Question #1: I just received $300,000 from the sale of a company and would like to invest in a handful of funds and stocks I like. What do you think of my asset allocation?
Question #2: Should I put all my bonds in my tax deferred investments?
Question #3: I have 401(k)s, IRAs, taxable accounts, and my wife has several accounts of her own. Where can we get help to put together your asset allocation using all these accounts? Is it possible to get good advice on an hourly basis?Question #4: My friend and I are in our 20s. I told him you recommend young investors should have all their long-term investments in equity funds. He is keeping 10% in bonds in case there is a big sell off, help protect him from loss and give him money to invest when the market is down. What do you think?Question #5: My grandmother has a 10 year CD paying 3.1%. She wants something that pays more but is safe. What would you recommend?
In this podcast Paul responds to questions by readers and listeners.
Question #1: In your “Ultimate Buy and Hold Strategy,” you use 40% bonds. What is the impact if you invested less in bonds? How much does a change in bonds change the expected return?
Questions #2: My 401(k) only has three index funds – Fidelity Spartan Total Market Index, Vanguard Small Cap Index and Fidelity Spartan International Index. How would you distribute the investments among the three funds?
Question #3: My 401(k) is run by Schwab, but the investment choices aren’t very good. They offer self direction wherein I can make my own investment choices. Would your Schwab ETF recommendations be a good way to diversify my 401(k)?
The first half of 2014 was pretty good. This podcast reviews the results and lessons it has taught us about long-term investing. It also compares some funds at Vanguard, DFA, and at Warren Buffet’s Berkshire Hathaway for the 6 months and 15 years ending June 30, 2014.
This podcast is in response to a question from a listener. He says, “Most of my non-retirement equity is in the U.S. Vanguard Total Market Index. What percentage of this fund is in the asset classes you recommend?” I used this question to show investors how to use the Morningstar free data base to figure this out on your own.
Are ETFs not living up to expectations? This podcast was suggested by a listener who read an article by Mark Hulbert, who noted that newsletters that used ETFs were getting lower returns with ETFs than open-end mutual funds. In this podcast I compare my returns, (as tracked by Mark Hulbert), with the rest of the newsletters. My results were substantially the same – with no trades – so the problem is not with the ETFs but rather those trading the ETFs.
I am as big a fan of Vanguard. I have recommended their funds for over 15 years and said, without hesitancy, that Vanguard is the best place for do-it-yourself investors to invest. They are a terrific source of index funds and ETFs and they do a terrific job of educating investors. That said, I also think they do a very mediocre job of asset allocation. In this podcast, I discuss the online survey and corresponding ETF recommendations. I cannot see into the future but I believe their advice will potentially cost investors millions of dollars over a lifetime.
I recently addressed a group of graduating seniors at Western Washington University on the topic, “10 steps you should take in the first 12 months after you graduate,” and, of course, the importance of finding a mentor cannot be understated. This podcast will give you some ideas both where to find a mentor and how to be one. It is intended to be shared with the students and young investors in your life.
I greatly enjoy teaching and talking with young people, and when I recently asked university students about the dollar amount they believe they need to retire, they said $1 million. Interestingly, that is the same amount I was told by students in 1966. On an inflation-adjusted basis, that 1966 $1 million would be more than $5.5 million today; daunting. In this podcast, I comment on my friend Paul Ferrell’s MarketWatch article “Eight secrets to help you retire today and enjoy it,” and share ideas for enjoying life, while offering good reasons to save and invest for the future and unexpected life events.
More than10 years ago, Rich Buck and Paul Merriman wrote a popular article titled, “Superior Diversification on a Shoestring Budget.” It is amazing how far the industry has come since the article was released. It focused on how to build a broadly diversified Vanguard portfolio following Paul’s Vanguard Aggressive Portfolio using 9 different funds. To complete the process took 9 years of patient investing. With commission-free ETFs at Vanguard and Schwab, and low minimums with Schwab index funds, most young investors can now build the entire portfolio in one year. In this podcast Paul discusses how to work with Vanguard and Schwab as well as some of the important differences between funds and ETFs. See Paul’s mutual fund recommendations and ETF recommendations.
by Stacy Gary (Podcast #8 in the series, Hurdle #2: “I lack the funds.”)
