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Chris Pedersen shows how to automate investing with simple 2-fund portfolios. He discusses how target-date funds work and how to combine them with small-cap value funds to achieve results similar to more complicated portfolios. He highlights the 2 Funds for Life fine-tuning table in the Portfolio Configurator and shows how it can be used to set expectations based on different allocations.
He also shows how 2 Funds for Life approaches can be compared to Sound Investing portfolios using the Configurator. Finally, he takes advantage of Paul's absence to praise Paul's example and highlight the importance of non-financial investments.
Resources mentioned:https://lookerstudio.google.com/u/0/reporting/a941a5d4-0929-45ea-b22e-3bb82dc334ff/page/p_zy32acuhdd?s=hqmha3-AK5k
Watch the video here.
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In this podcast Paul addresses the advantage of using a Flexible Distribution strategy. He starts by mentioning the earlier podcasts that focused on the Sound Investing Portfolios, Fine Tuning Your Asset Allocation Tables and Fixed Distribution Tables D1.4, D1.5, D9.4 and D9.5.
He then focuses on Flexible Distribution Tables F1.4, F1.5, F1.6, F9.5 and F9.6.
The following are links for listeners who want to review all the Fine Tuning Tables, all the Fixed Distribution Tables and all the Flexible Distribution Tables.9 Fine Tuning Your Asset Allocation Tables
S&P 500 (Table B1)
U.S. 2-Fund (50/50 S&P and Small Cap Value) (Table B9)
Fixed Distribution Tables
Flexible Distribution Tables
For questions on Flexible Distributions please send to [email protected] or post the questions in the comments section of the Flexible Distribution video. (link) -
Saknas det avsnitt?
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The move from the accumulation to distribution period of an investors lifetime includes some very important decisions.
What asset allocation between equities and fixed income? What combination of equity asset classes in the equity portion, as well as fixed income asset classes? What amount of distribution will be made annually? Will the payments be monthly, quarterly or annually? Will payments be adjusted for inflation and how often? 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 11 tables to address the questions above. It is recommended the viewer print out the PDF of the tables 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 below or email [email protected]. -
In segment #5 of the 2024 Book Camp Series Paul applies all of the first 4 segments lessons to putting the portfolios to work by making a regular monthly investment into several of the Sound Investing Portfolios. For those coming to the series for the first time Paul suggests listening to the first 4 segments.
#1 Stocks vs. Bonds: The $10 Million Decision
#2 The Ultimate Buy and Hold Portfolio 2024 Update
#3 Sound Investing Portfolios: 2024 Update
#4 Fine Tuning Asset Allocation 2024 Update
In his presentation Paul references Tables J1a, A1a, H2a, B1, B9, C1 and C9.
The purpose of the podcast is to familiarize investors with how to use and compare the rest of the Fixed Contribution Tables. This link takes investors to the rest of the C tables. -
In the previous three podcasts we have addressed the long term decision between investing in stocks vs. bonds, what equity asset classes you might use in building your equity portfolio and how to combine the different equity asset classes to build the best portfolio for your different investments.
The purpose of each of the Boot Camp Series is to address some of the most important investment decisions. In this podcast I discuss the question of how much fixed income an investor should hold in their portfolio.
There are 9 Fine Tuning Your Asset Allocation Tables. Each one assumes the use of one of the nine Sound Investment equity portfolios. Paul focuses on two of them and expects that those who are interested will be able to view the rest of the tables on their own.
The two tables use the S&P 500 (Table B1) and the U.S. 2-Fund (50/50 S&P and Small Cap Value) (Table B9). Each of these tables represents the annual returns of 11 combinations of equities and bonds. The goal is for investors to find the combination of equities and bonds for their risk limits and and return expectations.Paul will be monitoring the YouTube video and will respond to questions there.DisclosuresData Disclosure Notice - Funds (1970-Present)
Data Disclosure Notice - Indexes (1928-Present)
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In this podcast Paul addresses the construction, returns and risks of the Sound Investing Portfolios.
Table H1a lists the 9 Sound Investing Portfolios and includes percentages of each of the asset classes included in each portfolio.Table
H2a lists the risk and return data for each portfolio. The table compares profitable years, unprofitable years, decade returns and total return of a $10,000 investment.
Table H3a lists the portfolios annual return for each year for the period 1970-2023.
