Episodi
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I had an amazing conversation with David Baughier on the Forget About Money podcast!
We discussed my 12 One-Million Dollar Ideas for building wealth, the power of starting early, and why index funds are a game-changer for long-term investing.
We also covered the importance of diversification, the benefits of small-cap value stocks, and why sticking with a buy-and-hold strategy beats trying to time the market.
Whether you're new to investing or looking to refine your retirement plan, this episode has actionable tips to help you secure your financial future. Give it a listen—you won’t want to miss it!
Watch the video here.
Download the transcript here
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Paul starts the podcast with a discussion of his special presentation to the graduating nurses from the College of Nursing at Texas A&M. This presentation was part of a Life Transitions Series. He discusses how he might be able to do a similar presentation for other groups of graduating college students, as well as groups of investors who are trying to get the most from their company 401k.
The second topic is regarding a new set of tables that should help investors figure out potential future returns for the S&P 500, Small Cap Value, U.S. 2 Fund Index Portfolio and U.S. 4 Fund Index Portfolio.
The third topic was motivated by Ben Carlson’s articles on “Why Housing is Everyone’s Favorite Investment” and “What is the Historical Rate of Return on Housing?” Paul recently sold his home and discusses the challenges of figuring out how the profits compared to the S&P 500., As promised Paul had his meeting with David Sterman, an hourly CFP, who has followed our recommendations. Paul discusses his services and costs.
Here is his contact information:https://huguenotfinancialplanning.com
1358 Old Ford Rd. New Paltz, NY 12561
Phone: (917) 553-0675
For those interested in the Boglehead Conference:
https://boglecenter.net/2024conference/
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Episodi mancanti?
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Paul starts the podcast talking about the upcoming Boglehead Conference (Sept.27-29) in Minneapolis. The following link lists the speakers and topics. https://boglecenter.net/2024conference/
Q1: Should I invest $300,000 inheritance all at once or dollar cost average? 02:23
Q2: If SCV is such a great asset class why do the companies all have such low P/E ratios? 8:06
Q3: Given that our Roth IRAs have unlimited investment options how should we approach investing in our Roth accounts to best complement the life cycle funds in our 401k? 21:54Q4: Should we invest our IRA contributions the first of the year or dollar cost average over the year? 24:56
Q5: I’m 70 and am considering a combination of the 2040 target date fund and small cap value. How much should be in each? 26:34
Q6: Been in Ultimate Buy and Hold since 2013. I’m thinking about simplifying by using 2 or 4 fund portfolios. What are the pros and cons of change? Recommended reviewing. 29:37Q7: Can I still rollover regular IRAs into Roth now that I am retired? Recommended reading. 35:50
Q8: As a risk reducer to equities can I use T-Bills and money market funds rather than any kind of bonds. 37:35
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Paul starts with a general discussion of the decision to trust recent returns or make investment based on longer term returns. He uses AVUV and ARKK as two investments you could have made in September 2019. In the discussion he references a video where arkk creator and fund manager predicts future arkk returns.
Q: #1: Why should future results look like the past? 16:15
Q: #2 We are in mid 50s and we think we have more money than we will need in retirement. Is there a rule of thumb for how much money one needs? Should one just figure out their cost of living and back into the amount needed for retirement? 26:50
Q#3 Have you done a comparison of your returns compared to Dave Ramsey’s recommended portfolios? 32:55
Q #4 How can we teach young investors about the advantage of starting investing ASAP? See the following set of PowerPoints for the Orange County AAII. 40:02
Q #5 What is your take on Crypto Currency? Here is what people I trust say about CC.
Warren Buffett: “In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” Buffett said in 2018. And his stance hasn’t wavered since. According to Benzinga, Buffett believes that cryptocurrencies aren’t a viable or valuable investment. “Now if you told me you own all of the Bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything,” Buffett said at the Berkshire Hathaway annual shareholder meeting in 2022.
Ben Carlson: I have no idea what will happen with bitcoin or cryptocurrencies in general in the years ahead. Anyone who thinks they know with certainty how this all plays out is delusional. But I can say that my stance on crypto has evolved over the years to the point where I think the best-case scenario just might be the new digital gold.
Larry Swedroe Swedroe took a more skeptical view of Bitcoin. He pointed out that Bitcoin’s value proposition is questionable. Bitcoin has a theoretical limited supply, capped at 21 million coins. However, the existence of an unlimited number of substitute cryptocurrencies means Bitcoin faces a daunting challenge. An asset with an unlimited supply typically sees its value approach zero. Swedroe categorized Bitcoin as a Ponzi scheme, though he acknowledged that it could achieve high trading values based on what people are willing to pay.
