While I was at the Bogleheads conference in Minneapolis earlier this year, I had a lengthy interview with Paula Pant. 

I enjoyed the interview and found lots of questions and comments under the YouTube presentation that I wanted to answer. 

While I wrote short comments on the site, I decided many of the questions were worthy of more discussion.Here is a link to the YouTube interview and podcast:

#1.  “Most of my holdings are in cash as I cashed out last time the market went down.  How do I stay invested and think long-term to help me ride out the ups and downs of the market?”  02:17

#2.  “I’m just beginning my investment journey and planning to put 85K into dividend stocks so that I will be making up to 30% per year in dividend returns.”   https://rethinking65.com/the-preference-for-dividend-paying-stocks-is-irrational/ 10:41

 #3. "What Fidelity Funds do you recommend to build your 4 Fund Portfolio?"   15:00

#4.  "How often do you recommend rebalancing the 4 Fund Portfolio?" 17:02

#5  "Nobody knows what’s going to happen next so we should practice some humility and CHOOSE a strategy with a long-term edge."  What is the edge and what else do you need to know dividend stocks k? 21:02

#6.  "I”m not looking to beat the S&P 500…I’m more than happy with the returns I get from it.”  Does that mean it’s right for you? 24:36

#7.  In response to Paul's recommendation of the 4 Fund Portfolio this is what one viewer said, “For what it's worth, backtesting shows his proposed fund portfolio does not do better than VTI or VOO.”  Paul responds. 28:32

#8.  "The only small cap value available in my 401k is DFSVX which has an expense ratio of .30%.  Is this expense ratio too high? 32:32

#9. "Can you give ETF recommendations for all of the equity asset classes?"   Here are the Best In Class recommendations. 35:23

#10. "How do you fund a Roth IRA when a child doesn’t have earned income?" #11.  Please recommend more information on how I might adjust my 401k. We're talking millions and 2 funds for life. 36:37

#11 "Would you accomplish similar performance results by setting up a strategy using sector diversification instead of asset class diversification?" 40:01

#12  "I’m helping my 17 year old daughter with her Roth IRA.  What do you think about shooting for an all equity 40/30/30 portfolio of US small cap value/S&P 500/Total International market?” 42:23

#13. “This guy has been pushing small cap value  and underperforming for years.  Sorry, no thanks." 44:25

The podcast is dedicated to answering questions about:

 Target date funds:  “Do you think someone that simply maxes out their retirement accounts with target date funds and total market funds will be “fine”?

Selecting a distribution strategy:  What advice can you give to a DIY investor who is trying to decide what to do about how they access their money to live on and how much to take out?

Buy and Hold vs. market timing:  I believe in buy and holding  index funds, with low expenses. I don’t think I need to pay an investment advisor to help me do that.  I see the Merriman Wealth Management firm offers buy and hold and market timing services and charges AUM fees.  This is very different from what you suggest on your Foundation website.  What is your relationship with the Merriman firm and what are your beliefs about market timing?

All small cap value portfolio:  Do you know investors who are investing 100% of their portfolios in small cap value?  It seems like it might be a smart thing to do with very long term investments for a very young person.

Time to start market timing:   I am thinking about using timing with a large amount of new money.  Who do you use for the market timing aspect of your portfolio management?  

Flexible vs. fixed distribution strategies:  "I believe you expect that a flexible withdrawal strategy will pay out more money to live on, as well as leave more money to heirs.  Bill Bengen seems to believe that this strategy is not sustainable over the long term even if a person had enough money to accept lower annual withdrawal amounts in market draw downs.  Flexible withdrawal strategies make sense to me but there isn’t much writt en about them.  What am I missing?”

