Paul Merriman vs JL Collins portfolio head-to-head

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RovenSkyfall
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Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.

I want to have a 50:50 portfolio in my brokerage account with half being Paul Merriman's all value portfolio (70:30 US:Int) and the other half being a total index.

Given the equipoise (and disagreement) on the topic and the inability to know the future, I essentially figure it would be safe to have both in my taxable account. I am young 30s and (although may pursue FIRE) have a long timeline to let this experiment run. I am quite risk tolerant and have a pretty good shovel despite my age. For these reasons, I feel that a JL Collins approach may not be as aggressive as I want, but also have read about the criticisms of Merrimans small cap value weight (old data that is suspect given attempts at historical modeling and the results largely come from a handful of historical returns) and whether it will actually provide the historical returns. Thus, I feel like a true head to head in a portfolio may reveal the results (while satisfying my pull towards each portfolio).

Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard? I am open to any tips on how best to run this (was planning on yearly re-balancing for Merriman's portfolio). Thank you to the community in advance for your help!
Bama12
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by Bama12 »

You could open one at Vanguard and one at Fidelity.
I have been doing Paul's 10-10 for years.

I would not worry about what people here say about small value.
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

Great, thank you. One thing I never really hear is how happy people are with Paul's portfolio. Good to hear from someone who is happy with it. You re-balance yearly?
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JoMoney
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by JoMoney »

I find the idea of being partially slice-n-dice funny. You either slice-n-dice or you don't, what you're suggesting is just a very weak tilt, without the simplicity.
If you're chasing returns, you're right that nobody knows what will have the highest returns. What you can do, is look at the risks (which may include behavioral issues) a portfolio might be exposed to, and and don't expose yourself to things you might regret later on.
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Bama12
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by Bama12 »

RovenSkyfall wrote: Wed Apr 01, 2020 1:47 pm Great, thank you. One thing I never really hear is how happy people are with Paul's portfolio. Good to hear from someone who is happy with it. You re-balance yearly?
I never re-balance.

If something is off a lot, I just change up how much I buy.
livesoft
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by livesoft »

This 50:50 is pretty much the Trev H simplified portfolio that's been around a long time, so long-time readers know about it.
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

livesoft wrote: Wed Apr 01, 2020 2:22 pm This 50:50 is pretty much the Trev H simplified portfolio that's been around a long time, so long-time readers know about it.
Great thank you. Do you know if Trev H or Merrimans portfolios account for expense ratios and/or differences in outcomes of how a small value ETF actually produces versus what the historical predictions suggest?
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by livesoft »

Any look at historical performance takes into account expense ratios and outcomes during the time period looked at. Nothing can predict the future accurately nor precisely.
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

livesoft wrote: Mon Apr 13, 2020 10:15 am Any look at historical performance takes into account expense ratios and outcomes during the time period looked at. Nothing can predict the future accurately nor precisely.
How could they have done that with historical data? They just make one up? From what I have seen a lot of Merrimans data comes from historical calculations....
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by livesoft »

I meant historical data with real existing at the time ticker symbols.

If you want to then ask about brokerage commissions and/or taxes in the 1950s, 1960s, 1970s, then go ahead, but I won't be answering such questions.

Most recent history of small-cap value shows it is not good to tilt towards small-cap value. But maybe if one tilts now, they are buying low? Who knows? I don't.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by vineviz »

RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.
This isn't an answer to your direct question, but keep in mind that Merriman's portfolios almost universally have WAY too many funds in them as is. Lots of highly redundant holdings, each of which is too small to make a significant impact on overall portfolio performance.

This shortcoming will be magnified if his recommended portfolio is just half of your overall portfolio. As rule of thumb, if your asset allocation target has more than eight funds it definitely has too many.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Cantrip
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by Cantrip »

I used a Paul Merriman portfolio initially, but (as livesoft suggests) ended up changing to the TrevH 4 fund less than a year later as it tracks the Merriman well with lower cost and simplicity.

A vanguard retirement fund is highly likely to be your best choice. All in VTSAX is the lowest cost and most tax efficient choice. Perhaps a compromise could be 80% VTSAX and 20% VTIAX.

Do not follow two portfolios. Pick one. Keep things simple.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by White Coat Investor »

RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.

I want to have a 50:50 portfolio in my brokerage account with half being Paul Merriman's all value portfolio (70:30 US:Int) and the other half being a total index.