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1. My husband and I are moving to Fidelity to set up your Ultimate Buy and Hold Portfolio. How do we make the change from our holdings to your portfolio? Do I have to sell all of my holdings? Plus we want to find an hourly advisor to help. Can you make a recommendation? 1:45
2. I have $1million in a money market fund. Do you think it is time to start reducing the cash position and moving to short term bonds or equity ETFS? 8:45
3. Are target date funds the same as all in one funds? 17:15
4. I would like your guidance on the decision to put together a S&P 500 and Small Cap portfolio using 3 to 1 leveraged fu?nds. Does the extra return justify the higher risk? 20:00
5. How should I protect my portfolio against inflation from the loss of the petrodollar? 35:00
6. From what I can see you have not addressed investment needs of older people in their 80s and 90s. How should I invest? I just can’t afford to lose money at my age. 39:17
7. Would I be dumb to have 10% of my retirement funds in gold? 46:20
8. With the fed getting ready to lower interest rates should I move my money market funds into 10 year Treasuries? 52:40
9. In the small cap blend and small cap value indexes it seems investors don’t get the advantage of owning small companies that grow to be the giants of corporate America. How do you get the premium when you have to sell the companies when they move beyond their index? 59:15
10. What is the difference between your 2 Funds for Life strategy and the two fund strategy that holds the S&P 500 and small cap value? 1:01
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1. What is the best glide path (asset allocation) for a 58 year old pre-retiree and then in retirement? This is the link for Chris Pedersen’s 2 Funds for Life glide path. 2:50
2. I don’t need all of my RMD (required minimum distribution). How should I invest the excess? Here is the link to the video on "My 12 Favorite Vanguard Funds for Retirees” and the link to all of the Fine Tuning Tables. 11:19
3. My wife has easily onset demential. It’s costs $200,000 a year. How should a family invest in a situation like ours? Here is the link to the Vanguard Brokerage CDs (https://investor.vanguard.com/investment-products/cds) and stantheannuityman.com for MYGA rates. 17:18
4. What are your thoughts regarding precious metal investing? And if there is a place, what is the best way to do it? 22:52
5. Will the massive increase in passive investing, which has benefited the large cap growth indices, reduce the long term returns of small cap value? Here is the link to the long term returns Paul mentions. 28:50
6. How would the long term returns change if we overweight the U.S. 4 Fund Portfolio with slightly more small and large cap value? Here is the link to the Equity Asset Classes (1928-2023) 32:01
7. I’m 72 and my wife is 63. How different should our glide paths be? Here is the link to the Vanguard and Blackrock TDFs. 44:10
8. Are REITTs more like stocks or bonds? 46:41
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On July 25, 2024 Paul and Chris made a presentation to the Puget Sound AAII. Paul spoke to the latest research on small cap value and Chris spoke to the latest research on his 2 Funds for Life Portfolio. Following the presentation they answered questions from the guests.
Q: What advice do you give on conversion of regular IRAs to Roth IRAs?
Q: What investments do you recommend to offset large losses in the equity markets?
Q: Why do you recommend AVUS over VOO, or other S&P 500 funds? In Chris’ answer he recommends listeners read his AAII article on ETF Selection.
Q: Why don’t you recommend Long Term Treasury Bond fund? Vanguard Long Term Treasury VGLT
Q: Do you recommend a pension and/or Social Security be considered the equivalent of a bond fund?
Q: Can you compare RSP (an equal weighted S&P 500 Fund) vs. SPY?Watch the full video here.
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In this podcast Paul discusses an article by Truth Teller Ben Carlson (The Biggest Winners in the Stock Market), regarding a study by Dr. Hendrik Bessenbinder (Which U.S. Stocks Generated the Highest Long-Term Returns )
This study is an update from an earlier study from Bessenbinder that Paul has recommended many times.
Paul also discusses an article by Truth Teller John Rekanthaler, "When Rebalancing Creates Higher Returns—and When It Doesn’t”This article adds to THE discussion of the impact of rebalancing on the latest video/podcast.
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Paul, Daryl, and Chris are together again to discuss what they each think are the best single charts or graphs to help people understand investing and make good decisions.
Paul starts by asking Chris and Daryl how much we can rely on the past to predict the future.
Paul follows that with a deep dive into his choice for the most important chart -- the quilt chart.
Daryl follows up with his choice -- a discussion of the tell-tale chart.Chris finishes with his choice: a discussion of the 2 Funds for Life Fine Tuning Table.
