One of the biggest mistakes investors make is not to diversify sufficiently to virtually eliminate stock or company risk. Paul reads part of two important articles. In “Speculating versus investing: The buying of individual stocks,” Larry Swedroe discusses the reasons owning individual stocks is an approach that requires taking more risk without an additional return. He also lists the reasons investors find it compelling to take this additional return, even though the expected return could be far less than simply owning an index fund. In a related topic, Paul reads from Jeremy Siegel”s 1998 “Valuing growth stocks: Revisiting the Nifty Fifty.” This fascinating article tracks some of the “best stocks” in the world over a 25-year period. He then compares the returns of the Nifty Fifty with the S&P 500, large cap value, small cap blend and small cap value.
About Paul Merriman
Posts by Paul Merriman:
Paul expresses three outrages, exposing the dirty tricks some advisors use to exaggerate their performance. He also corrects a mistake on his last podcast regarding mid-cap funds, and answers several questions from listeners: Is it time to get out of small cap funds and get into TIPS? What ETFs do you recommend to put the “Two-Fund Solution” to work?” “Why did some small cap value mutual funds and ETFs do much better than others in 2016? And he ends the podcast with a little information about what he considers the most exciting investment project of his life.
This podcast is recorded from the 2011 CD collection recorded for the premium package for the “Financial Fitness After 50” PBS show. There is lots of advice for first time investors, as well as retirees, but some of the biggest mistakes are made within a few years of retirement. If even one of Paul’s warning keep you from making one of these mistakes, you will be glad you took the time to listen. If you have friends who are close to retirement, we hope you will forward this podcast.
Fellow Retirementor Ken Roberts always has a long list of questions for me on his Ken’s Bull and Bears Report. In this interview Ken asks questions about stock performance in a growing economy, how to beat the market, the need for professional advisors, lessons learned from the Trump election, my favorite Bogle quotes and how to be sure an advisor has your best interest in mind. During the interview I surprised myself by noting that Bogle, Buffet and Trump are all losers——as well as myself!
The most common question I get is focused on the likelihood of abnormally low future returns on stocks. This is not only a common question today, it is one of the most common questions investors have after any difficult market period. How can anyone possibly know what happens next? There is always a list of reasons for the market to go up, as well as to go down. The “Death of Equities” is the most famous stock market article ever written.
We are surrounded by people who lie. Experts say we lie on a regular basis, so the fact that our politicians, corporations and those trying to sell us something often lie should not be a surprise. Paul wants investors to search hard for the truth, not just by others but also lies we tell ourselves. He suggests a powerful way to use the smartphone in search of the truth and yes, it could earn you an extra million dollars
Warren Buffet, Peter Lynch, John Bogle and Ben Franklin and more… Paul discusses some of the most meaningful financial quotes and suggests that reviewing such quotes once a year may help you be more committed to and focused on the most important investment basics.This recording was produced for Public Broadcasting Service (PBS) as part of a 2011/12 pledge package. As Paul had not listened to the CD since recording, he was surprised to find he’d used a quote from Donald Trump and said, “I think his quote was very thoughtful and represented an idea that is seldom considered when trying to make a list of the most important investment decisions.”
What will market do under President Trump? And 12 other important investment Q&A’s
When Paul addressed members of the community in a seminar co-sponsored by the Bainbridge Community Foundation on Nov. 3, 2016, he was unable to answer all questions at the time but agreed to do so through this special podcast. Here are the questions addressed on this podcast:
1. What is the best source to determine the asset class of each mutual fund?
2. 8% seems like a high rate of return. Is it really a reasonable assumption for future growth?
3. Is it possible to get 8% with 20% or more in bonds?
4. What benchmark should I use to evaluate the performance of a portfolio?
5. Do you read the prospectuses that mutual fund companies send you?
6. How do you determine the total cost of owning funds like Vanguard? What about 401k fees?
7. Most U.S. companies are global. What percent of you have in international funds?
8. According to research only 15% of actively managed funds exceed the long term returns of the S&P 500. Why not invest most of your money in S&P 500 index funds or ETFs?
9. What is the difference between growth and value companies? Should you own both kinds?
10. What happens to the market when we have a cyber attack or the election ends undecided? (Note this was asked before the Presidential election)
11. My wife has followed your recommendations for years while I invest in individual stocks. Do think it is possible to compromise? And should we compromise?
12. There are so many index funds. Which are the most appealing?
13. How do you expect the market to do if Trump gets elected? (In my answer I address the reason I thought it was likely for Trump to win)
Examining 88 years of returns and risks of an all-value portfolio, Paul explains why young investors might legitimately consider a 100% all-value portfolio, while the combination of these asset classes should account for only a small part of a retiree’s portfolio.
2. With the market selling at record levels, is it time to consider a bear market fund to defend against big loses?
3. How can the combination of a great short-term track record and a commission-motivated salesperson lead to terrible financial outcome?
In this interview with Jimmy Dot Direct & Stan The Annuity Man, Paul discusses the impact of an extra 1/2 percent, loss expectations with different combinations of stocks and bonds, and other topics important for both first-time investors to those getting ready for retirement. For those interested in immediate life annuities, get Stan’s free books on all types of annuities, available at: http://www.stantheannuityman.com/. He offers great information and will not call you.
Paul reviews Clements’ new book, “How to Think About Money,” highlighting key topics from each chapter and encouraging you to purchase this book for any first-time investor… reading it before passing it along. This informative book can motivate first-time investors to increase their savings rate, put more long-term savings into equites and stick to low-cost index funds.
keywords: how to think about money, jonathan clements, first time investing, how to invest, what are index funds, paul merriman podcast, sound investing
In this first of a 10-part CD series produced for the PBS Show, “Financial Fitness After 50” (2012), Paul discusses how to identify an advisor who will provide all the services you need to ensure you maximize the advantage of working with a professional. He’ll also show you how to tell if the advisor is working in your best interest or in his /her own.
Over the last 3 years the S&P 500 has been the best performer of all the asset classes, as shown in the table of returns at http://paulmerriman.com/