Given the equipoise (and disagreement) on the topic and the inability to know the future, I essentially figure it would be safe to have both in my taxable account. I am young 30s and (although may pursue FIRE) have a long timeline to let this experiment run. I am quite risk tolerant and have a pretty good shovel despite my age. For these reasons, I feel that a JL Collins approach may not be as aggressive as I want, but also have read about the criticisms of Merrimans small cap value weight (old data that is suspect given attempts at historical modeling and the results largely come from a handful of historical returns) and whether it will actually provide the historical returns. Thus, I feel like a true head to head in a portfolio may reveal the results (while satisfying my pull towards each portfolio).

Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard? I am open to any tips on how best to run this (was planning on yearly re-balancing for Merriman's portfolio). Thank you to the community in advance for your help!
Not all that different from my portfolio except I'm 60/20/20 stocks/bonds/real estate. But I have a moderate SV tilt.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by unclescrooge »

Bama12 wrote: Wed Apr 01, 2020 2:11 pm
RovenSkyfall wrote: Wed Apr 01, 2020 1:47 pm Great, thank you. One thing I never really hear is how happy people are with Paul's portfolio. Good to hear from someone who is happy with it. You re-balance yearly?
I never re-balance.

If something is off a lot, I just change up how much I buy.
So you're rebalancing through contributions.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by unclescrooge »

vineviz wrote: Mon Apr 13, 2020 12:59 pm
RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.
This isn't an answer to your direct question, but keep in mind that Merriman's portfolios almost universally have WAY too many funds in them as is. Lots of highly redundant holdings, each of which is too small to make a significant impact on overall portfolio performance.

This shortcoming will be magnified if his recommended portfolio is just half of your overall portfolio. As rule of thumb, if your asset allocation target has more than eight funds it definitely has too many.
How do you decide to draw the line at 8 funds? What is this rule of thumb based on?
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by jjface »

Just open 2 brokerage accounts in vanguard.

Or same for fidelity. Fidelity lets you name them so you can see which is which at first glance. But not hard to tell in vanguard either.

Personally though I'd say just pick one and go for it. Fact is if one outperforms the other for the next 10 years it could easily reverse for the following 10. You just can't base your future decisions on past performance reliably. Just pick a plan and stick to it.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by vineviz »

unclescrooge wrote: Tue Apr 14, 2020 7:00 pm How do you decide to draw the line at 8 funds? What is this rule of thumb based on?
You probably know that diversification is an area in which I've done a lot of research over the past few years. After analyzing thousands of combinations of publicly traded funds/ETFs, eight funds seems to be the point beyond which there is no longer any plausible case to be made for diversification benefits.

Most often, the number of funds can be collapsed further than this without any statistically significant loss of diversification.

By way of example, let's take a look at Merriman's Best-in-Class ETF portfolio which contains 13 different funds: Vanguard Total Stock Market (VTI), Invesco S&P 500® Pure Value (RPV), iShares Core S&P Small-Cap (IJR), SPDR® S&P 600 Small Cap Value (SLYV), Vanguard REIT Index  (VNQ), Vanguard FTSE Developed Markets (VEA), iShares MSCI EAFE Value (EFV), Schwab Fundamental Intl Sm Co (FNDC), WisdomTree Intl Small Cap Div  (DLS), WisdomTree Emerging Markets SmCp  (DGS), Vanguard Short-Term Government Bond VGSH 0% 12% 18% (VGSH), SPDR® Blmbg Barclays Interm Term Trs (SPTI), and Vanguard Short-Term Infl. Prot. Securities (VTIP).

You can intuit, probably, that holding two different large cap US funds and two different S&P 600 funds is not necessary. There are four different developed market funds, and three different US Treasury funds. But we don't need to rely on intuition.

Using principal components analysis, you can compute the amount of portfolio variance that each incremental fund is contributing.

Image

This graph shows the cumulative explained variance for each increment component, ordered from most explanatory to least. By the time you reach the 8th component (i.e. 8th most explanatory fund) you've already achieved 99.77% of the total variance of the whole portfolio. The five final funds account for less than 0.25% of the variance of the portfolio.

There are other quantitative approaches (Shannon entropy is one), but the long and short of it is that Merriman's portfolios generally multiple funds with similar risk exposures.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by AspireToRetire »

RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.

I want to have a 50:50 portfolio in my brokerage account with half being Paul Merriman's all value portfolio (70:30 US:Int) and the other half being a total index.

