide financial education to investors at all stages of life.  Thank you!

How much should you take out of your portfolio in retirement? This is one of the biggest financial decisions you will make. In this presentation, Paul discusses the use of the Fixed Distribution Tables, updated for 2021 data.  He uses Fine Tuning Tables B1 (S&P 500) and  B9 (U.S. 4 Fund Portfolio) as the return series he will use for the discussion. He looks at 4 tables in each series. The tables reflect the outcome of taking a 3, 4, 5 and 6 percent original distribution, with annual inflation adjustments. The comparisons are based on the use of 40/60, 50/50 and 60/40 equity/fixed income portfolios. Paul focuses on the 20, 30 and 52 year periods of returns. When considering these portfolios, Paul suggests looking at the risk/return studies in No-Nonsense Portfolios and “150 Portfolios Better Than Yours.” This podcast is part of the educational offerings from The Merriman Financial Education Foundation, a registered 501(c)3.  If you found value in this podcast, here are five ways to support the podcast and our foundation: 1)   Leave a podcast review on your player of choice. 2)  Sign up for our twice-a-month newsletter at PaulMerriman.com and join 30,000+ savvy investors who value free financial education, and receive a free pdf copy of We’re Talking Millions! 12 Ways to Supercharge Your Retirement. We ask that you share it with family and friends! 3)   Use our M1 Finance affiliate link to set up a brokerage account and use our portfolio suggestions. If you fund your account with a minimum of $1,000, our foundation will receive a one-time affiliate fee — at no cost to you — which helps support our financial education projects. 4)   Buy our latest books, We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement and 2 Funds for Life: A quest for simple & effective investing strategies, the profits from which help support our work. 5)   Consider making a tax-deductible donation to the Foundation to support our mission to provide financial education to investors at all stages of life.  Thank you!

Paul discusses the latest Equity and Fixed Income Tables (1928-2021). Also, see updates of The Ultimate Buy & Hold Fine Tuning Your Asset Allocation, Fixed Contributions and No-Nonsense Tables. Plus, he answers the following questions: How can I determine expected risk and return of a portfolio that combines investments from several of your portfolios? Is there any benefit adding international large-cap fund to the U.S. 4 Fund Portfolio? Is the 60/40 portfolio dead? Should I add alternative investments to my portfolio? How do I track my results if I start my investment mid-year? Does it make sense to substitute your Vanguard Monthly Income Fund for your Government Bond fund recommendations? What are your rebalancing recommendations? Paul ends with a wonderful comment from a young investor about dealing with the temptation to check his results daily.

In this podcast, you’ll learn about the long-term impact of using regular Fixed Contributions and our updated Tables for 2022. For young investors, this can mean adding millions to your retirement. Before listening to this podcast, Paul suggests you review the YouTube 2022 updates on The Ultimate Buy and Hold, Fine Tuning Your Asset Allocation, and No-Nonsense Portfolios. There are 9 Tables that investors can use to compare the long-term results of using each of these different equity combinations, with the addition of bonds for more conservative investors. The purpose of the tables and this podcast is to help young investors understand the long-term impact of a small monthly investment along with 3% annual increases. The corresponding Fine Tuning Tables are used for return calculations. Paul compares the decade returns of the S&P 500 only with a 50/50 split between the S&P 500 and small-cap value. Doubling in value: Paul highlights the extra risk of having all the money in one asset class. In the 10 years ending 2009, the S&P 500 declines in value, even including additional investments. Meanwhile, the more diversified 50/50 S&P/SCV doubled in value for the same period. In fact, almost every other portfolio doubled over that 10 year period. The sequence of return can mean a $1.5 million difference.  Paul shows another situation (Tables C8 and C9) where two portfolios had almost the same compound rate of return, but one beats the other by about $1.5 million. It points to how important the sequence of return is. Use The Merriman Lifetime Investment Calculator to test different beginning dates to see the impact of different sequences of return. Interestingly, the annual result of regularly adding new money seldom leaves the portfolio with less value than the previous year.  For example, in the case of the S&P 500, there were only 7 years out of 52 that the following year wasn’t higher than the last.  In the case of the 50/50 S&P/SCV, there were only 5 years that the following year wasn’t higher. Hopefully, this knowledge will help you consider building different portfolio combinations with unique parts of your long-term investments.  For example, you could segregate one smaller account that is all small-cap value for the entire period, another in the U.S. 4 Fund Portfolio, and yet another in a Worldwide 4 Fund Portfolio.

