Give Thanks and Share Your Knowledge

November 24, 2016

Wow! I just finished watching your Financial Fitness Forever 2016 video presentation… for the first time. Much there I will enjoy reviewing again, together with the materials. At the risk of going overboard with superlatives, this is surely one of the finest overviews of sound investing fundamentals available in such a concise presentation. And the fact that you’ve offered the presentation on-line to the public at no charge is an amazing gift. – Steve C.

Dear Friends,

Happy Thanksgiving! I hope you have much to be thankful for, as do I. This year, in addition to the blessings of my family, I am thankful for the many opportunities to do what I love, which is to educate investors to keep and grow more money with less risk and more peace of mind.

We have surpassed 10,000 subscribers to this newsletter, which serves as a summary of the weekly MarketWatch articles ­– written with my long-time colleague and friend, Rich Buck – my weekly podcasts, a variety of resource materials and experts – like Joline Godfrey and Andy Landis – and Q&A’s from you I hope you enjoy and find useful. The video I recorded for the Washington Society of CPAs, and was able to offer for free, has been viewed by almost 4000 of you. Thank you (and please continue sharing!).

I was also able to share the message of “sound investing” by making a number of presentations to AAII chapters, the annual RetireMeet Conference in Bellevue, quarterly Western Washington University classes, Michigan CPAs and several local groups on Bainbridge Island . I also have been a guest in radio and podcast interviews by Sam Marks from Invest Like a Boss, Stan The Annuity ManMichael Port, author, speaker, small business marketing consultant and public speaking teacher, and Ken Roberts of Ken’s Bulls and Bears. Meeting and speaking to many sincere and interesting people – from all walks of life – has been a pleasure and honor.

I know that money is considered by many a “private subject,” but I hope that this Thanksgiving, surrounded by friends and loved ones, you might share with them the free resources of my website – the videos, books, podcasts, articles and portfolio recommendations – that may empower them to start and/or become better investors, enjoy more freedom and do more good in the world.

Social Security Expert Andy Landis

In our Oct. 14 newsletter, I introduced you to Andy Landis, one of the nation’s foremost authorities on Social Security and Medicare. Andy is a regular contributor on and an old friend who has spent the last 30+ years as an author, speaker, and consultant. His latest book is Social Security: The Inside Story. I heartily recommend his book. Here is another article that will give you an idea of his perspective.

The Top Five Social Security Myths
by Andy Landis, Thinking Retirement

A lack of information can cause bad retirement decisions.  Even worse is wrong information.  Let’s get a reality check on the top five Social Security myths—or “myth-information,” if you will.

Myth 1:  Social Security payments are based on your last 10 years of work (or 5, or 15, …).  False.  Your Social Security retirement payments are based on your lifetime average earnings. SSA uses your best 35 years of work, indexed for inflation. (Fewer years are used for mid-career death or disability.)

“Myth-understanding” the 35-year average can cause a wrong turn.  For example, meet Janet.  She was born in 1950 and had very high lifetime earnings. Janet longed to retire at 57. But she thought that Social Security was based on the last 10 years, so she worked 5 more years at maximum earnings to avoid a big Social Security cut. At 62, she learned that the extra years of work yielded exactly $52 per month. Sure, it’s more, but if Janet had known that number at age 57, would she have kept working for 5 more years?

To avoid an “oops,” get a Social Security estimate. Sign up to get estimates anytime. Then tailor the estimate to any retirement scenario you’re considering (like early or partial retirement), using SSA’s online Estimator.
Click here to continue reading…

Questions & Answers

The next “Ask Me Anything” session will take place Wed. Dec. 23 at 1:00 p.m. EST. You can go to this link anytime to leave your questions or join me at the link at date and time. The following Q&A’s are from the October session. You can read them all by clicking here. You can find hundreds of questions posed by our readers and listeners and my answers archived at my website.

To your success,


Q: As a first-time investor, do you recommend starting with mutual funds or with stock and bonds?
I am 40-years-old with two young children and contributing 12% on my 401k. I have saved some money, and now I’m ready to invest.

A: Congratulations on being a great saver. I assume, from your comment, you are sitting on mostly cash or bonds in your 401k. That may feel safe in the short term but will likely require saving a lot more than 12% to have enough to retire at a reasonable age. I suggest you read two of my free e-books, “First Time Investor: Grow and Protect Your Money,” and “101 Investment Decisions Guaranteed to Change Your Financial Future.” They should help you move to the investing step with confidence.

Q: Why do you believe value will do better than growth?

Vanguard opened their value and growth index mutual funds in November 1992. Vanguard value temporarily outperformed growth from 2004 to 2008, but growth outperformed value by 0.6% per year since the end of 1992. In summary, with respect to fund data from 1965 until now, value has shown no significant advantage over growth on a real time basis.

A: Your question opens a discussion that investors who love numbers, as I do, would enjoy. As I have limited space in which to answer, I will be as efficient as I can. The best source of long-term asset class returns comes from the work of Drs. Fama and French, as well as Ibbotson and Associates. In the Fama/French studies, large-cap value from 1993 through 2015 compounded at 10.8%, while large-cap growth compounded at 9.5%. For the same period, small-cap value compounded at 13.7%, while small-cap growth compounded at 10.5%. As expected, small-cap did better than large and value did better than growth.

FYI, from 1975 through 1992 the small- and large-cap growth compounded at 21.4% and 15.8% respectively, and small and large cap value 24.3% and 19.6%. Again, small beat large and value beat growth.

It is important to understand there are big differences between how Vanguard identifies large cap and small, as well as value and growth. The reason I personally own DFA funds, instead of Vanguard, is due to the difference in how they construct their small cap and value portfolios.

Q: You wrote that you no longer recommend Vanguard funds over Fidelity, but what about for Target funds? Morningstar rates Vanguard’s more highly than Fidelity’s.

A: My comment regarding Vanguard and Fidelity funds had only to do with the ability to put together a portfolio using index mutual funds or ETFs. My belief is Vanguard has a much better target date funds than Fidelity.

Q: Should I take a lump sum payout from my pension fund, so I can invest it for the long term, or take a monthly pension payment?   

A:  I strongly suggest you find an hourly advisor to go over all the challenges and opportunities of the two paths. You may find a combination of both will be the right answer. If you have little experience in managing your money, you run the risk of getting caught in a severe bear market and find yourself looking for a safe place — after your portfolio is down 25%. Whatever balance of stocks and bonds you have will likely lead to high-to-low loses in major bear markets.

Here are three topics I recommend you explore on my site:

Asset class selection

Balance of stocks and bonds
Distribution strategies 


Why I’m not changing my portfolio after the election

After last week’s presidential election, I heard from many investors who wondered if they should ditch their equities or stay put … or even invest more.






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Paul Merriman | |

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