Thoughts on Paul Merriman's Portfolio

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JustinR
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Re: Thoughts on Paul Merriman's Portfolio

Post by JustinR »

EngineerEd wrote: Fri May 25, 2018 1:49 pmFor International equity I never was able to get any value tilt. Back in 2013 there were no international value ETFs, now there is the high dividend yield ETF which effectively is international large cap value. I don't like the high expense ratio on that one though (0.32%). I did use to split my non-EM international 50/50 between total international and all world ex-US small cap. However eventually I aggregated them both into total international admiral class. Maybe I'll pick up some international small cap again soon, then again maybe not. I don't see any easy way to get cheap international value tilt yet though.
Why did you move out of International Small Cap?

Also, how different is Intl Small Cap from Intl Small Cap Value? Are they completely different? Vanguard doesn't have an ISCV fund, so I've been using ISC instead and am wondering how "good enough" it is.
Last edited by JustinR on Sat May 26, 2018 10:29 pm, edited 1 time in total.
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Taylor Larimore
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Re: Thoughts on Paul Merriman's Portfolio

Post by Taylor Larimore »

Taylor you know it’s disingenuous to compare those portfolios listed on market watch. The version of Merriman’s portfolio listed there is 40% bonds, the 2nd graders portfolio is 10% bonds.
Jags4186:

I agree that it can be "disingenuous" to compare two portfolios with different stock/bond allocations. I did not pick the portfolios, but I know I would much rather have held the Second Grader Portfolio than the Merriman Ultimate Portfolio during the past 10-years,

I was responding to zadie who wrote: "His (Merriman) study shows a far greater return as well." I think we can agree: "it depends."

There is more than one road to Dublin.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Leif
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Re: Thoughts on Paul Merriman's Portfolio

Post by Leif »

ThisJustIn wrote: Sat May 26, 2018 8:13 pm What is DFA exactly? (What do you mean by I had access to DFA funds?) Can I not device an All-value portfolio using Vanguard funds (mutual fund or ETF)? All I need to find is the corresponding funds for US LCV, US SCV, International LCV, and International SCV, and EM.
DFA stands for Dimensional Fund Advisors. They provide a number of mutual funds. Their funds are based on research by Dr. Eugene Fama and Dr. Ken French. Dr. Fama received the Nobel prize in Financial Economics.

I use from DFA:

US SCV - DFSVX
ISCV - DISVX
DFEVX - Emerging Market Value

For other funds I use a combination of Vanguard and Fidelity funds. These three funds, I feel, are best supplied by DFA.

DFA funds may only be purchased through one of their authorized dealers. Mostly financial advisors that have taken their course in understanding their methodology and I think a state has their funds in a 529 plan. Also available in some companies retirement savings plans.

If you search for DFA on this site you will find tons of references.
Northern Flicker
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Re: Thoughts on Paul Merriman's Portfolio

Post by Northern Flicker »

A number of those asset classes (eg TIPS, REITS, global REITS) did not exist 50 years ago. Although Mexico, Argentina, and Brazil for instance had stock exchanges, emerging markets equity did not generally exist as an asset class 50 years ago either. It is highly unlikely that Mr Merriman’s 50-year backtest was for a portfolio an investor could have held or that generated returns that could have been obtained by an individual investor, with or without an advisor.

Also, the portfolios have a strong int’l tilt on the equity side and the starting year chosen for the backtest 50 years ago happens to be a start year very favorable for non-US equities relative to US equities.

The portfolios are entirely more complex than necessary.
ThisJustIn
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Re: Thoughts on Paul Merriman's Portfolio

Post by ThisJustIn »

Taylor Larimore wrote: Sat May 26, 2018 8:44 pm
zadie wrote: Sat Oct 18, 2014 1:16 pm I agree that it is more complicated than the 3 fund portfolio, his study shows a far greater return as well.
zadie:

Not according to Market Watch.

The winning portfolio is the Second Grader's Three-Fund Portfolio.

Best wishes.
Taylor
Are these numbers in MarketWatch returns after tax? 6.64% return over 10 years for Second Grader portfolio (60 / 30 / 10) looks quite low to me.
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CyclingDuo
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Re: Thoughts on Paul Merriman's Portfolio

Post by CyclingDuo »

Earl Lemongrab wrote: Fri May 25, 2018 1:27 pmI have a slice and dice portfolio, although not exactly the Merriman portfolio. Rebalancing isn't difficult because I track each asset class and direct new contributions to whichever are lagging. I haven't needed to sell/buy anything since the 2008 crash ended.
Pretty cool with the M1 Finance platform that Paul set up his portfolios and partnered with 2 years ago. All of Merriman's portfolio's can be set up with the click of the mouse or a tap of the trackpad, or a tap on the phone in the M1 Finance platform (taxable as well as tax deferred versions - and in any flavor of AA one desires). Rebalancing with the click of a button removes any fuss with Excel. :mrgreen:

https://paulmerriman.com/m1-finance/
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
paul merriman
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Re: Thoughts on Paul Merriman's Portfolio

