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This updated discussion of the Ultimate Buy and Hold Portfolio highlights the advantages of equity asset allocation and worldwide diversification. The presentation was presented to members of the Washington State Society of CPAs.

At the end of the presentation Paul adds his list of 15 million dollar decisions that all investors will make in their lifetime.

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Join me on Catching Up to Fi l with Rick Ferri to discuss key investing topics like asset allocation and the pros and cons of small-cap value vs. total market funds.

TIMESTAMPS / CHAPTERS

00:00 ⛓️ Understanding Bonds and Young Investors

02:31 🌟 Introduction to Financial Literacy Titans

03:12 🎓 Paul Merriman's Financial Education Foundation

04:18 🧠 Rick Ferri and the Bogle Center for Financial Literacy

12:09 ⚖️ The Importance of Asset Allocation

23:11 🌍 Debating International vs. US Stocks

35:12 🗓️ Target Date Retirement Funds: Pros and Cons

45:55 📈 Exploring Small Cap Value Investing

49:34 🧩 Understanding Non-Traditional Index Funds

50:28 🔍 Small Cap Value Performance Analysis

52:56 👨‍👩‍👧‍👦 Generational Wealth and Portfolio Management

53:54 🧬 Diverse Value Factors in Investing

55:55 🚧 Challenges of Small Cap Value Investing

57:33 🧭 The Philosophy of Long-Term Investment Strategies

01:01:11 🧪 Debating the Evidence-Based Investing Approach

01:12:46 🛡️ The Importance of Staying the Course

01:22:05 🎤 Final Thoughts and Recommendations

In the left corner, we have Paul Merriman, the seasoned finance veteran weighing in at 183 pounds. In the right corner, Dr. Karsten Jeske, the scrappy newcomer at 208 pounds. The bell rings, and the small cap value debate begins.

This episode features a financial boxing match between two investment heavyweights with dramatically different perspectives. Paul Merriman champions diversification through the efficient frontier, which means adding small cap value to your portfolio. Dr. Karsten Jeska has “thrown cold water” on this approach, favoring simpler strategies like “VTSAX and chill.”

The stakes are high — we’re talking potentially millions of dollars in your retirement account over decades.

Merriman argues that history shows clear evidence for small cap value’s premium. From 2000 to 2009, small cap value outperformed the S&P 500 in all but one year, compounding at 10 percent while the S&P 500 returned negative 1 percent. He believes this pattern will continue, creating a powerful diversification effect when combined with broader market indexes.

Jeske counters that small cap value’s outperformance is mostly “front-loaded” in history, happening before anyone knew about it. Since 2006, small cap value has underperformed. He argues that once an advantage becomes widely known, it disappears in an efficient market. Adding small cap value might even be “di-worsification” — increasing complexity without improving returns.

The debate expands beyond small cap value to touch on:

• Active vs. passive investing strategies
• Market timing vs. buy-and-hold approaches
• Simplicity vs. complexity in portfolio construction
• The role of faith vs. evidence in investment decisions

While both experts disagree about small cap value’s future, they agree on fundamentals: invest early, stay invested for the long term, and understand that no one can predict markets with certainty.

What starts as a technical debate evolves into a philosophical discussion about evidence, probability, and the limits of our knowledge — all with millions of retirement dollars hanging in the balance.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.

(0:00) Debate intro: small cap value vs index funds

(4:01) Merriman: small cap value offers premium returns

(9:40) Jeske: small cap value underperformed since 2006

(18:20) Historical performance data significance

(25:15) Stakes: difference of millions over time

(33:08) Diversification vs added volatility debate

(41:45) Risk-adjusted returns comparison

(49:08) Questioning true diversification benefits

(57:40) Value traps and actively managed funds

(1:05:08) Technology stocks vs value investments

(1:13:45) Data selection bias in studies

(1:19:40) Faith vs science in investment decisions

(1:29:20) Personal risk tolerance considerations

(1:36:08) Closing arguments on investment strategies

(1:42:08) Paula declares the debate a draw

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If a retired investor has the ability to use a flexible distribution strategy it will likely produce one of the best financial outcomes in retirement.

Before discussing flexible distributions Paul lists the reasons he believes that 99% of successful long term depends on defensive steps. After listing 18 defensive decisions he explains why flexible distributions are better than fixed distributions for those who have over said.

The presentation includes 16 distribution tables that can be found in this pdf for the presentation.

In each case Paul compares the difference in returns and risk between the fixed and flexible distribution strategies. The discussion compares returns and total distributions for two of the 9 sound investing portfolios: one using the S&P 500 and the other the U.S. 2 Fund Portfolio (50/50 S&P 500Small Cap Value).

Other links noted in the presentation:

Sound Investing Portfolios

The move from the accumulation to distribution period of an investors lifetime includes some very important decisions.

