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.
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.
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.
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/
For 10 years, Paul had a weekly “Outrage of the Week” on his Seattle radio show. He says it was never a problem finding something that made him hopping mad. In this podcast, Paul explains his recent outrage about one of America’s most trusted insurance companies giving their employees the shaft. He also answers questions from his listeners and readers at paulmerriman.com (Note to listeners: there are 12 Q&A’s mentioned on the podcast, but one was removed in order to better address it in a future Q&A).
1. As a first time investor afraid of losing money in the market, can you recommend a book to read and what can you say that will help me take the high risk of stocks?
2. Why don’t you create a portfolio of ETFs that can select from all available ETFs?
3. How can I get you to update your 401(k) for my company?
4. Now that Fideliity has lowered their fees on ETFs, should I move from Vanguard to Fidelity?
5. How can I get my company to add index funds to the 401(k) choices?
6. How about using some of the best performing REITs rather than index funds?
7. How are ETF portfolios changed as the companies change size or value/growth characteristics?
8. What do you do with proceeds from a RMD that you don’t need to live on?
9. What would you do to make my portfolio better?
10. What do you think of The Mutual Fund Store?
11. Should I use the Four Fund Solution or The Ultimate Buy and Hold Portfolio for the equities part of my portfolio?
Paul explains the importance of adding value to your portfolio. The higher long-term returns of value stocks is not in question, but it is confusing to many investors as to why troubled and out-of-favor companies are expected to make more than great companies. To clarify this, Paul reads sections from both “Financial Fitness Forever” and “Live It Up Without Outliving Your Money.” And for those who aren’t interested in all these details, it’s important to know that almost every famous professional investor became famous using value stocks (e.g., Warren Buffet, Peter Lynch, John Templeton, and Michael Price).