Sound Investing

An investment advisor and long time podcast listener recently wrote to Paul: “By any stretch of the imagination this market (S&P 500) is expensive. Back in 1987 you took your clients to cash or very near cash. Do you feel that that today is the same situation?  I’ve never market timed in my career, but today fells like the time to do it if there ever was a time.” Paul discusses what really happened in 1987. He follows that with sharing parts of two blogs by Ben Carlson, CFA and author of the blog, “A Wealth of Common Sense.” Paul also shares the latest predictions for 2022 from two of the most respected financial institutions in America. Hopefully, it will help investors deal with the question: is it time to sell? Happy Thanksgiving! Ben Carlson’s articles referenced in this podcast: "Two Things That Are Both True” "Perma Arguments”

In this lively conversation, Paul Merriman and Daryl Bahls interview Chris Pedersen – author of 2 Funds for Life – A quest for simple & effective investing strategies (Oct. 2021) and creator of the 2 Funds for Life strategies – about the simplicity and effectiveness of these strategies and the data that supports them. Below is a link to start reading the book for free. Questions discussed: · How did you get the title of “financial wizard”? · Is the book for young people? · What are some of the questions the book answers, and why should investors care about them? · What's a target-date fund, and why is it the foundation of the 2 Funds for Life strategies? · What's the gist of the 2 Funds for Life approach? · Why is small-cap value the best choice second fund for accumulators and retirees? · Is a target-date fund on its own enough?  How much more money did the 2 Fund for Life strategies make in the past? · Why does the book focus on "real" (after removing inflation) instead of "nominal" (including inflation) results? · How much deeper were the drawdowns (losses) for 2 Fund for Life strategies compared to a target-date fund? · Are 2 Fund for Life strategies more resilient after major market declines? · Why might investors need or want some of the deeper details in the book? START READING THE BOOK FOR FREE at our website: https://paulmerriman.com/2-funds-for-life-book/

Paul address the pros and cons of cryptocurrencies. He discusses his personal opinion after reading from several articles that do a good job of presenting the basics of cryptocurrencies. In this week’s Sound Investing newsletter, Paul expands on his views about cryptocurrency. Subscribe now — always free! — at https://paulmerriman.com/signup/ and get your free copy of We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement. Suggested links: https://www.freecodecamp.org/news/explain-bitcoin-like-im-five-73b4257ac833/ https://gen.medium.com/you-dont-understand-bitcoin-because-you-think-money-is-real-5aef45b8e952 https://www.youtube.com/watch?v=ggvlgNMr_NE Additional links to understand the basics of cryptocurrency from NGPF.org: https://www.ngpf.org/blog/investing/is-bitcoin-bad/ https://www.ngpf.org/blog/current-events/cryptocurrency-bitcoin-primer/ https://www.ngpf.org/blog/question-of-the-day/question-of-the-day-what-is-the-value-of-cryptocurrency-stolen-each-day-on-average/ https://app.nearpod.com/presentation?pin=DHIRS

Chris Pedersen talks with Ed Fulbright, CPA, on Ed’s “Mastering Your Money” podcast, about the 2 funds for life strategy he developed as Director of Research for The Merriman Financial Education Foundation, and his new book, 2 Funds for Life: a quest for simple and effective investing strategies.  Chris tells the story of how Paul Merriman’s meeting with Jack Bogle, the founder of Vanguard and father of index funds, led to his development of 2 funds for life. The challenge was to greatly simplify Merriman’s Ultimate Buy and Hold strategy so it is accessible to everyone. At the same time, keeping the simple strategy massively diversified and tilted toward maximizing return and minimizing risk, while adjusting for a lifetime so the risk is automatically reduced as people age. Chris also talks about the challenges of approaching retirement, some steps he took to minimize anxiety and transition to retirement, the best advice he received, and about risk and the importance knowing your own tolerance. Get your copy of 2 Funds for Life: a quest for simple and effective investing strategies. All profits from the sale of the book support the work of The Merriman Financial Education Foundation. 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 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! 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!