Paul encourages listeners to pose questions regarding the Sound Investing Portfolios. Send questions to [email protected].
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Paul recommends new listeners listen to the previous podcast on Equities vs. Bonds prior to this podcast.
The purpose of this annual update is to remind investors of the power of equity asset class diversification. Paul makes the case for the 10 equity asset class portfolio that he introduced over 25 years ago. During the presentation he uses Tables A1a and A2a. A1a shows the series of portfolios, starting with the S&P 500 on its own, and then the results of adding 9 other asset classes one at a time.
In A2a Paul reviews the Ultimate Buy and Hold results to 7 other portfolios that investors may select for better returns with fewer funds and similar volatility.
In both cases he shows the results with both annual and monthly rebalancing.
On the next podcast Paul will dig into the important differences of the risk and return for all 9 portfolios, including the S&P 500 as the single holding.
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This podcast is the first in the series of 8 to 10 podcasts, videos and articles that will be found under Bootcamp and Best advice.
In this podcast Paul discusses the biggest investment decision of an investor's lifetime: Invest in stocks or bonds. He reviews the long term risk and return for both important asset classes. In each case there is a set of 3 tables that reflect the returns from 1928 to 2023. In Tables J1a and J2a he compares the annualized return for the entire period as well as for all the 15 and 40 year periods. His discussion includes the impact of inflation as well as rebalancing. He also encourages those who have not read "We’re Talking Millions! 12 Simple Ways to Supercharge Your Retirement” to download the free pdf.
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Join Paul and Chris for this podcast/video they recorded. During the conversation Paul mentions Chris’ free copy of “2 Funds for Life” and a fascinating interview with Professor Scott Cederburg on Rational Reminder. Cederburg is an advocate for a lifetime portfolio of all equities.
The following are the topics and questions they discussed:
What does an investor do if a small cap value fund is not available in their 401(K)? Does a small cap blend fund, that is available, have the same impact as small cap value? How do you choose between investing in a higher expense ratio ETF (say Avantis) compared to investing in a low expense ratio small cap value index fund? Would the decision be as simple as going with the lower expense ratio fund?
How do taxes impact your recommendations whether the asset class is held in taxable or tax advantaged accounts? Specifically, the S&P 500 fund that has little to no annual taxes vs small cap value which is less tax efficient.
Are you tempted to invest in individual stocks or actively managed funds?
Since small cap value funds can have long periods of underperformance, does that suggest those approaching retirement should avoid small cap value funds?
How did you react to the March 2020 Market Meltdown and other past major market declines? Did you try to take advantage of the declines as a buying opportunity?
What about combining 25% each small cap value and S&P 500 fund with 50% target date fund?
What’s the best way to move from your present holdings to a 2 Funds for Life Portfolio?
Where do I find information on how you make your selection of Best In Class ETFs? Here is the page that has links to the articles, podcasts and video. Plus here is a link to Chris’ AAII article on the topic.
I’m setting up a 50/50 small cap value/target date fund. Would it help to add international small cap value?
How about using two small cap value ETFs? DFA and Avantis each have similar ETFs but different portfolios.
What is the status of Chris’ new white paper on 2 Funds for Life? -
Paul looks at the guaranteed advantages of 10 different investment decisions. He also challenges one of the oldest claims about our expectations for returns.
During the presentation he discusses the important differences between investment success and investor success. He encourages all listeners to get the free pdf of Paul Heys book, “Spending Your Way to Wealth(s).”
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In the process of looking for a document I came across a group of questions that had been hidden away in my saved documents.
The good news is the list included some great questions. The bad news is I'm not sure which presentation generated the questions.
1. What are the best investments to make and what milestones should an investor reach?
2. Do you recommend a solo 401k or SEP IRA for a single employee LLC that will never have employees? Recommended reading from Truth-Teller Jim Dahle- https://www.whitecoatinvestor.com/sep-ira-vs-solo-401k/
3. How much more do you think Avantis Small Cap Value (AVUV), which has higher fees, will make than Fidelity Small Cap Value Index (FISVX)?
4. I have $1.5 million in cash and a total portfolio value of $5.8 million. My asset allocation is 43% equities and 57% bonds. I have Social Security and other income of $90,000. Should I change my balance to 60% equities and 40% bonds?
5. If you only need a 2% withdrawal rate, what would be the right asset allocation for a someone really investing for my survivors? How about 90% equities and 10% bonds?