The answer to this question includes 4 distribution tables:  

Table D1.4 - Fixed Distributions: S&P 500 Equity Portfolio - Conservative ($40,000/yr)

Table F1.4 - Flexible Distributions (Conservative-4.0%/yr): S&P 500 Equity Portfolio

Table D4.4 - Fixed Distributions (Conservative-$40,000/yr): US 4-Fund Equity Portfolio 

Table F4.4 - Flexible Distributions (Conservative-4.0%/yr): US 4-Fund Equity Portfolio 

Finally Paul reads four Ben Carlson quotes about the nature of bull and bear markets.  Paul makes reference to a table of annual Price to Earning (P/E)ratios starting in 1871 and another comparing the S&P 500 Price to Book Value from 2000 to 2024.

As this podcast is being released on Thanksgiving Day Paul begins by thanking those people who choose to follow the Foundation’s work, those who forward our articles, podcasts and videos to others, and those who donate time and money to the Foundation.

He also addresses the challenges of living at three different homes (Bainbridge Island, Portland and Rancho Mirage) in 2024.  We know some donations have been lost in the mail.  

Our concern is people will declare a charitable deduction that did not actually happen.  By the way, the permanent address of the Foundation is now -

2445 NW Westover Road #311,

Portland, Oregon 97210.

Paul comments on his challenges in recommending cryptocurrency.

Finally he discusses the life changing impact of goal setting.  

The following are articles and videos on goal setting from some of the Truth Tellers Paul recommends.

Jim Dahle writes to young doctors but the information is usually good for all people who are putting together a financial plan. The Power of Focus in Your Financial Life

Jonathan Clements is struggling with cancer and for anyone facing death sooner than expected, and the goal setting that might be considered, I think you will find his journey worth reading. The C Word.

William Bernstein has recently updated his best selling , “The Four Pillars of Investing.”  In this short introduction you will hopefully decided it’s worth reading the rest of the book.

Here is a podcast that you won’t want to miss.  Larry Swedroe is interviewed by another Truth Teller, Ben Felix and Cameron Passmore.  The book they discuss has been updated since the interview.  "Your Complete Guide to a Successful and Secure Retirement" is one of the best books I know for those trying to address the many important retirement goals.

 While Christine Benz is the Director of Personal Finance at Morningstar I thought it might be interesting to get her take on the non-financial plans we should consider.  Her new book has  become a best seller.  How to Retire: 20 lessons for a happy, successful, and wealthy retirement.

Paul and Chris interview M1 Finance's CEO, Brian Barnes, and ask several listener questions.

This is the follow-up to their previous M1 Finance 2024 update podcast and YouTube video.  

They start by asking Brian how and why he created the company. That's followed by a wide-ranging conversation that includes some interesting surprises, like Chris's realization that using M1's target-date pies instead of traditional target-date funds can result in some real tax efficiency.

Here's the topic list with time codes.

00:00:00 Intro

00:08:12 M1 Genesis

00:12:51 Partial-Share ETF Trading

00:15:59 Who is M1 for?00:19:42 What's next?

00:22:44 Is M1 a robo-advisor?  

00:25:36 M1 Pies

00:29:38 Pies vs. TDFs00:34:32 Tax Efficiency

00:35:46 How safe is M1?

00:41:13 Fixed trade windows

00:48:07 Crossing orders

00:49:22 Competitive rates

00:51:29 Which ETFs?

00:53:19 Fees?

00:57:07 Multi-account rebalancing?

00:58:31 Entrepreneur's experienceDisclaimers:Content is not intended to provide personal tax or financial advice.
This information is intended to be used and must be used for information purposes only.
M1 is a technology company offering a range of
financial products and services. “M1” refers to
M1 Holdings Inc., and its wholly-owned, separate
affiliates M1 Finance LLC, M1 Spend LLC, and
M1 Digital LLC.
Related to M1 Spend:
For informational purposes only and not a trade
recommendation. All product and company names
are trademarks or registered trademarks of their
respective holders. Use of them does not imply any
affiliation with or endorsement by them.