In this podcast, Paul is joined by Daryl Bahls and Chris Pedersen to answer a variety of questions posed during the AAII Conference 360.  What mutual funds and ETFs do you personally own? Paul, Chris and Daryl share their individual approaches and holdings. Are there any good-to-excellent small cap newsletters Paul recommends?  In the answer Paul references http://hulbertratings.com/, the best source of newsletter results, and also the "Cabot Turnaround Newsletter" and "Nate’s Notes." Where can we get a list of small cap value funds and ETFs? In your distribution tables, by inflation adjusting the distributions but not the value of the portfolio holdings, doesn’t that mislead a potential investor? Where can we get the free copy of We’re Talking Millions!? What are the specific 4 funds you recommend an investor hold for life?  Paul includes mention of links to recommended funds or ETFs: https://paulmerriman.com/vanguard-tax-deferred-etf-portfolios/ https://paulmerriman.com/best-in-class-etf-recommendations/ https://paulmerriman.com/4-fund-portfolios/ When re-balancing the 2 Funds for Life, do you strictly look at the end-of-year value of each asset, or are there other criteria you recommend evaluating? My Schwab account rates my portfolio on risk vs. return.  Is this the ultimate way to measure how I am doing? If your account is taxable will using factor investing and rebalancing create a tax drag that overwhelms the better expected returns? Chris, which websites did your AAII panel on Factor Investing recommend for researching funds and learning about factor investing: https://paulmerriman.com/best-in-class-etf-recommendations/ https://www.portfoliovisualizer.com/ https://www.morningstar.com/ https://www.etf.com/ https://alphaarchitect.com/blog/ Daryl Bahls is Director of Analytics for The Merriman Financial Education Foundation and Chris Pedersen is Director of Research and author of the new book, 2 Funds for Life: A quest for simple & effective investing strategies available at Amazon and other online booksellers. You can watch Paul’s presentation Small-Cap Value presentation here. You can get your free copy of We’re Talking Millions! right here. The American Association of Individual Investors is an independent, nonprofit corporation formed for the purpose of assisting individuals in becoming effective managers of their own assets through programs of education, information and research. Learn More: https://www.aaii.com/membership/about-aaii You can join here starting at $2/month: https://invest.aaii.com/membership/

Cryptocurrencies, ARKK, inflation, market timing, Vanguard High Yield Bond Fund and emerging markets and mor This podcasts includes questions from a fellow advisor as well as questions from readers and listeners. Do you care that bond interest rates are below inflation and it seems that rates will stay below inflation over the next decade? Do you encourage investors to search for alternatives to bonds with higher expected returns? Do you think returns should be presented in real (after inflation) or nominal (no inflation) terms? Could an equity trend-following strategy be used as an alternative for bond funds? What advice do you give young investors on cryptocurrencies or stocks like GME or AMC? Many investors are convinced that investing in new rapidly growing companies (such as those ins the ARKK ETF) are superior to small cap value companies. Why choose the losers over the winners? Is a simple conventional 60:40 portfolio best for most investors? Why is your Ultimate Buy and Hold Portfolio underperforming the S&P 500 over the last 6 months? This answer explorers the winners and the losers over the last year. I’m disappointed in the recent 3 years of returns of emerging markets. Can you give me some historical perspective on the recent underperformance? Would an international small cap value fund be a good substitute for an emerging markets fund? What are the pros and cons of Vanguard’s High Yield Bond Fund and Total Bond Fund?

There can be big differences between asset class returns, as well as differences within asset classes. Why do some great funds look like dogs compared to their competitors?  How can there be over a 20% one year difference in return between two funds in the same asset class?  Paul examines these questions and recommends investors use the quilt chart constructed by Daryl Bahls to understand the randomness of short-term returns. He suggests reviewing any period of 10 to 20 years to see the movement from the best to worst from one year to the next. Link to Quilt Chart: https://paulmerriman.com/wp-content/uploads/2021/01/2020-Year-End-Podcast-Charts.pdf Article on 4 Fund Combo: https://paulmerriman.com/market-got-you-down-how-to-construct-a-comeback-portfolio/