6. Is there a time or value of investments that someone should get a trusted advisor? If so, how do you find them? Several sources mentioned: https://www.garrettplanningnetwork.com/about/contact/ and https://adviceonlynetwork.com/
7. What changes can a 50-something make to boost their 401k returns?8. What are your thoughts on robo advisors/investing?
9. What is your advice for a parent who wants to persuade their adult children to educate themselves about investing? After you listen to the answer please send me an email to [email protected] about what steps you would take? Please include your phone number.
10. Will the program be recorded? Of course I don’t know as I don’t know where the list came from. If you know, please let me know.
11. What should I do with penny stocks that are down 89 to 90 percent?
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In this podcast Paul discusses ten million dollar mistakes investors make, along with the mistake that is the biggest reason he believes most investors fail to achieve the return they deserve. As part of his presentation he references the following two tables.
Table 1 and Table 2.
D1.3
D1.4
Paul reminds listeners to forward copies of our 3 free books. -
Paul, Chris, and Daryl are back together for the first time in 2024. The podcast starts with Chris demonstrating a new and improved Portfolio Configurator, which adds the 2 Funds for Life portfolios. Now, investors can see how the equity portion of Sound Investing Portfolios, like the Ultimate Buy and Hold or Four Fund Combos, compare to various 2 Funds for Life approaches.
Next, they discuss the question "Which backtested portfolio has the highest return per unit of risk, and shouldn't we all be using that one?" Daryl uses Table H2, and Chris uses the 2 Funds for Life Fine Tuning Table to point out various ways investors might define risk and try to find the portfolio with the best return per unit of risk.
The podcast closes with some thoughts on 2024, and requests for feedback on the new Portfolio Configurator. Chris, Daryl and Paul also comment on the new documentary, “Turn Off the Noise.” This documentary is available free through the end of the month.
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Trust is the key for most investors to stay the course for the long term. I formed a lasting trust in the academic work of Drs. Fama and French when I attended a 2 or 3 day workshop at Dimensional Fund Advisors in 1994.
That trust led our firm to use the DFA funds since the mid 90s. While I believe there are a lot of people who find our long term studies helpful, I’m not sure that all of those people understand that almost all of our studies that go back to 1928 are based on the work of the academics who are associated with DFA.
If you don’t immediately feel better about the source of our data, I think you will feel better if you watch the new documentary, “Turn Off the Noise.” I sent it to Daryl and he responded, “Spectacular!” I sent it to Chris and his response was, “We stand on tall shoulders.”
You can watch the documentary at no cost by going here. You will be asked to fill in a few pieces of information and use the Access Code: RATIONAL This offer only extends through January 31, 2024
Then I would like you to watch a wonderful interview of Errol Morris, an Academy Award-winning film director and author. The following are the notes from interviewers Ben Felix and Cameron Passmore.
In today’s episode, Errol Morris, Academy Award-winning film director and author, joins us to talk about his recently released documentary called Tune Out the Noise. The documentary focuses on the revolution that's happened in the financial system, how the markets work, and why the advancements made are so vital. Errol is an acclaimed figure in film and literature, boasting an impressive array of accolades, notably securing an Oscar for his renowned documentary The Fog of War.His work spans various arenas, encompassing short films for prestigious events and many charitable and political organizations. In our conversation, we delve into the significance of storytelling in communicating complex subjects, the power of serendipity, the evolution of finance, and the enigmatic nature of truth. We discuss the necessity of storytelling, the unexpected occurrences that influenced finance, the importance of empirical data in understanding truth, the central story of Tune Out the Noise, and much more. He also provides insights into the amazing economists, many of whom are past guests, who helped shape the financial landscape. Discover how chance, humility, and the pursuit of truth intertwine in this captivating episode, where the intriguing art of storytelling converges with the complexities of the financial world. Tune in now!
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In this podcast Paul starts by recommending, “Episode 285: A Year In Review" a podcast/video.
In Paul’s review of 2023 returns he compares Chris’ Best In Class ETF recommendations with similar Vanguard ETFs and the average return in each equity asset class.He also gives returns for the most popular portfolios including, Ultimate Buy and Hold, 2 Fund U.S., 4 Fund U.S. and 4 Fund WW.