Given the equipoise (and disagreement) on the topic and the inability to know the future, I essentially figure it would be safe to have both in my taxable account. I am young 30s and (although may pursue FIRE) have a long timeline to let this experiment run. I am quite risk tolerant and have a pretty good shovel despite my age. For these reasons, I feel that a JL Collins approach may not be as aggressive as I want, but also have read about the criticisms of Merrimans small cap value weight (old data that is suspect given attempts at historical modeling and the results largely come from a handful of historical returns) and whether it will actually provide the historical returns. Thus, I feel like a true head to head in a portfolio may reveal the results (while satisfying my pull towards each portfolio).

Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard? I am open to any tips on how best to run this (was planning on yearly re-balancing for Merriman's portfolio). Thank you to the community in advance for your help!
OP, it’s simple math.

If you combine both allocations, the total portfolio will be:
50% total US market (VTSAX)
35% US value
15% International value

Viola!

No need to do sub accounts or make it any more complicated.

In ten years, see if VTSAX beats out the rest of your account (very easy to compare performance of each holding on Vanguard).

Cheers,
AspireToRetire
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by SemiTech11 »

Hi!

I would appreciate it if you would post some details about how you arrived at this principal component analysis? Also, do your principal components directly correspond to the funds you have listed?

Thanks!!
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AspireToRetire
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by AspireToRetire »

SemiTech11 wrote: Tue Apr 14, 2020 10:35 pm Hi!

I would appreciate it if you would post some details about how you arrived at this principal component analysis? Also, do your principal components directly correspond to the funds you have listed?

Thanks!!
The OP said he wants to split his portfolio 50:50 between JL Collins total market and the Merriman 70:30 all value portfolio.

So half the portfolio will be the total US market (ie VTSAX as JL Collins recommends).

The other half will be 70% US value and 30% International value which is the Merriman all value portfolio. 70/2=35 and 30/2=15.

So to achieve what the OP desires the complete portfolio allocation is:
50% VTSAX
35% US value
15% International Value

Simple math.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by unclescrooge »

vineviz wrote: Tue Apr 14, 2020 8:19 pm
unclescrooge wrote: Tue Apr 14, 2020 7:00 pm How do you decide to draw the line at 8 funds? What is this rule of thumb based on?
You probably know that diversification is an area in which I've done a lot of research over the past few years. After analyzing thousands of combinations of publicly traded funds/ETFs, eight funds seems to be the point beyond which there is no longer any plausible case to be made for diversification benefits.

Most often, the number of funds can be collapsed further than this without any statistically significant loss of diversification.

By way of example, let's take a look at Merriman's Best-in-Class ETF portfolio which contains 13 different funds: Vanguard Total Stock Market (VTI), Invesco S&P 500® Pure Value (RPV), iShares Core S&P Small-Cap (IJR), SPDR® S&P 600 Small Cap Value (SLYV), Vanguard REIT Index  (VNQ), Vanguard FTSE Developed Markets (VEA), iShares MSCI EAFE Value (EFV), Schwab Fundamental Intl Sm Co (FNDC), WisdomTree Intl Small Cap Div  (DLS), WisdomTree Emerging Markets SmCp  (DGS), Vanguard Short-Term Government Bond VGSH 0% 12% 18% (VGSH), SPDR® Blmbg Barclays Interm Term Trs (SPTI), and Vanguard Short-Term Infl. Prot. Securities (VTIP).

You can intuit, probably, that holding two different large cap US funds and two different S&P 600 funds is not necessary. There are four different developed market funds, and three different US Treasury funds. But we don't need to rely on intuition.

Using principal components analysis, you can compute the amount of portfolio variance that each incremental fund is contributing.

Image

This graph shows the cumulative explained variance for each increment component, ordered from most explanatory to least. By the time you reach the 8th component (i.e. 8th most explanatory fund) you've already achieved 99.77% of the total variance of the whole portfolio. The five final funds account for less than 0.25% of the variance of the portfolio.

There are other quantitative approaches (Shannon entropy is one), but the long and short of it is that Merriman's portfolios generally multiple funds with similar risk exposures.
Thank you for quick response and informative post!

If you were to cull 5 ETFs from the the above merriment portfolio, which ones would you choose?