Post by paul merriman »

I have tried to make it clear that the title, "Ultimate Buy and Hold" is simply the best I can find. I'm sure anybody who has taken the risk of advising others (for money or not) is recommending the best they know. I started using that title over 20 years ago so it shouldn't come as a surprise that there have been changes as I learned steps that should produce better returns. I teach college students who will not likely use a 10+ fund portfolio so we are presently working on a two or three fund solution that can be applied at Vanguard, Fidelity, Schwab and most 401k plans.
paul merriman
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Re: Thoughts on Paul Merriman's Portfolio

Post by paul merriman »

For my friends who are investing money for their newborn grandchildren, I have recommended they use small cap value. For my own Roth IRA, that will not be used in my lifetime, I am not quite so aggressive but make it an all equity, all value portfolio. The following is my all value asset allocation: 5% small cap emerging markets (DEMSX), 5% value emerging markets (DFEVX), 20% international small cap value (DISVX), 20% international large cap value (DFIVX), 25% U.S. large cap value (DFLVX) and 25% U.S. small cap value (DFSVX). I think it is possible the portfolio to double every 6 years on average. But I'm quick to add, I do not and cannot know the future. All of my trust in this strategy is based on 90 years of past results. The only problem I have is I can't buy the past.
Mardoc01
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Re: Thoughts on Paul Merriman's Portfolio

Post by Mardoc01 »

Paul, been following you just recently heard podcast from 2015 where you really liked vtwv now it seems you prefer viov. One follows sp 600 vs Russell 2000. Is past performance of vtwv what made you fall out of love with it ?
Jags4186
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Re: Thoughts on Paul Merriman's Portfolio

Post by Jags4186 »

Taylor Larimore wrote: Sat May 26, 2018 10:12 pm
Taylor you know it’s disingenuous to compare those portfolios listed on market watch. The version of Merriman’s portfolio listed there is 40% bonds, the 2nd graders portfolio is 10% bonds.
Jags4186:

I agree that it can be "disingenuous" to compare two portfolios with different stock/bond allocations. I did not pick the portfolios, but I know I would much rather have held the Second Grader Portfolio than the Merriman Ultimate Portfolio during the past 10-years,

I was responding to zadie who wrote: "His (Merriman) study shows a far greater return as well." I think we can agree: "it depends."

There is more than one road to Dublin.

Best wishes.
Taylor
I would have rather have held Apple the last 10 years, does that mean buying Apple stock is better than the 3 fund portfolio?
ThisJustIn
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Re: Thoughts on Paul Merriman's Portfolio

Post by ThisJustIn »

Here is what I understand from this thread and comparison of multiple portfolios. Please let me know if this is correct (Paul, your input is highly appreciated here).

Let's say I device three different portfolios, using Vanguard funds (and not DFA funds, because I probably don't want to pay for account management fees):

1) Paul Merriman's Ultimate Buy&Hold using Vanguard index funds,
2) Paul Merriman's Ultimate Buy&Hold using Vanguard ETFs,
3) Three-fund portfolio (VTSAX, VTIAX, VWITX)

Here is their performance backtested in portfolio visualizer: http://bit.ly/2phO9Qm , between 1985-2018, but shown only for January 2017 - April 2018, because not all funds go back that long.
If you look at this plot, performance of these funds are almost identical. But I also keep in mind that this spans only 1.5 years, so it is not really considered long-term.

Given this, should I assume that three-fund portfolio performance and the performance of Ultimate Buy&Hold portfolio using Vanguard funds are identical? In this case, does the benefit of Ultimate Buy&Hold portfolio come into play only when I use DFA funds, and not any of the funds out there I can but easily from Vanguard or Fidelity or Schwab? Anyone care to explain?
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Johnnie
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Re: Thoughts on Paul Merriman's Portfolio

Post by Johnnie »

I have an analogy for Paul's Ultimate vs. 3-Fund: It's the difference between a casino gambler at the craps table who has six or 10 different side bets going on every throw of the dice, the effect of which is to increase his odds just a smidge over the gambler who bets only on the main thing.

...And of course in the long term those gamblers all lose, which is why I have another analogy for the difference between casinos and the stock market for the past 90 years. In the stock market the individuals making the "bets" (investments) get to be the "house."