Tables referrenced-
Table J1b- Equity Index Returns: 1-yr Periods (1928-2023)
Table K1a- 4 US Asset Class Indexes & 4 Fund Combo Relative Return Ranking (1928-2023)
Table K2a Asset Classes & 4 Fund Combo (1928-2023) - Return Rank Frequency
Table K1b S&P 500 & US SCV Relative Return Rank Comparison (1928-2023)
Table K8a Sound Investing Port. Returns: 10 Yr Periods (1928-2023)
Table K6a Sound Investing Portfolios, S&P 500 & US SCV Relative Return Ranking (1928-2023)
Table K7a Sound Investing Portfolios, S&P 500 & US SCV (1928-2023) - Return Rank Frequency
Watch video here.
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One of the most challenging aspects of being a 100% do-it-yourself investor (DYI) is dealing with the emotions of wanting to make major changes in a portfolio due to what may easily be seen as catastrophic news. The DYI doesn’t have a professional to help them think through the difficult times like the 2008 meltdown, the October 19, 1987 22% one day decline or currently, the upcoming election results.
Paul believes one of the best sources of professional support a DYI could have is George Sisti’s, "On Course Financial Planning Vectors" newsletter. On this podcast Paul reads Sisti’s July issue focused on “The Election!” as well as the misleading “noise” that investors get from the typical predictions that Wall Street produces this time of year.
Paul recommends investors read George's letters anytime they are feeling uncomfortable with the market. He even suggests that investors download his archived letters for future reading.
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Paul starts the podcast discussing the upcoming (July 13, 2024) presentation for AAII Puget Sound Chapter (9-10:30). Chris Pedersen and Paul will present, “2 Investment Decisions Guaranteed to Change Your Financial Future. ”Here is a link for more information and to sign up for this presentation. Here is the link to sign up.
Today’s podcast is a discussion of the latest research from Daryl Bahls, Director of Analytics for The Merriman Financial Education Foundation. Paul believes these new tables are likely the best teaching tool he has found to give investors a realistic idea of the future sequence of returns. While Paul focuses on several of the 20 slides in the attachment, more of these will be discussed next week with Daryl and Chris.
Paul starts his discussion with his latest update of the Equity Asset Classes (1928-2023) table.
He then explains why Daryl’s Quilt Charts are a better way for investors to understand the sequence of returns they are likely to experience.
Paul asks listeners to send him questions from the slide deck so they can be addressed in next week's podcast with Daryl and Chris. -
Join Paul as he is interviewed by Ed Fulbright, CPA and host of Mastering Your Money on WNCU 90.7 FM in Durham, N.C.
How do Grandparents decide to help with education or retirement or legacy building of their grandchildren? You often recommend small cap value as the primary investment vehicle for creating legacy for your grand children. Why did you select this investment? You recommend a low cost strategy for $365 per year. Can you tell our listeners about how this works? You also have different options for people who may have older children or grandchildren. Can we discuss those options? You suggest writing a letter to a child or grandchild. Can we discuss the power of the letter to the child or grandchild? What is the best advice you have ever received? -
The following questions were generated during a presentation Paul made to the Orange County and New York City AAII Chapters.
1. How do we go about finding someone (money manager) who follows your portfolio recommendations? Plus what is a reasonable fee to pay for advisory services? In the answer I do mention David Sterman. link:https://huguenotfinancialplanning.com/and two videos by Rob Berger: 5 Hidden Costs of Fee-Only Advisors and 5 Key Questions to Ask Your Investment Advisor
2. How can I decide whether to go from 50/50 stocks and bonds to 70/30? I suggest looking at table B1 and B9.
3. What bond durations do you recommend?
4. What are the ETFs that you recommend for each of the equity asset classes you list?
5. Can I share your presentation with my children? Here is a presentation that might be good for a young person.
6. How do I find a good money manager and what questions should I ask? Here is a link to our free book, “Get Smart or Get Screwed: How to Select the Best and Get the Most Out of Your Financial Advisor.”
7. How do I get access to all of your charts and tables? Here is the link to Boot Camp where you can have access to all the tables.
8. What is your view of small cap value returns over the coming decades? In my answer I mention Ben Carlson’s article on randomness of historical returns- When is the Mean Reversion Coming in the Stock Market? and his article Long-Term Recency Bias.
And here is the new graph that Daryl Bahls proceeded to see the returns of a couple of portfolios over the same periods as Ben addressed.
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On June 8, 2024 Paul gave a 2 hour presentation to the Seattle Chapter of Choose FI. The topics covered the 8 biggest investment decisions, plus a new piece on putting aside money for a newborn to 21 year old.
Here is the video link. This podcast covers 10 unanswered questions from the presentation, plus 5 additional topics that guests listed as most important topics of the meeting.