Also, did you get around to painting your kitchen ceiling? I noticed a spot on mine and it's really bothering me!
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by vineviz »

unclescrooge wrote: Tue Apr 14, 2020 11:55 pm If you were to cull 5 ETFs from the the above merriment portfolio, which ones would you choose?
Merriman offers three different allocations (aggressive, moderate, conservative) of this portfolio and I'm just looking at the moderate case now (i.e. a 60/40 stock/bond allocation). The exact difference might vary depending on how much overall portfolio volatility the investor wanted to aim for.

But basically speaking the five most dispensable ETFs from the above list are iShares Core S&P Small-Cap ETF (IJR), Schwab Fundamental Intl Sm Co ETF (FNDC), Vanguard FTSE Developed Markets ETF (VEA), WisdomTree International SmallCp Div ETF (DLS), and Vanguard Short-Term Treasury ETF (VGSH).


I gave VTIP a pass, despite it's now statistical impact on the 60/40 portfolio, because there'd be no way to get the low volatility of Merriman's "conservative" variant without a short-term bond fund of some sort.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by unclescrooge »

vineviz wrote: Wed Apr 15, 2020 12:30 pm
unclescrooge wrote: Tue Apr 14, 2020 11:55 pm If you were to cull 5 ETFs from the the above merriment portfolio, which ones would you choose?
Merriman offers three different allocations (aggressive, moderate, conservative) of this portfolio and I'm just looking at the moderate case now (i.e. a 60/40 stock/bond allocation). The exact difference might vary depending on how much overall portfolio volatility the investor wanted to aim for.

But basically speaking the five most dispensable ETFs from the above list are iShares Core S&P Small-Cap ETF (IJR), Schwab Fundamental Intl Sm Co ETF (FNDC), Vanguard FTSE Developed Markets ETF (VEA), WisdomTree International SmallCp Div ETF (DLS), and Vanguard Short-Term Treasury ETF (VGSH).


I gave VTIP a pass, despite it's now statistical impact on the 60/40 portfolio, because there'd be no way to get the low volatility of Merriman's "conservative" variant without a short-term bond fund of some sort.
Makes sense.

Just to be clear, you are looking at it from the point of view of diversification, not expected returns, right?

Also, you would keep VNQ over IJR? I thought the more recent literature pointed in the opposite direction.
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

AspireToRetire wrote: Tue Apr 14, 2020 10:31 pm
RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.

I want to have a 50:50 portfolio in my brokerage account with half being Paul Merriman's all value portfolio (70:30 US:Int) and the other half being a total index.

Given the equipoise (and disagreement) on the topic and the inability to know the future, I essentially figure it would be safe to have both in my taxable account. I am young 30s and (although may pursue FIRE) have a long timeline to let this experiment run. I am quite risk tolerant and have a pretty good shovel despite my age. For these reasons, I feel that a JL Collins approach may not be as aggressive as I want, but also have read about the criticisms of Merrimans small cap value weight (old data that is suspect given attempts at historical modeling and the results largely come from a handful of historical returns) and whether it will actually provide the historical returns. Thus, I feel like a true head to head in a portfolio may reveal the results (while satisfying my pull towards each portfolio).

Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard? I am open to any tips on how best to run this (was planning on yearly re-balancing for Merriman's portfolio). Thank you to the community in advance for your help!
OP, it’s simple math.

If you combine both allocations, the total portfolio will be:
50% total US market (VTSAX)
35% US value
15% International value

Viola!

No need to do sub accounts or make it any more complicated.

In ten years, see if VTSAX beats out the rest of your account (very easy to compare performance of each holding on Vanguard).

Cheers,
AspireToRetire
Great suggestion, thank you
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

vineviz wrote: Wed Apr 15, 2020 12:30 pm
unclescrooge wrote: Tue Apr 14, 2020 11:55 pm If you were to cull 5 ETFs from the the above merriment portfolio, which ones would you choose?
Merriman offers three different allocations (aggressive, moderate, conservative) of this portfolio and I'm just looking at the moderate case now (i.e. a 60/40 stock/bond allocation). The exact difference might vary depending on how much overall portfolio volatility the investor wanted to aim for.

But basically speaking the five most dispensable ETFs from the above list are iShares Core S&P Small-Cap ETF (IJR), Schwab Fundamental Intl Sm Co ETF (FNDC), Vanguard FTSE Developed Markets ETF (VEA), WisdomTree International SmallCp Div ETF (DLS), and Vanguard Short-Term Treasury ETF (VGSH).