“I Lack Funds”
While “buy low, sell high” is common sense, we do not always exercise common sense, and often make decisions based on emotion; especially with money, which is a deeply emotional topic. Stacy references the book, “The Behavior Gap” by Carl Richards, that speaks to the behavior gap between how we perceive ourselves and what we actually do, and encourages investors to question their choices in terms of life goals. Stacy Gary may be contacted at: email@example.com
In a recent TV interview, Warren Buffet spent 3 hours answering a barrage of questions from a group of popular hosts on CNBC. Many of the questions were expected and a few were new and interesting to hear his perspective. I think you will enjoy his perspective to the question, “Is the market rigged?” You can read the entire 3-hour interview in an unofficial transcript.
In the interview, Buffet recommended to the trustees of his estate for the benefit of his wife: “I’ve told the trustee to put 90% of it in an S&P 500 index fund and 10% in short-term governments.” I’m sure lots of investors will think, “what’s good enough for Warren Buffet is good enough for me.” In this podcast I explain why Warren Buffet’s decision regarding his wife is probably not appropriate for your spouse. How can I argue with the Oracle of Omaha? Because history and the evidence is on my side. I hope you agree.
Recently, I spent two days at Western Washington University, speaking to five different groups of students. Several students asked about the pros and cons of trying to improve portfolio performance through trading, adding value through short- to intermediate-term gains. They wanted to know what evidence exists to show why trading isn’t better than the long-term, diversified portfolios I recommend. There is lots of evidence, but one of the most conclusive comes from DALBAR. The Boston based research firm just released its 20th annual “quantitative analysis of investor behavior” report. Rich Buck and I wrote an overview of the report’s findings.
In this podcast, I take you deeper into the report, adding information that makes the results of the study even more more surprising, and somewhat depressing. Investors (often with the help of financial community) continue to do life changing damage to their portfolios; even some of the most conservative investors. The good news is that habits leading to these terrible returns can be changed.
Paul shares a great way to increase your retirement by this one simple step.
In this Podcast Paul answers investment questions, and even a personal one.
1. Our money is in taxable accounts. Your Vanguard, Fidelity and T Rowe Price portfolios are for tax-deferred investors. What changes should we make for taxable accounts?
2. How does your portfolio compare to U.S and international total market indexes?
3. Is 30% in bonds too conservative at age 29?
4. My wife and I are in our mid-thirties and 10 years away from early retirement. How much risk should we take?
5. Schwab has very low minimums and expenses in their index funds. Would these funds be a good place for a first-time investor to start?
6. We are coming to San Miguel and wondered if we can meet with you?<
Everyone should have an “ultimate strategy,” based on the best way you know how to do something. This podcast, updated for 2014, presents the best way I’ve found to position yourself for the future. The ultimate strategy must have a long history of success, be able to be managed simply, offer better rates of return on investment and no more exposure to risk you’re willing to take. It should also allow you to rest assured that your strategy works in good times and bad. No matter what times are like, this is the “Ultimate Buy and Hold Strategy” for the long haul.
Recommendation: Before listening to this podcast, please print the pie graphs (or have them available to reference). You can find them – and more articles on this topic – at: http://paulmerriman.com/
The # 1 article on Marketwatch.com last week was entitled, “New doomsday poll: 99.9% risk of 2014 crash.” This warning is a compilation of scary predictions about the losses investors are about to experience. What scares a lot of readers is the names of the “experts” are well known and very convinced of their positions. Paul warns investors that listening to this kind of advice can be very costly, even life changing. He shares how he deals with the possibility that these gurus might be right, and even predicts when the next big bear market is likely to come.
In this 10-minute podcast, Paul Merriman covers 22 advantages of index funds and index ETFs. There is no other investment in the securities industry that has so many advantages. Whether you are a first time investor or a multi-millionaire, index funds and ETFs are the best answer to meet most investor’s long term needs.