Sure, PPINGOFR, but for 90 years those who have bought-and-held in this game were the winners.
"I know nothing."
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vineviz
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Re: Thoughts on Paul Merriman's Portfolio

Post by vineviz »

ThisJustIn wrote: Sun May 27, 2018 2:59 pm
Given this, should I assume that three-fund portfolio performance and the performance of Ultimate Buy&Hold portfolio using Vanguard funds are identical? In this case, does the benefit of Ultimate Buy&Hold portfolio come into play only when I use DFA funds, and not any of the funds out there I can but easily from Vanguard or Fidelity or Schwab? Anyone care to explain?
I wouldn’t presume that there IS any benefit to the Merriman portfolios, but any benefit it MIGHT have lies in its asset & risk factor allocation and NOT in the specific fund choices.

You can easily build a great portfolio with 3-10 low cost ETFs.

And starting with a well-diversified 3 fund portfolio, the marginal benefit of each fund you add will be declining.

I can see no reason to ever need more than two large cap domestic funds, one small cap value domestic fund, two international funds, and two bond funds. Anything more than that will never impact your retirement in any significant way.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
palaheel
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Re: Thoughts on Paul Merriman's Portfolio

Post by palaheel »

Paul, thanks for your DFA fund choices and allocations. I have access to some DFA funds in my 401k (not your choices, sadly), but your choices give me something to work with.
Nothing to say, really.
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CyclingDuo
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Re: Thoughts on Paul Merriman's Portfolio

Post by CyclingDuo »

paul merriman wrote: Sun May 27, 2018 9:48 am I have tried to make it clear that the title, "Ultimate Buy and Hold" is simply the best I can find. I'm sure anybody who has taken the risk of advising others (for money or not) is recommending the best they know. I started using that title over 20 years ago so it shouldn't come as a surprise that there have been changes as I learned steps that should produce better returns. I teach college students who will not likely use a 10+ fund portfolio so we are presently working on a two or three fund solution that can be applied at Vanguard, Fidelity, Schwab and most 401k plans.
As a college professor let me say "That's great, Paul!"

I would certainly promote the access to possibly the full 10 fund version via the M1 option as it allows partial share purchase and starting with as little as $100. Perfect for those students you are speaking to as they get going with their investing.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
ThisJustIn
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Re: Thoughts on Paul Merriman's Portfolio

Post by ThisJustIn »

CyclingDuo wrote: Mon May 28, 2018 11:52 am
paul merriman wrote: Sun May 27, 2018 9:48 am I have tried to make it clear that the title, "Ultimate Buy and Hold" is simply the best I can find. I'm sure anybody who has taken the risk of advising others (for money or not) is recommending the best they know. I started using that title over 20 years ago so it shouldn't come as a surprise that there have been changes as I learned steps that should produce better returns. I teach college students who will not likely use a 10+ fund portfolio so we are presently working on a two or three fund solution that can be applied at Vanguard, Fidelity, Schwab and most 401k plans.
As a college professor let me say "That's great, Paul!"

I would certainly promote the access to possibly the full 10 fund version via the M1 option as it allows partial share purchase and starting with as little as $100. Perfect for those students you are speaking to as they get going with their investing.
@CyclingDuo: Can we create Paul's portfolio using Vanguard funds suggested here (http://paulmerriman.com/vanguard/), and still expect similar performance over three-fund portfolio? Could you elaborate more on the 10-fund version of the portfolio that you plan to create in M1Finance?
rustymutt
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Re: Thoughts on Paul Merriman's Portfolio

Post by rustymutt »

My thoughts are that I'm glad I found Paul's weekly Internet show in the early 90's and changed the way I think about investing. 8% average over the last 20 years. Didn't win any gold metals, but it worked, and for that I will forever be grateful.
Even educators need education. And some can be hard headed to the point of needing time out.
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CyclingDuo
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Re: Thoughts on Paul Merriman's Portfolio

Post by CyclingDuo »

ThisJustIn wrote: Mon May 28, 2018 2:32 pm
CyclingDuo wrote: Mon May 28, 2018 11:52 am
paul merriman wrote: Sun May 27, 2018 9:48 am I have tried to make it clear that the title, "Ultimate Buy and Hold" is simply the best I can find. I'm sure anybody who has taken the risk of advising others (for money or not) is recommending the best they know. I started using that title over 20 years ago so it shouldn't come as a surprise that there have been changes as I learned steps that should produce better returns. I teach college students who will not likely use a 10+ fund portfolio so we are presently working on a two or three fund solution that can be applied at Vanguard, Fidelity, Schwab and most 401k plans.
As a college professor let me say "That's great, Paul!"

I would certainly promote the access to possibly the full 10 fund version via the M1 option as it allows partial share purchase and starting with as little as $100. Perfect for those students you are speaking to as they get going with their investing.
@CyclingDuo: Can we create Paul's portfolio using Vanguard funds suggested here (http://paulmerriman.com/vanguard/), and still expect similar performance over three-fund portfolio? Could you elaborate more on the 10-fund version of the portfolio that you plan to create in M1Finance?
The Vanguard list is in the first post of this thread. The link you list is for the Admiral Share version.