I gave VTIP a pass, despite it's now statistical impact on the 60/40 portfolio, because there'd be no way to get the low volatility of Merriman's "conservative" variant without a short-term bond fund of some sort.

Thank you for all the helpful information! Just to be clear I was planning on using the All value 70:30 portfolio which is 5 funds.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

White Coat Investor wrote: Mon Apr 13, 2020 11:50 pm
RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm Hello all! Long time reader, first time poster here.

I will not claim to be an expert in either of their investing styles but have done quite a bit of reading/listening to both and feel like I have a relatively strong handle. I have also come across many topics here regarding each persons philosophy and wanted to see if you all had any input on what I want to try.

I want to have a 50:50 portfolio in my brokerage account with half being Paul Merriman's all value portfolio (70:30 US:Int) and the other half being a total index.

Given the equipoise (and disagreement) on the topic and the inability to know the future, I essentially figure it would be safe to have both in my taxable account. I am young 30s and (although may pursue FIRE) have a long timeline to let this experiment run. I am quite risk tolerant and have a pretty good shovel despite my age. For these reasons, I feel that a JL Collins approach may not be as aggressive as I want, but also have read about the criticisms of Merrimans small cap value weight (old data that is suspect given attempts at historical modeling and the results largely come from a handful of historical returns) and whether it will actually provide the historical returns. Thus, I feel like a true head to head in a portfolio may reveal the results (while satisfying my pull towards each portfolio).

Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard? I am open to any tips on how best to run this (was planning on yearly re-balancing for Merriman's portfolio). Thank you to the community in advance for your help!
Not all that different from my portfolio except I'm 60/20/20 stocks/bonds/real estate. But I have a moderate SV tilt.
Good to know I am in good company with the SV tilt. Thanks for the response!
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by MotoTrojan »

I tilt to value in all my asset classes and agree the PM 10 fund is way too many funds.

My core allocation is:
50% US Large w/ value tilt (RAFI Fundamental so I get some growth exposure)
20% US Small Value
30% Ex-US Developed Small Value (RAFI Fundamental so some growth exposure)

In reality because in my 401k I use Total US rather than Large Value (don't want a pure large-value tilt) my US Large is more like 50/50 blend/fundamental.

No need to get cute with blend & value funds intentionally etc...
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by MotoTrojan »

RovenSkyfall wrote: Wed Apr 01, 2020 12:22 pm
Is anyone aware of how I could set this up to have two sub accounts in my brokerage account in Vanguard?
If you really want to go this route I believe you can open as many taxable brokerage accounts as you want at Vanguard. Same with tIRA/Roth IRA accounts.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by MrBeaver »

JoMoney wrote: Wed Apr 01, 2020 1:48 pm I find the idea of being partially slice-n-dice funny. You either slice-n-dice or you don't, what you're suggesting is just a very weak tilt, without the simplicity.
If you're chasing returns, you're right that nobody knows what will have the highest returns. What you can do, is look at the risks (which may include behavioral issues) a portfolio might be exposed to, and and don't expose yourself to things you might regret later on.
I find most of the confusion because Merriman's slice & dice actually combines two different strategies:
  • Slice & Dice: Allow allocation to drift some before rebalancing (rebalancing bands) - a quasi-momentum strategy with 'limits' to encourage rebalancing when valuations effectively diverge.
  • Pick Winner Buckets: Overweight sectors that have performed well in the past, under the assumption that they will continue to outperform the broad market.
With that terminology defined, what's strange to me is that:
  • Many Bogleheads claim they are against slice & dice, but are perfectly happy doing rebalancing with rebalancing bands between equities and bonds, or between US and ex-US equities instead of using a single balanced fund. By the above definition, they are using slice & dice, but with a smaller number of segmentations. I do wonder whether the tax advantages of keeping them separate has unknowingly encouraged people to use this method (even though they often think they are not because the number of slices is smaller)
  • Picking an allocation between stocks and bonds, or between US and ex-US equities is often not done by their actual market weights. Market weight of world stocks vs bonds is roughly 43/57 stocks/bonds last time I checked, but we don't hear calls to blindly set our allocations that way, the advice is to choose a stock/bond allocation that fits one's risk tolerance. A similar behavior repeats itself in US vs international equities.
I have read the arguments that 'bonds are for diversification and their expected return is lower, so their allocation and balancing method vs stocks is not the same as between two equity classes', but I just don't buy it. They are both investments, they just happen to have low correlation.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by DesertDiva »

