Joe Shaefer of Stanford Wealth Management, an old friend of more than 30 years, recently wrote an article for Seeking Alpha. “Passive Index Investing is a Delusion” is an active manager’s view of investing in indexes. In the podcast I address Joe’s views of why index investing is a losing strategy and why I think he is dead wrong. While Joe raises many interesting problems of investing in indexes, he fails to give investors credit for being able to address all those problems successfully.
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.
Among the many choices investors must make, the most important is who to turn to for trustworthy information, advice and help.
This podcast, adapted from a chapter in my book, “Financial Fitness Forever,” is the first in a series of articles to address the four most-important choices every investor faces.
The subsequent will address how to diversify, how to control risk, and whether or not to try to beat the market.
Investors who get right even one of these four choices will have a leg-up on the competition. Nail all four of them (it’s not really very hard), and you’ll be among the most successful investors of your generation.
I’ll finish the series with a fifth podcast on how to reduce your stress level while ensuring that all these things get done properly.
Paul discusses the Schwab, Fidelity and TD Ameritrade commission-free ETF offerings. He helps investors find the least expensive ETFs, as well as the firms that offer the best selection of asset classes. To help those following the “Turn $3,000 to $50 million” strategy, Paul reviews the small-cap value offerings of all three firms, plus Vanguard. He suggests reading the Vanguard article, as well as the latest on the other three.
On this short special podcast Paul addresses the difficult market decline that has many investors concerned the market is heading for a bigger sell off. If you are having serious concerns about what should be done next, he suggests you reread “22 things we should know about bear markets.” He also pleads with young investors to celebrate the opportunity to buy equities at a discount, and for older investors, to control the downside with the right amount of fixed income funds. http://paulmerriman.com/22-
In this podcast Paul discusses the historical returns of the S&P 500, large cap value, small cap blend and small cap value. He knows many investors live with the belief they will find an actively managed that will outperform his favorite of the four, small cap value. Three of the most famous investors of all time, Peter Lynch, Bill Miller and Warren Buffet had records that few will ever match. What are the odds these great investors will do it again? But you may find small cap value did almost as well as the three did during the peak of their careers.
In 2011 John Bogle predicted a 7% 10 year growth rate (including dividends) for the S&P 500. In June, 2015 he reduced his prediction to 5%. Now he is predicting a 4% growth rate for the next decade and that doesn’t include mutual fund expenses, taxes or inflation. That might not be unsettling to investors if he didn’t have all the historical info to make his point. In this podcast Paul talks about the steps one might take to improve their return, including one that suggests a 20% return should be easy. In fact, the promotional literature for this service shows how an investor could have turned $5000 into $154,250. Paul suggests there is a safer way to add returns without taking much more risk—and maybe less risk than the S&P by itself.
Paul compares the returns of buy-and-hold and timing portfolios for the period 2000-2014. You’ll learn about all the advantages and disadvantages of timing. If you are interested in using timing in your portfolio, Paul discusses what he thinks is the best combination of asset classes and market timing systems.
- How do market timing returns compare to buy and hold returns in bear markets? 0:44
- Isn’t value investing really a form of market timing? 1:50
- Why not put all of your investments into value asset classes? 3:35
- What does it take to be a successful market timer? 6:05
- What kind of trust did you set up for your kids? 12:45
- What is the best benchmark for our portfolios?16.30
- Is there a way to ensure one will have money for retirement distributions?20:58
- Should you use the RMD (required minimum distribution) as an opportunity to rebalance? 24:42
- How do I find a DFA advisor? 25:38
Beware the dangers of letting the noise of Wall Street ruin your financial future. Does the headline, “Market building of a breakout—and may be bad!” make you change your commitment to your investment strategy? If it does, you are likely in trouble. Paul discusses how he processes the challenge of investment pornography and finds peace of mind with his investments.