Thoughts on Paul Merriman's Portfolio
Thoughts on Paul Merriman's Portfolio
I know most folks here tout the 3 fund portfolio, but was looking for your thoughts on Paul Merriman's "The Ultimate Buy and Hold Strategy". I'm not a fan of the name, but the strategy is intriguing. http://paulmerriman.com/the-ultimate-bu ... tegy-2014/
Your thoughts?
Below you can see his fund selections and %.
Vanguard Tax Deferred Portfolios
Fund Symbol Aggressive Moderate Conservative
Vanguard 500 Index VFINX 11% 6% 4%
Vanguard Value Index VIVAX 11% 7% 5%
Vanguard Small Cap Index NAESX 11% 7% 4%
Vanguard Small Cap Value Index VISVX 12% 7% 5%
Vanguard REIT Index VGSIX 5% 3% 2%
Vanguard Developed Markets Index VDMIX 9% 6% 3%
Vanguard International Value VTRIX 18% 10% 7%
Vanguard FTSE All‐Wld ex‐US SmCp Index VFSVX 9% 5% 4%
Vanguard Emerging Mkts Stock Index VEIEX 9% 6% 4%
Vanguard Global Ex-U.S. Real Estate Index VGXRX 5% 3% 2%
Vanguard Short‐Term Treasury VFISX 0% 12% 18%
Vanguard Interm‐Term Treasury VFITX 0% 20% 30%
Vanguard Inflation‐Protected Secs VIPSX 0% 8% 12%
Vanguard Tax-Managed Portfolios
Fund Symbol Aggressive Moderate Conservative
Vanguard 500 Index VFINX 12% 7% 5%
Vanguard Value Index VIVAX 13% 8% 5%
Vanguard Small Cap Index NAESX 12% 7% 5%
Vanguard Small Cap Value Index VISVX 13% 8% 5%
Vanguard Developed Markets Index VDMIX 10% 6% 4%
Vanguard International Value VTRIX 20% 12% 8%
Vanguard FTSE All-World ex-US Small Cap Index VFSVX 10% 6% 4%
Vanguard Emerging Markets Index VEIEX 10% 6% 4%
Vanguard Intermediate Term US Treasuries VFITX 0% 6% 9%
Vanguard Limited Duration Tax-Exempt VMLTX 0% 16% 24%
Vanguard Intermediate Term Tax-Exempt VWITX 0% 18% 27%
Your thoughts?
Below you can see his fund selections and %.
Vanguard Tax Deferred Portfolios
Fund Symbol Aggressive Moderate Conservative
Vanguard 500 Index VFINX 11% 6% 4%
Vanguard Value Index VIVAX 11% 7% 5%
Vanguard Small Cap Index NAESX 11% 7% 4%
Vanguard Small Cap Value Index VISVX 12% 7% 5%
Vanguard REIT Index VGSIX 5% 3% 2%
Vanguard Developed Markets Index VDMIX 9% 6% 3%
Vanguard International Value VTRIX 18% 10% 7%
Vanguard FTSE All‐Wld ex‐US SmCp Index VFSVX 9% 5% 4%
Vanguard Emerging Mkts Stock Index VEIEX 9% 6% 4%
Vanguard Global Ex-U.S. Real Estate Index VGXRX 5% 3% 2%
Vanguard Short‐Term Treasury VFISX 0% 12% 18%
Vanguard Interm‐Term Treasury VFITX 0% 20% 30%
Vanguard Inflation‐Protected Secs VIPSX 0% 8% 12%
Vanguard Tax-Managed Portfolios
Fund Symbol Aggressive Moderate Conservative
Vanguard 500 Index VFINX 12% 7% 5%
Vanguard Value Index VIVAX 13% 8% 5%
Vanguard Small Cap Index NAESX 12% 7% 5%
Vanguard Small Cap Value Index VISVX 13% 8% 5%
Vanguard Developed Markets Index VDMIX 10% 6% 4%
Vanguard International Value VTRIX 20% 12% 8%
Vanguard FTSE All-World ex-US Small Cap Index VFSVX 10% 6% 4%
Vanguard Emerging Markets Index VEIEX 10% 6% 4%
Vanguard Intermediate Term US Treasuries VFITX 0% 6% 9%
Vanguard Limited Duration Tax-Exempt VMLTX 0% 16% 24%
Vanguard Intermediate Term Tax-Exempt VWITX 0% 18% 27%
Re: Thoughts on Paul Merriman's Portfolio
This kind of micromanagement has been the reason for DFA's core and vector funds.