Using an article from Ben Carlson Paul is able to find even more reasons 2024 should be a very profitable year for investors.Paul discusses his nominee for the #1 Fund Family in America.
He closes with a portion of a letter from Subah Randhawa, President of Western Washington University.
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In the last podcast of the year Paul discusses the many important projects Chris Pedersen, Daryl Bahls and he will explore in 2024.
He then addresses a question from a listener: Why not all equities forever? The question is the focus of a wonderful interview with Scott Cederburg, Associate Professor of Finance at the University of Arizona. Scott is the guest of Truth-Teller Ben Felix and Cameron Passmore on their podcast, Rational Reminder.
In this podcast (https://rationalreminder.ca/podcast/284) entitled "Challenging the Status Quo on Lifecycle Asset Allocation” Scott discusses his groundbreaking research on the implications of retirees using all equities during their entire retirement vs. the traditional stock/bond allocation most experts recommend.
Paul uses Tables D1.4 Fixed Distributions S&P 500 and D9.4 Fixed Distributions U.S. 4 Fund to demonstrate how much better returns than all equity large cap blend can be earned with a combination of small, large, growth and value and up to 50% in fixed income.
Another listener asks where one can find the tables referenced in the podcast entitled, "The best gift of all? A financial legacy for a child"
Here is the link to the pdf that includes the tables mentioned in the article. He also recommends he review these tables that Daryl put together to show the impact of two investors starting at age 18 and 23.
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Paul Merriman and Chris Pedersen introduce the 2 Funds for Life Fine Tuning table and describe how it can be used by investors of all ages to evaluate various combinations of target-date and small-cap value funds.
Historically, these combinations have produced higher returns and higher safe withdrawal rates with only modest increases in risk compared to the target-date fund alone. The table provides investors a way to see what these differences have been in the past for target-date funds across their lifetimes when combined with 0% to 50% small-cap value in 10% increments.
Paul and Chris also discuss rebalancing approaches and the methodologies used in the backtests. Whether you're a young investor, mid-career, or well into retirement, we think this information will be relevant and hope that it will be life-changing.
Watch video here- https://youtu.be/SiByQZzf3vQ
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Paul wishes to warn podcast listeners that this podcast contains a lot of important numbers from the following 4 tables. The torrent of numbers can be irritating but these are some of the most important aspects of risk and return we should know.
Paul asks that investors email him with questions about the tables. [email protected]
In this podcast Paul introduces a new way to understand and compare the likely risk and return of equity asset classes. The biggest challenge for first time investors is not understanding the likely losing periods they will experience as part of the normal progression of successful investments. These 4 tables compare the historical risk and return of the S&P 500, Small Cap Value, a 2 fund portfolio that’s 50/50 S&P and SCV and 4 fund portfolio with 25% each in S&P, Small Cap Value, Large Cap Value, and Small Cap Blend. -
The biggest challenge of educating first time investors is reaching them with our educational materials. One of the best ways to reach young investors is through young podcasters who have loyal audiences of these first time investors. Jose and his podcast, Slow Brew Finance is a great example. It is available both as an audio and video podcast.
During the presentation Paul mentions a table of returns for the S&P, U.S. large cap value, small cap blend and small cap value. Here is the link.
To sign up to Slow and Steady, a bi-monthly email newsletter with bite-sized practical personal finance thoughts and tips https://slowbrewfinance.com/subscribe
The topics in this interview include:
00:00 - Intro03:04 - Your Own Small Value Portfolio
07:23 - Value and Quality
10:12 - What if Value Doesn't Work Anymore?
14:47 - International Diversification
19:51 - Momentum
23:14 - Size
27:55 - Market Timing via Trend Following
39:13 - The Key to Becoming a Good Investor
46:42 - Investor Psychology
55:59 - Outro
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Paul begins the podcast by noting a recent interview he had with Andrew Giancola of Master Money and the Personal Finance Podcast. The topic is “Simple Financial Steps With Massive Payoffs.”
In this podcast Paul discusses a new study that compares long term returns of the S&P 500 and the 4 Fund Portfolio. The study was motivated by an article written by Ben Carlson.
Paul discusses the same 20 year periods starting in 1930 and compares the results of The 4 Fund Portfolio to that of the S&P 500. He also makes the case, using one of his favorite quilt charts, that the 4 Fund Portfolio is not only more profitable but is less risky on an annual basis. - Visa fler