Here’s an idea: study the Boglehead’s wiki pages.

https://www.bogleheads.org/wiki/Getting_started
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

DesertDiva wrote: Thu Apr 16, 2020 9:14 am Here’s an idea: study the Boglehead’s wiki pages.

https://www.bogleheads.org/wiki/Getting_started
Good idea, but not that helpful. I have already been through this and as my post hopefully conveyed, I am interested in something else.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by DesertDiva »

RovenSkyfall wrote: Thu Apr 16, 2020 1:39 pm
DesertDiva wrote: Thu Apr 16, 2020 9:14 am Here’s an idea: study the Boglehead’s wiki pages.

https://www.bogleheads.org/wiki/Getting_started
Good idea, but not that helpful. I have already been through this and as my post hopefully conveyed, I am interested in something else.
And yet here you are, on the Boglehead's forum :twisted:
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

DesertDiva wrote: Thu Apr 16, 2020 2:12 pm
RovenSkyfall wrote: Thu Apr 16, 2020 1:39 pm
DesertDiva wrote: Thu Apr 16, 2020 9:14 am Here’s an idea: study the Boglehead’s wiki pages.

https://www.bogleheads.org/wiki/Getting_started
Good idea, but not that helpful. I have already been through this and as my post hopefully conveyed, I am interested in something else.
And yet here you are, on the Boglehead's forum :twisted:
Sorry maybe I am misunderstanding how your post was supposed to help answer my question. The wiki suggest one come to the forum when they have a question "If you have questions on any investing or finance topic, just ask in the Bogleheads® forum. No question is too simple or too complex. If you have a specific question, dive right in. " on the front page.

I read through most of the things and am familiar with a lot of it. Maybe I missed it and you can point me to where the wiki answers my question. Or maybe I am being trolled, cant tell...
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RovenSkyfall
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by RovenSkyfall »

White Coat Investor wrote: Mon Apr 13, 2020 11:50 pm
Not all that different from my portfolio except I'm 60/20/20 stocks/bonds/real estate. But I have a moderate SV tilt.
Nice and then you followed up with a nice in-depth post! Thank you!!!
https://www.whitecoatinvestor.com/small ... -strategy/
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by willthrill81 »

A moderate tilt to small and value is basically what you've taken on, and that's perfectly reasonable. Given the lengthy underperformance of these factors and all the talk of those who owned them throwing in the towel, I won't be surprised at all to see these factors begin outperforming again.

But be prepared for any tilt of any kind to underperform the market for a decade or longer. If you're not prepared for that, then don't tilt.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by nanameg »

JoMoney wrote: Wed Apr 01, 2020 1:48 pm I find the idea of being partially slice-n-dice funny. You either slice-n-dice or you don't, what you're suggesting is just a very weak tilt, without the simplicity.
If you're chasing returns, you're right that nobody knows what will have the highest returns. What you can do, is look at the risks (which may include behavioral issues) a portfolio might be exposed to, and and don't expose yourself to things you might regret later on.
I agree with the this and I think it’s similar with using simple international index funds...if vanguard says in their writings that you need 40% to offset volatility why does a PAS advisor suggest 18%? It’s illogical to me.
I’m sure I’m missing something..but you either do it or u don’t...what’s the good of such a small percentage? Isn’t that essentially slicing and dicing too?

I asked the advisor and his response was the 40% number was for the whole portfolio not just the stock portion. I’m sure I’m missing something as I say. Can someone else explain?
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White Coat Investor
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by White Coat Investor »

RovenSkyfall wrote: Tue May 05, 2020 2:59 pm
White Coat Investor wrote: Mon Apr 13, 2020 11:50 pm
Not all that different from my portfolio except I'm 60/20/20 stocks/bonds/real estate. But I have a moderate SV tilt.
Nice and then you followed up with a nice in-depth post! Thank you!!!
https://www.whitecoatinvestor.com/small ... -strategy/
Well, the post was written and scheduled long before the comment, but glad to be helpful.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by retired@50 »

nanameg wrote: Tue May 05, 2020 5:00 pm
JoMoney wrote: Wed Apr 01, 2020 1:48 pm I find the idea of being partially slice-n-dice funny. You either slice-n-dice or you don't, what you're suggesting is just a very weak tilt, without the simplicity.
If you're chasing returns, you're right that nobody knows what will have the highest returns. What you can do, is look at the risks (which may include behavioral issues) a portfolio might be exposed to, and and don't expose yourself to things you might regret later on.
I agree with the this and I think it’s similar with using simple international index funds...if vanguard says in their writings that you need 40% to offset volatility why does a PAS advisor suggest 18%? It’s illogical to me.
I’m sure I’m missing something..but you either do it or u don’t...what’s the good of such a small percentage? Isn’t that essentially slicing and dicing too?