Paul mentions his upcoming presentation to the ⁠⁠L.A. Chapter of AAII⁠⁠ on November 16, 2024    10:30 to noon.

Chris Pedersen and Daryl Bahls join Paul to answer your questions.  Paul opens the podcast with a brief introduction of the team and notes how thankful he is for their commitment to helping others.

Paul mentions the huge moves small cap value funds made on November 6.  He follows that with a comparison of the 5 year returns of AVUV and  3 Vanguard small cap value funds (VBR, VIOV and VTWV).  AVUV compound rate of returns were 3 plus percent higher than the Vanguard funds.  Paul’s questions:  What caused the higher returns and are they likely to be similar in the future?

Chris responds with a lengthy discussion of the systematic approach that AVUV uses and Paul reads what AVUV says about their systematic approach.

Chris compares the DFA small cap value fund (DFSV) with AVUV.  Chris also talks about a relative ranking he wants add to his Best In Class recommendations next year.

Chris discusses the quality factor of AVUV vs. funds that build their small cap value portfolio using the Russell 2000 Small Cap Value Index.  He introduced a new term: rich minus weak ratio.Paul and Chris discuss the question:  Is AVUV and actively managed fund?

Question:  JL Collins recommends VTI (Total Market Index) and Warren Buffett recommends VOO (S&P 500).  Which do we recommend?  Chris notes the important differences between VTI and AVUS and suggests a likely extra .5% return from AVUS.

For those who want to own only total market funds, the group discusses the possibilities of replacing both VIT(U.S. Total Market)  and  VXUS (International Total Market) with total market indexes that favor slightly smaller companies with a slightly more value tilt.

Paul references Ben Carlson’s article about, ⁠⁠“Some Things I Don’t Believe About Investing.”⁠⁠ 

Chris, Daryl and Paul weigh in on things they don’t believe about investing.Chris ends with some important comments about how we are likely helping investors.

Watch video here.

On November 16, 2024 Paul will speak to the L.A. Chapter of AAII via a Zoom presentation.  Here is the link:  

2 Funds to Own Forever, and How to Invest in Small Caps
In this podcast Paul addresses 4 major considerations when selecting a small cap value ETF.  His discussion compares the returns, along with 4 major factors, for AVUV, VBR, VB,, VIOV, DFSVX and DFSV.
Is gold worthy of a place in our portfolios?  Probably not but Paul talks about his gold position and why bonds are likely a lot better.
He also discusses the important decision to choose buy and hold over market timing.  He references the following article from Truth Teller Ben Carlson:

Don’t Take Financial Advice From Hedge Fund Managers

Watch the video here.Paul Merriman, a former wealth manager turned financial educator, joins us to share investing wisdom that could reshape how you think about your money.
We kick things off talking about portfolio diversification. Paul suggests a simple four-fund strategy that includes large cap, small cap, and value stocks. He says this mix has historically beaten the S&P 500 with lower risk.
We then dive into international investing. Paul explains that while adding international stocks doesn't necessarily boost returns, it can help smooth out the ride. He keeps half his equity portfolio in international stocks, even at age 81.
Got kids? Paul's got some advice for you too. He tells us about putting money aside for his new granddaughter, aiming to fund her Roth IRA as soon as she can earn income. He breaks down how investing just a dollar a day from birth to age 21 could turn into millions by retirement age. It's a powerful lesson in starting early and the magic of compound interest.
We also chat about some common investing mistakes. Paul stresses that young investors often underestimate the power of stocks over bonds for long-term growth. He shares some eye-opening numbers: $100 invested in bonds since 1928 would have grown to about $12,000, while the same amount in small cap value stocks would be worth nearly $15 million.
Paul wants you to think of investing as a partnership with businesses. When you buy a mutual fund, you're becoming a senior partner in thousands of companies. At first, your contributions drive most of the growth. But over time, market returns take over, and you become the junior partner to a much larger fortune.
We wrap up with Paul sharing his excitement about a 40-hour financial education program he helped create at Western Washington University. It's designed to teach students essential money skills throughout their college years, from budgeting as freshmen to understanding 401(k)s as seniors.
Throughout our chat, Paul's message is clear: start early, stay diversified, and think long-term. He believes that with the right education and mindset, anyone can build a solid financial future.
4 Fund Combo Guide
Table Numbers
Quilt Charts
Historical Risk and Return Tables
Portfolio Configurator
Timestamps:
Note: Timestamps will vary on individual listening devices based on dynamic advertising run times.
0:00 Intro to Paul Merriman and podcast topic
0:57 Two-fund portfolio strategy
3:55 Four-fund portfolio strategy explained
5:31 Large cap performance concerns
7:06 S&P 500 vs Total Market Index
10:59 AI impact on large companies
14:43 Market trends and historical performance
20:41 International equity in portfolios
25:26 ETFs vs index funds
29:41 Non-US investor asset allocation
38:41 Setting up kids financially
43:57 Early investing importance
48:37 Common investor mistakes
50:25 Investing as business partnership
52:51 Evolving financial education landscape
For more information visit the show notes- https://affordanything.com/550-paul-merriman-the-4-fund-strategy-that-beats-the-sp-500/