Q&A:
1. How to find the best 3 year fixed annuity. https://www.stantheannuityman.com/
2. How to select the best target date fund.
3. Why small cap value stocks make higher returns.
4. When do Roth conversions make sense? Link: https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
5. What is your bottom line best portfolio without having to go through all the tables?
6. Will Western Washington University offer financial literacy classes on their satellite campuses?
7. What additional advice would you give to a 45 year old who wants to live on a 4% distribution for the rest of their life?
8. What distribution advice would you have for a single person who is planning to retire before age 45?
9. In creating your tables, how often do you rebalance the portfolios?
10. Please explain the most important differences between an ETF and a regular mutual fund. https://www.thebalancemoney.com/differences-between-mutual-funds-and-etfs-2466791https://www.investopedia.com/ask/answers/09/mutual-fund-etf.asp#:~:text=Both%20mutual%20funds%20and%20ETFs%20offer%20investors%20pooled,offer%20a%20wide%20selection%20of%20actively%20managed%20funds.
More topics from the June 8 presentation:
11. What changes should I make in my portfolio when I retire?
12. Are low expenses the biggest decision when investing in index funds?
13. What are the most important steps I can take to get better returns?
14. What are the biggest (most costly) mistakes investors make?
15. Is investing in the Total Market Index or S&P 500 all you need to reach FI?
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Mavis Tsai is a friend I have known for decades. Our paths crossed as I was teaching one of my free 3 or 6 hours workshop.
In January she asked me to participate in her 5-day online event entitled, "Confluence of Hearts: A Global Summit on True Self, Brave Connections, and a Love-Led World” In the description of the event she noted: "Together, we will explore cutting-edge insights on reconnecting with our true selves and our fellow humans, dismantling antiquated societal structures, harnessing our passions and gifts, and co-creating a thriving future for generations to come by contributing our highest selves to the world.”
We have one thing in common. We are both trying to help people get better—but in very different ways.
When she asked me to participate I begged off.
Here is a paragraph from my attempt to graciously say no.
"I am trying to help people have a better financial future, and I’m willing to do it for free, but I’m not sure I fit the mold of the kind of speakers you are bringing together. I’m an expert on investing by the numbers. I want do-it-yourself investors to take the steps that will give them the highest probabilities of long term investment success. Normally that means squeezing every ounce of emotion out of the process.”
Mavis knows I like lists so she gave me a list I couldn’t resist.
1. Your expertise in investment not only aligns with our summit's focus on creating a love-led world but is a crucial piece of it. Financial stability and wisdom empower individuals to live their true selves and make brave connections. By teaching attendees how to secure their financial future, you're offering them the freedom to pursue their passions and contribute meaningfully to society.
2. Our summit thrives on the diversity of thoughts and approaches. Your unique perspective on investing by the numbers adds an invaluable dimension to our discussions. It’s about balancing the heart and mind—your approach provides the stability and clarity needed to pursue one's true passions with less financial fear.
3. Contrary to taking the passion out of investing, your method encourages a highly disciplined form of passion. It's about being passionate about our goals and the systematic pursuit of those goals. This disciplined approach is a form of emotional intelligence that is highly relevant to our attendees' journey towards a love-led life.
4. Your willingness to contribute your highest self by educating others for free is the epitome of what this summit stands for. (Your interview will be for less than an hour :)). It’s about contributing to a thriving future by sharing our gifts. Your insights can help our audience make informed decisions that align with their values and long-term success.
5. Your concern about confusing your followers is understandable. Participating in this summit, however, is an opportunity to show the depth and versatility of your expertise. It’s a platform to demonstrate how financial wisdom is foundational to living a fulfilled, passion-driven life, bridging your work with broader life goals. I said yes and the conversation is entitled,
"Balancing Hope and Reason: The Lifetime Path to Successful Investing.”
I hope you enjoy it.
Watch the video here.
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On May 18, 2024 Chris Pedersen made a presentation to the Houston Chapter of AAII. At the end of the presentation Chris answered over 20 questions. Those questions are on this podcast. Here are the question topics:
1. Portfolio expectations compared to S&P 500?
2. How would adding small cap value (SCV) help a retiree?
3. How important is asset class location using 2 Funds for Life?
4. Would a do it yourself target date portfolio be better than buying a target date fund?
5. How do you expect interest rates to impact equity?
6. How different are the Total Market Fund expected returns from the S&P 500?
7. What are drawbacks by investing in SCV?
8. What steps should we take to manage emotional risk?
9. What is your opinion about combining TIPs with equities?
10. Should you increase your equity holdings as the get older?
11. Please comment of Christine Benz’s Bucket Portfolio?
12.. What SCV funds do you recommend?