I asked the advisor and his response was the 40% number was for the whole portfolio not just the stock portion. I’m sure I’m missing something as I say. Can someone else explain?
nanameg,
From your own Portfolio Review thread (viewtopic.php?f=1&t=313968&p=5231932#p5231365) you posted the makeup of your portfolio as follows:
Total US stock 27%
Total International Stock 18%
Total US Bond 38%
Total International Bond 17%
The 40% international stock is a percentage of your total stock holdings, not your total portfolio. In your case you hold 45% stock and 55% bonds.

Mathematically, 45 * 0.4 = 18. So, 40% of the stock you own is international.

RovenSkyfall, sorry about the digression in the middle of your thread.

Regards,
This is one person's opinion. Nothing more.
nanameg
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by nanameg »

retired@50 wrote: Wed May 06, 2020 9:48 am
nanameg wrote: Tue May 05, 2020 5:00 pm
JoMoney wrote: Wed Apr 01, 2020 1:48 pm I find the idea of being partially slice-n-dice funny. You either slice-n-dice or you don't, what you're suggesting is just a very weak tilt, without the simplicity.
If you're chasing returns, you're right that nobody knows what will have the highest returns. What you can do, is look at the risks (which may include behavioral issues) a portfolio might be exposed to, and and don't expose yourself to things you might regret later on.
I agree with the this and I think it’s similar with using simple international index funds...if vanguard says in their writings that you need 40% to offset volatility why does a PAS advisor suggest 18%? It’s illogical to me.
I’m sure I’m missing something..but you either do it or u don’t...what’s the good of such a small percentage? Isn’t that essentially slicing and dicing too?

I asked the advisor and his response was the 40% number was for the whole portfolio not just the stock portion. I’m sure I’m missing something as I say. Can someone else explain?
nanameg,
From your own Portfolio Review thread (viewtopic.php?f=1&t=313968&p=5231932#p5231365) you posted the makeup of your portfolio as follows:
Total US stock 27%
Total International Stock 18%
Total US Bond 38%
Total International Bond 17%
The 40% international stock is a percentage of your total stock holdings, not your total portfolio. In your case you hold 45% stock and 55% bonds.

Mathematically, 45 * 0.4 = 18. So, 40% of the stock you own is international.

RovenSkyfall, sorry about the digression in the middle of your thread.

Regards,
Thanks retired@50. I am math illiterate which makes investing difficult but I’m determined to learn.

I thought from looking at those numbers that I had 18% of my total stock portion in international not 40%!
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by lepa71 »

Cantrip wrote: Mon Apr 13, 2020 11:23 pm I used a Paul Merriman portfolio initially, but (as livesoft suggests) ended up changing to the TrevH 4 fund less than a year later as it tracks the Merriman well with lower cost and simplicity.

A vanguard retirement fund is highly likely to be your best choice. All in VTSAX is the lowest cost and most tax efficient choice. Perhaps a compromise could be 80% VTSAX and 20% VTIAX.

Do not follow two portfolios. Pick one. Keep things simple.
Do you re-balance it yearly? Do you keep anything in bonds? Where do you keep Emergency Funds?

In general. Paul is advocating for value funds. Why not growth? Thanks
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by equivestor »

I like the JL Collins approach to investing in 1 fund. I invest 100% in the Vanguard Total Stock Market Index (VTSAX). It's in a taxable account. I purchased it in March 2020 at $58 and its now $90. Simplicity with great performance.
lepa71
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by lepa71 »

equivestor wrote: Tue Nov 17, 2020 5:52 pm I like the JL Collins approach to investing in 1 fund. I invest 100% in the Vanguard Total Stock Market Index (VTSAX). It's in a taxable account. I purchased it in March 2020 at $58 and its now $90. Simplicity with great performance.
That is too short of a time to judge.
equivestor
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by equivestor »

lepa71 wrote: Tue Nov 17, 2020 6:26 pm
equivestor wrote: Tue Nov 17, 2020 5:52 pm I like the JL Collins approach to investing in 1 fund. I invest 100% in the Vanguard Total Stock Market Index (VTSAX). It's in a taxable account. I purchased it in March 2020 at $58 and its now $90. Simplicity with great performance.
That is too short of a time to judge.
I commented on the last 8 months because that's when I discovered the J L Collins book "The Simple Path to Wealth" and purchased the fund soon after reading the book in March 2020. The Vanguard fund has been around since 1992, and in my opinion, has an outstanding track record. Simplicity with great performance.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by Cantrip »

[/quote]

Do you re-balance it yearly? Do you keep anything in bonds? Where do you keep Emergency Funds?