In this podcast, Paul examines the outright lies made by industry leaders about the difference between index funds and active management.  They hope to skew your thinking to their advantage – not yours. Trillions of dollars in Americans' retirement savings are invested in large and small accounts managed by banks, brokerages, mutual funds, and insurance companies, which continue to fight the regulation of fiduciary responsibility. Whether your IRA or 401K will assure a safe retirement remains largely a gamble. In the documentary “The Retirement Gamble” – as true today as it was when made in 2013 – producers Martin Smith and Marcela Gaviria build on reporting from the groundbreaking series “Money, Power and Wall Street.” They reveal how fees, self-dealing, and kickbacks bring great profits to Wall Street while imperiling the prospects of a secure future for individuals. The documentary explores who has the consumer's best interests in mind, and whether there is a better way to manage our retirements. Paul’s book, Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor, looks at why the brokerage industry is not serving your best interests and includes extensive lists of questions you should ask – and services you should receive – from an advisor. In particular, Chapter 16, which he reads in this podcast, addressing how not to “get screwed" by emotional appeals. Watch the Frontline Documentary:  “The Retirement Gamble”:  https://www.youtube.com/watch?v=lkOQNPIsO-Q Get your copy of Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor. It is available for sale at Amazon and other online booksellers, which supports the work of The Merriman Financial Education Foundation, or download a free copy. Here is what others have written about this book: “Excellent book especially for a DIY investor or someone just learning about personal finance… There is a plethora of bad investment advice out there in the world… It is difficult to sort through all the nonsense and to determine the true from the false… Fortunately, for Merriman's readers, he takes them by the hand and leads them through the jungle of nonsense out there in the world and explains how to avoid being taken in.” - DN “As a teacher of community-based investing classes, [I found it] a very useful book… I will definitely be adding it to my recommended reading list! I particularly liked the 2nd half of the book (chapters 11-16) that contains real-life examples of the bad practices and bad products you'll run across in your interactions with securities and annuities sales people. I had to follow the investment industry for years to learn about the various schemes and deceptions that need to be avoided. But you can gain all that knowledge in a week by reading (and rereading a few times) this part of the book.” – AP “This easy to read and easy to understand book is consistent with the other 4 books of Paul Merriman's that I have now read… What I have liked most about each of his books, although they may be written about different aspects of investing and in different words, is that they provide a consistent philosophy and recommendation on how to invest.” – DD Correction- Get Smart or Get Screwed was published in 2012 and not 2011.

Paul talks with Barbara Friedberg, financial writer and former investment portfolio manager, about his popular 4 fund combo and how and why to implement it. Among their discussion is how the 4 fund combo strategy outperformed the S&P 500 over the last 92 years. From 1928 through 2020 the Merriman 4-fund portfolio earned an average annual return of 11.7% versus the S&P 500 average return of 10.00%. [This podcast is also available as a video at:  https://youtu.be/vMFtJLAxFhI]. The Merriman Financial Education Foundation Four Fund Combo – - Small Cap Value - Small Cap Blend - Large Cap Value - S&P 500 Sign up for free at M-1 Finance and create your own 4 Fund Combo: https://m1finance.8bxp97.net/aXrzb (Affiliate Link – If you fund an account for $1,000 or more, The Merriman Financial Education Foundation receives a one-time affiliate fee.) Watch our M1 finance video tutorial with Chris Pedersen https://www.youtube.com/watch?v=02_KIRvBbmo Barbara A. Friedberg, MBA, is a former investment portfolio manager and university finance and investing instructor. She currently owns and manages two Investing websites: Robo-Advisor Pros https://www.roboadvisorpros.com/ and Barbara Friedberg Personal Finance https://barbarafriedbergpersonalfinance.com

Paul gives listeners a taste of what he will be discussing Sept. 25, 2021 at the Puget Sound Chapter of the American Association of Individual Investors (AAII) and at AAII’s virtual Annual Investor Conference Sept. 30 and Oct. 1. The title of the Puget Sound Chapter talk is, "The Ultimate Buy and Hold Strategy—on Steroids!” and for the Investor Conference it is, “20 Things You Should Know About Small Cap Value.” Below in the notes, Paul asks for your feedback. For those attending the Conference, Paul invites you to join him Oct. 1 at 8:30 a.m. for a special Plenary Session wherein he will receive the James Cloonan Award For Excellence In Investment Education. While in a recent podcast, S&P 500 vs. Small Cap Value NEW Fine Tuning Table, Paul discussed a new Fine Tuning Table — showing the year-by-year returns, along with the associated risk, of 11 combinations of the S&P 500 and a Small Cap Value index — in this podcast he continues that conversation, explaining how you can also put it to work during the accumulation and distributions period of your life. He introduces another new Fine Tuning Table that reflects an equity portfolio that is equally divided between the S&P 500 and SCV, along with multiple percentages of fixed income.  He also compares a Table of Fixed Contributions using the S&P 500 and S&P/SCV as well as Fixed Distribution Tables reflecting the S&P 500  and 50/50 S&P 500/SCV.   Paul asks a favor of his listeners.  Please let him know: What combination of S&P 500 and SCV would be comfortable for you? Send your response to paul@paulmerriman.com and please include your age and retired vs. non retired status. Many thanks to Daryl Bahls, our Director of Analytics for these and more than 150 tables prepared for The Merriman Financial Education Foundation to help you be a better investor.