1. What asset allocation between equities and fixed income?
2. What combination of equity asset classes in the equity portion, as well as fixed income asset classes?
3. What amount of distribution will be made annually?
4. Will the payments be monthly, quarterly or annually?
5. Will payments be adjusted for inflation and how often?
6. Will the distributions be based on a fixed distribution with regular adjustments for inflation (the topic in this presentation) or on a flexible basis (the topic of the next segment)?

In this podcast Paul uses 15 slides to address the questions above. It is recommended the viewer print out the ⁠PP presentation  to make it easier to follow the numbers.

Many may find it is easier to follow the information on Paul’s video⁠ on the same topic.

If you have questions about the presentation please leave comment or question in the comment section of the video  or email ⁠[email protected]⁠.  For those sending an email please let us know the topic of the Boot Camp presentation.

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Young and first time investors have to address a number of monumental decisions.  

• How much money to save for the future
• How much they should invest in equities and bonds
•  How much of the equities should be in large, small, value, growth, U.S. and international asset classes
• How much to increase the investment each year

This podcast/video helps the investor address those decisions.  For those listening to the podcast here is a link to the pdf of all of the tables referenced in the presentation.  He only focuses on a handful of tables but here is a link for those who want to review the entire set of tables.

Paul discusses the accumulation process from the viewpoint of an investor as well as a small business owner.

 If you have questions please send them to [email protected] or leave them in the comment section below.  

Here is the video link-

This is the 4th in a series of 9 Boot Camp videos/podcasts.  

The previous three segments covered :

1. Stocks vs. Bonds
2. The Ultimate Buy and Hold Portfolio
3. Sound Investing Portfolios.

In this presentation Paul focuses on the differences between the risks and returns of different percentages stocks and bonds.  He also discusses one table that mixes different percentages of the S&P 500 and small cap value.Here are a couple of videos that focus on small cap value.

$13.83 Million? Yes Please! Paul Merriman’s Small Cap Value Strategy

The one asset class you must own

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Chris Pedersen updates his recommendations and describes his selection process in an interactive presentation with Paul and Daryl along for the ride.

This "Best In Class ETFs Recommendations" presentation is the 9th in the Boot Camp Series.  (We have not completed some of the earlier presentations due to the high interest in Chris' Best In Class Recommendations).

The focus of each the Boot Camp presentation is to help investors make the best of what we consider to be  the biggest long term decisions they will make.

Of course we cannot know the ETFs that will produce the highest returns but we can measure the likely impact of the factors that Chris discusses during his presentation.

On behalf of all of the people who find this work helpful, as well as Daryl Bahls and myself, I want to thank Chris Pedersen for all he has done to help us understand the potential long term advantage of his analysis.  It is our hope that his work will give investors  the confidence and commitment to “stay the course" in the normal ups and downs of the market.

00:00:00 - Intro

00:07:15 - Changes

00:12:31 - Factor Basics

00:18:00 - Selection Criteria

00:20:21 -- Quantifying Differences

00:24:32 -- Comparing in an Asset Class

00:31:10 -- More than just numbers

00:32:12 -- BIC ETFs on Website

00:33:05 -- US Large Cap Blend

00:34:33 -- US Large Cap Value

00:37:40 -- US Small Cap Blend

00:42:30 -- Int'l Large Cap Value

00:43:30 -- Int'l Small Cap Blend

00:44:15 -- Em. Mkts Small Cap Blend

00:44:50 -- Portfolio Configurator

00:46:25 -- Roboadvisor ETFs

00:51:06 -- Versus Russell 2,000?

00:54:00 -- Avantis & DFA Advantage

01:03:36 -- Analysis Timeframes

01:04:44 -- Closing Remarks

Links:

Best-in-Class ETF Recommendations Page

Portfolio Configurator

Sound Investing Portfolios Bootcamp Page

The 2024 numbers are finally in and we have produced the #1 investment decision in the  Bootcamp series. There is no question that the biggest lifetime decision an investor makes is the choice between the safety of bonds and the potential long term growth of stocks.  Here is a⁠ link⁠ to the pdf of the set of slides Paul uses in the presentation.  The presentation includes the ⁠updated 1, 15 and 40 year returns tables ⁠ along with the  ⁠quilt charts for the 1928 to 2024 period⁠.

Our thanks to  Daryl Bahls who has put together most of the tables in the Bootcamp series.

If you have questions please send them to ⁠[email protected]⁠.  Please put  Bootcamp #1 in the subject line. 

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The purpose of this podcast/video is to help investors understand the likely risk and return parameters of small cap value, S&P 500, 2 Fund Portfolio (50% each SCV/S&P) and 4 Fund Portfolio (25% each SCV/S&P/SCB/LCV).  In each case the best, worst, and average 1, 2, 3,  5, 10. 15, 20, 25, 30, 35, 40 year returns are listed.
The following tables are discussed:

S&P 500 Historical Risk and Return 

US SCV Index Portfolio Historical Risk and Return

 US 2 Fund Index Portfolio Historical Risk and Return 

US 4 Fund Index Portfolio Historical Risk and Return 

Also the risk and return page from the Sound Portfolios  is referenced.