13. Are there other target date funds you recommend besides Vanguard?
14. At age 60 what kind of return should I expect over the rest of my life?
15. Do you recommend nudge withdrawals over withdrawals from the whole portfolio?
16. Why would more profitable small cap value funds do better than portfolios of less profitable companies?
17. Do you recommend VT, the Vanguard Worldwide equity fund?Inside the Investment Mind of Chris Pedersen with host Charles Rotblut. Charles is the editor of the AAII Journal, and a vice president and Chartered Financial Analyst at AAII
Q1: What is the best way to get big positions in cash invested? All at once or dollar cost average over time?
Q2: How should target date fund investors choose the best date for their situation?
Q3:What are the pros and cons of backtesting historical performance?
Q4: Why did you choose the drawings in your book “2 Funds for Life?”
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Chris explains investing diversification with some analogous side trips to the worlds of food and nature.He starts by illustrating the importance of perspective, emphasizing the need for many decades of data in backtesting.Next, he covers the ingredients, or asset classes and styles, most investors will use to diversify.With the ingredients in hand, he explains what happens when we mix them, and how mixing ingredients that are substantially different can improve the return we get for any given level of risk.He then covers the real-world implications for accumulators and retirees and finishes off with some fine tuning tables and thoughts on the discipline needed to be a meaningfully-diversified investor.Here is Chris' pdf from his presentationGet a free copy of We're Talking Millions
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Eleven months a year Dr. Robert Pass produces a podcast dedicated to a review of the latest literature and thought leaders in pediatric cardiovascular care. For the last 3 years Rob has finished his podcast series with a focus on personal finance.
It has been an honor to work with Rob on these special podcasts for the last 3 years. This is his podcast from December 2023.
To conclude 2023 we end with noted national authority on personal finance and investing, Mr. Paul Merriman.
Mr. Merriman reviews some basic ideas about asset allocation within a retirement plan such as a 403b, 401k or IRA with the goal of achieving the highest degree of return for level of risk.
He reviews the importance of diversification and also shares with us both a '2 fund' and '4 fund' approach to creating a low cost, efficient and diversified portfolio that has, historically, been associated with good long term returns.
Mr. Merriman's work can be seen at: paulmerriman.com
For those interested learn more about his '2 Fund' solution: https://www.paulmerriman.com/2-funds-for-life-update-2023
For those interested to learn more about his '4 Fund' solution: https://www.paulmerriman.com/4-fund-combo
For those interested in target date funds: https://www.paulmerriman.com/target-date-funds
Finally, for those who did not previously take advantage of Paul's free book, the following is a link to a free PDF of the book: https://irp.cdn-website.com/6b78c197/files/uploaded/Were-Talking-Millions.pdf
Please note: This episode is not intended to provide specific personal finance advice and is for entertainment purposes only. Please consider speaking with a trusted advisor before making any significant changes to your retirement assets. -
Paul and Chris cover several questions about the Best-in-Class ETF recommendations and selection process.
What's the overarching objective of the Best-in-Class ETF recommendations?* What's the 6-step process described in your AAII Best-in-Class ETF Article? Why is it sometimes worth paying another tenth of a percent or more for funds with more exposure to small or value? Is AVUV's recent 6%/year return advantage over VBR expected and/or likely to continue?* What did Avantis say are the market conditions that favor or disadvantage their approach?* How should investors think of the risks of tilting away from the cap-weighted market indexes towards small and value? Retail investors have a potential superpower versus institutional fund managers -- patience! How many hours does it take Chris to update the Best-in-Class ETF recommendations? JL Collins is a big proponent of the total market index. How much is our Best-in-Class ETF recommendation for large-cap blend (AVUS) likely to outperform a total-market index fund such as VTI? What happens when small-cap value becomes super popular?Links: Best-in-Class ETF Bootcamp video and podcast
AAII article on Choosing Best-in-Class ETFsPortfolio configurator
Portfolio visualizer factor statistics, factor regression tool, and fund factor regressions.
Watch video here
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Join Paul and Chris to follow up on Chris’ video on "2 Funds for Life Update 2024" .
In this discussion Chris covers the history of the development of this popular portfolio, as well as his new table that covers the expected returns for all of the periods from ages 20 to over 90.
The advantages of Blackrock over Vanguard target date funds and why it should make over .5% a year more over their lifetimes. The reasons paying more for a small cap value fund may pay big rewards over the long term. The advantages and disadvantages of the more aggressive 2 Funds for Life Portfolios. How to build the Portfolio by using several different accounts The impact of rebalancing vs. letting the 2 funds grow independently
The discussion included comments on:Watch video here
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