The Marriage Kids and Money Podcast is dedicated to helping you do just that. Each week, Andy Hill interviews personal finance experts, millionaire parents and financially independent couples to find out how they achieved their success. He then takes that information and breaks it down into digestible takeaways that will help you win with money.

With over 400 episodes and counting, Marriage Kids and Money has been awarded “Best Family Finance Content” by Plutus two years in a row and "Content Creator of the Year". We review everything from how to achieve family financial independence to how to help your kids become future millionaires (who are generous).

Paul Merriman shares how DIY investors could become millionaires through a 2 Fund Portfolio and/or 4 Fund Portfolio!

⁠Watch the video here.⁠

Investors need to get past marketing and sales pitches to know what they're getting when they invest.  Morningstar is a great place to get that depth.

Paul and Chris describe how they each use the free Morningstar tools to evaluate mutual fund and ETF characteristics, such as:

* Expense ratios

* Liquidity and bid/ask spreads

* Geographic focus

* Value and size tilts

* Financial characteristics

* Factor exposures

* Number of holdings

* Tax efficiency and* Charted historical performance with side-by-side comparisons.

Chris also briefly describes how he uses the premium X-Ray feature to compare portfolios with different fund families, including the Best-in-Class ETFs, which he plans to update early next year.

For those interested in a more quantitative approach, please take a look at the Bootcamp video Chris created for the Best-in-Class ETF selection process, where he describes how he uses Portfolio Visualizer to quantify fund factor exposures and factor statistics to estimate expected returns.  Here's a link to that video at the time where the Portfolio Visualizer discussion begins:  ⁠https://youtu.be/UaEC-JZYYJA?t=852⁠

Here is the video link for this podcast.

https://www.youtube.com/watch?v=rDN3LyEFk3E

Paul updates his list of reasons to use index funds plus comparing the handful of Vanguard Small Cap Value ETFs (VTWV, SLYV, VBR AND VIOV) with the newer Avantis and DFA small cap value ETFs.  He also makes the case that AVUS and DFAU total market funds are likely to produce better returns than VTSAX, VTI, VOO AND VFINX.

He also discusses the 15 year returns of 6 each large cap growth, large cap value, small cap blend, small cap growth and small cap value indexes.  The lessons from these tables should be enough to encourage investors to take a closer look at the holdings in their holdings in these asset classes.  

In his discussion of indexing he mentions a podcast "#1 reason to own index funds " that has had more than 1,067,000 opens and his MarketWatch article entitled “30 Reasons I Love Index Funds.” He also committed to producing a video, on how to use Morningstar to compare your mutual fund and ETF investments, before the end of the year.