Here's the link to the versions one can set up with a click of a button at M1.

https://paulmerriman.com/m1-finance/

You'll see the M1 version is a mix of Vanguard, iShares, WisdomTree, etc... .

I have no accounts at M1 or plans to set one up there at the moment, I was just mentioning this is a very cool and easy tool for those who are just starting out and don't have the capital yet to purchase full shares of ETF's as M1 allows partial share purchases with a minimum investment of $100 to get started. Even if one does have the capital, the M1 "one click" sets it up for you automatically with the proper percentages. That combined with the rebalance button really removes any complexity and - in my opinion - should also remove any fear of "too many moving parts" where one feels overwhelmed with being able to manage it all. Looks like the M1 platform takes care of all of that quite simply for the investor. One click to start. One click to rebalance. IMO - that is way cool.

If you click on the link within that M1 Finance page above that fits your needs (taxable vs. tax deferred; AA percentage from conservative to aggressive you will see the funds involved. I set my Merriman Ultimate B&H up at the start of 2017 in a pair of IRA accounts. Since my accounts are at Fidelity, I used the iShares version of the portfolio (iShares are commission free at Fidelity) and a good old fashioned spread sheet. I did a rebalance one year later in February of this year.

https://paulmerriman.com/fidelity-tax-d ... ortfolios/

Here is Paul's "Best in Class" update from February 2018 with ETF's (mix and match from various companies)

https://paulmerriman.com/best-in-class- ... portfolio/
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
JustinR
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Re: Thoughts on Paul Merriman's Portfolio

Post by JustinR »

Is the 10% REIT slice he recommends split into 5% US, 5% international?

Or all US?
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CyclingDuo
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Re: Thoughts on Paul Merriman's Portfolio

Post by CyclingDuo »

JustinR wrote: Mon May 28, 2018 9:27 pm Is the 10% REIT slice he recommends split into 5% US, 5% international?

Or all US?
Yes, if in tax deferred. 5% US, 5% international.

No, if in taxable.

Click on the various links to see the variances.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
JustinR
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Re: Thoughts on Paul Merriman's Portfolio

Post by JustinR »

CyclingDuo wrote: Mon May 28, 2018 9:41 pm
JustinR wrote: Mon May 28, 2018 9:27 pm Is the 10% REIT slice he recommends split into 5% US, 5% international?

Or all US?
Yes, if in tax deferred. 5% US, 5% international.

No, if in taxable.

Click on the various links to see the variances.
Where does he mention international REITs?

In the original paper, he doesn't break down the REIT category at all: https://thetaoofwealth.files.wordpress. ... y-2012.pdf

Is it just me or is the Merriman site really messy (no offense), and doesn't explain the portfolio well at all. The PDF above is still the best write up of it.
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CyclingDuo
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Re: Thoughts on Paul Merriman's Portfolio

Post by CyclingDuo »

JustinR wrote: Mon May 28, 2018 9:49 pm
CyclingDuo wrote: Mon May 28, 2018 9:41 pm
JustinR wrote: Mon May 28, 2018 9:27 pm Is the 10% REIT slice he recommends split into 5% US, 5% international?

Or all US?
Yes, if in tax deferred. 5% US, 5% international.

No, if in taxable.

Click on the various links to see the variances.
Where does he mention international REITs?

In the original paper, he doesn't break down the REIT category at all: https://thetaoofwealth.files.wordpress. ... y-2012.pdf

Is it just me or is the Merriman site really messy (no offense), and doesn't explain the portfolio well at all. The PDF above is still the best write up of it.
Maybe Paul will jump in and answer all of that. Or you could PM him or send him an email. Looks to me like he has simply updated that 2012 pdf you link as the version on his website from 2017 is the more current and available here: https://paulmerriman.com/the-ultimate-b ... tegy-2017/

I know at the end of 2016 when I was researching the portfolio for tax deferred, the 10% position in REITs was divided up with 5% going into FREL (Fidelity) and 5% into IFGL (iShares) for US and International coverage. Same if I had done it at Vanguard with 5% going to VNQ and 5% going to VNQI.

I don't find the website hard to navigate at all, so don't understand your comment. If you click on Mutual Funds, the 4 options of Vanguard, Fidelity, T.Rowe Price, and Schwab appear in the pull down menu with all of the funds needed for the portfolio at each firm. Sort of the Same in the ETF heading, but instead of clicking on anything in the pull down, just click on ETF and the link will show you each firm. Click on the firm of your choice, and all of the funds needed for the portfolio at Vanguard, Fidelity, Schwab, and Ameritrade appear.
"Save like a pessimist, invest like an optimist." - Morgan Housel | "Pick a bushel, save a peck!" - Grandpa
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