In this podcast and video, Paul Merriman, Chris Pedersen and Daryl Bahls discuss the 2022 update of "No-Nonsense Portfolios" Tables along with new tables used in a recent presentation at the 2022 White Coat Investor Conference. That presentation was entitled “The Inside Story of 150 Portfolios Better Than Yours.” The two tables compare the risk and return of 20 different portfolios.   Those listening to the podcast should review the tables before listening. Lessons learned: For each of the 20 portfolios the tables compare: 1. The annual, decades, and total returns from 1970 through 2021 2. The number of up and down years and average of each 3. The growth of $10,000 (range from $1.9 to $9.5 million) 4. The most popular portfolios earned less than 1/3 of the two most profitable The discussion covers many important lessons in the tables: · There are many ways to measure risk · Higher returns can be achieved at less risk · The risk of having too much of a portfolio in one asset class · The importance of combining small and value with traditional large-cap blend portfolio · Rebalancing of an equity portfolio can increase the long-term return · A portfolio can never score well during the decade periods but end up #1 for the whole period · The portfolio that grew to $9.5 million was less risky than the one that grew to $1.9 million After the discussion of the tables, Chris, Daryl and Paul talk about the portfolios they would recommend.

The idea began more than 25 years ago: Use tables to show the risk and reward of different equity asset classes — along with different combinations of equity and fixed income — so that investors gain a firm understanding of the relationship between long-term return and short-term risk, and make their investment decisions accordingly.  At that time, there were two tables — one for the S&P 500 (as the equity position) and a second for the Ultimate Buy and Hold combination of 10 different equity asset classes. Since then, we have added more combinations of these asset classes equity combinations. We call these the Fine Tuning Tables. In this podcast Paul discusses and reviews 9 different combinations of equity asset classes from the stand-alone S&P 500 to the 10-fund Ultimate Buy and Hold Portfolio. To get the most out of this podcast, Paul suggests you revisit the previous one, (Ultimate Buy and Hold Strategies: 2022 Update) and this table (Table A1). He begins with a quick review of the previous podcast and then looks at the 9 different equity asset classes that are the basis of the 9 Fine Tuning Tables. (Table A2: Alternative Equity Portfolio Table).  Then he reviews Table B1 for the S&P 500 and bond combinations. The goal is to alert users to the many risk and return lessons on this table.  Following this table, he reviews the Tables B7 through B14 that represent the different portfolio combinations that can be built with the 10 funds in the Ultimate Buy and Hold Portfolio. Those include: Ultimate Buy and Hold Worldwide 4 Fund U.S. 4 Fund Worldwide All Value U.S. All Value Worldwide All Small Cap Value All U.S. Small Cap Value S&P and Small Cap Value (50/50) Next week’s podcast will be a discussion about the 9 different equity asset class combinations. Paul will be joined by Chris Pedersen and Daryl Bahls to help Sound Investing investors select from the variety of strategies.

Since 1995 Paul has been writing and teaching Do-It-Yourself investors about the Ultimate Buy and Hold Portfolio. In this 2022 update he uses the UBH table (70-30) and UBH tables (50-50)  to make the case for 10 equity asset classes he thinks investors should consider owning in the equity portion of their long-term investments. The key takeaways: The S&P 500 can easily be “beat” without taking more risk. The impact of adding just 10% of another equity asset class can improve long-term returns. The impact of even .1% more return can be life changing over long periods of time. Adding more risky asset classes can substantially reduce risk. Diversification of equity asset classes is as important as diversification of individual stocks. Rebalancing is not about higher returns but is about limiting risk. Adding international equities can have a meaningful impact on long-term returns whether you add 30% or 50% to the portfolio. There is not risk in the past, we always know what we should have done. The UBH Portfolio is not designed to get the best return, but is designed to get a better return than the S&P 500 without substantially more risk.