In general. Paul is advocating for value funds. Why not growth? Thanks
[/quote]

Rebalance yearly on my birthday (though every two years would be more ideal to allow for momentum). I'm 40 years old with a stable job so in accumulation. Have 20k in checking account and 60k in an EBond Ladder/Ibonds for emergency fund; otherwise 100% stocks (I was keeping a large amount of silver/gold which was mostly sold off mid year and put in stocks).

Historical long-term outperformance versus Growth is the primary reason Paul Merriman tilts Small and Value. He believes there are structural reasons for this outperformance and that it will continue. It may also be more diversified (though this is subject to debate).
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by lepa71 »

Cantrip wrote: Sat Nov 21, 2020 9:15 am
Do you re-balance it yearly? Do you keep anything in bonds? Where do you keep Emergency Funds?

In general. Paul is advocating for value funds. Why not growth? Thanks
[/quote]

Rebalance yearly on my birthday (though every two years would be more ideal to allow for momentum). I'm 40 years old with a stable job so in accumulation. Have 20k in checking account and 60k in an EBond Ladder/Ibonds for emergency fund; otherwise 100% stocks (I was keeping a large amount of silver/gold which was mostly sold off mid year and put in stocks).

Historical long-term outperformance versus Growth is the primary reason Paul Merriman tilts Small and Value. He believes there are structural reasons for this outperformance and that it will continue. It may also be more diversified (though this is subject to debate).
[/quote]

What do you get from EBond Ladder/Ibonds? It looks like almost nothing. I was looking at Marcus no-penalty CD for 7 months at 0.55%.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by willthrill81 »

lepa71 wrote: Sat Nov 21, 2020 11:15 am What do you get from EBond Ladder/Ibonds? It looks like almost nothing. I was looking at Marcus no-penalty CD for 7 months at 0.55%.
EE bonds held for 20 years have a one-time adjustment made by the Treasury to double their nominal starting value, which is equivalent to a 3.53% nominal yield. That's about the highest guaranteed nominal yield available to most investors these days, but the EE bonds must be held for the full 20 years for this to occur. If they are sold prior to then, the nominal interest rate paid is close to zero.

I bonds currently have a real yield of zero (i.e. they will match inflation as measured by CPI), which is better than TIPS of all maturity levels.

EE bonds held for 20 years are guaranteed to beat .55% nominal, and I bonds will beat that as long as inflation is at least .55% annually.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by lepa71 »

That is if you keep it for 20 years, isn't it?
Just wondering, how is it for EF? I guess you could sell it anytime.
Am I missing something?
Thanks
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by Cantrip »


What do you get from EBond Ladder/Ibonds? It looks like almost nothing. I was looking at Marcus no-penalty CD for 7 months at 0.55%.
The Ebond if held for 20 years has a low 3.5% return but its better than current alternatives for bonds. It also acts as an emergency fund during the first few years of holding, as while only yielding 0.1% it will not decrease in value and selling it prematurely does not have much opportunity cost.

The Ibond is simply an emergency fund.

The Marcus CD is reasonable if you need liquidity within the first year of purchase.
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by lepa71 »

Can I buy those with Vanguard?
When does the interest rate become 3.5%?
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Re: Paul Merriman vs JL Collins portfolio head-to-head

Post by UpperNwGuy »

lepa71 wrote: Tue Nov 17, 2020 6:26 pm
equivestor wrote: Tue Nov 17, 2020 5:52 pm I like the JL Collins approach to investing in 1 fund. I invest 100% in the Vanguard Total Stock Market Index (VTSAX). It's in a taxable account. I purchased it in March 2020 at $58 and its now $90. Simplicity with great performance.
That is too short of a time to judge.
While nine months is indeed too short a time to judge, if you run the VTSAX numbers for the last two decades, you reach the exact same conclusion: "Simplicity with great performance."
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