Re: Thoughts on Paul Merriman's Portfolio
Too many moving parts.
Way too many moving parts for a guy with a simple mind, of his portfolios the ones that make some sense to me, again for a guy with a simple mind are the Vanguard Emergency Fund Portfolio and the Vanguard Monthly Income Portfolio.
Way too many moving parts for a guy with a simple mind, of his portfolios the ones that make some sense to me, again for a guy with a simple mind are the Vanguard Emergency Fund Portfolio and the Vanguard Monthly Income Portfolio.
~ Member of the Active Retired Force since 2014 ~
Re: Thoughts on Paul Merriman's Portfolio
A Merriman portfolio was the 'inspiration' for a very long and useful thread:
http://www.bogleheads.org/forum/viewtopic.php?t=38374
So lots of thoughts about it in that thread.
http://www.bogleheads.org/forum/viewtopic.php?t=38374
So lots of thoughts about it in that thread.
- SimpleGift
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Re: Thoughts on Paul Merriman's Portfolio
The most important decision that an investor makes in their lifetime is the basic stock/bond split. This one decision will ultimately determine one's long-term portfolio returns and risk profile. For many investors, this is enough! A simple portfolio of broadly diversified stocks and high-quality bonds is perfectly adequate and will provide most of the benefits of a more complex one.
Some further diversification, such as adding international and emerging market stocks or tilting to small cap value, may marginally increase expected returns and reduce portfolio volatility. But there's diminishing benefits to this slicing-and-dicing, I believe, as the complexity of portfolio management at some point outweighs the marginal risk/return advantages — a point that Merriman doesn't address in his portfolio recommendations.
Personally, I wish I'd kept things simpler early in my investing career.
Source: Paul Merriman
Some further diversification, such as adding international and emerging market stocks or tilting to small cap value, may marginally increase expected returns and reduce portfolio volatility. But there's diminishing benefits to this slicing-and-dicing, I believe, as the complexity of portfolio management at some point outweighs the marginal risk/return advantages — a point that Merriman doesn't address in his portfolio recommendations.
Personally, I wish I'd kept things simpler early in my investing career.
Source: Paul Merriman
Re: Thoughts on Paul Merriman's Portfolio
I agree that it is more complicated than the 3 fund portfolio, his study shows a far greater return as well.
Re: Thoughts on Paul Merriman's Portfolio
I like the Merriman portfolio, I have been implementing many of its elements since 2007. Mainly, I am small/value tilting.
You might choose something other than Vanguard for your Value funds, particularly for small value. I own the Vanguard Small Value Index ETF but it has been criticized for being too mid-cap and not having enough value stocks. Essentially Vanguard takes the indexes, cuts them in half, calls one value and the other growth. Not a bad approach, but there are better ways to capture the small and value premiums.
Another thing to consider is that the small/value tilts have performed well during the 2000's and until recently. The Large Growth stocks seem to have done better recently, particularly in 2014. The small/value tilting approach might be in for a stretch of underperformance.
You might choose something other than Vanguard for your Value funds, particularly for small value. I own the Vanguard Small Value Index ETF but it has been criticized for being too mid-cap and not having enough value stocks. Essentially Vanguard takes the indexes, cuts them in half, calls one value and the other growth. Not a bad approach, but there are better ways to capture the small and value premiums.
Another thing to consider is that the small/value tilts have performed well during the 2000's and until recently. The Large Growth stocks seem to have done better recently, particularly in 2014. The small/value tilting approach might be in for a stretch of underperformance.
A fool and his money are good for business.
- SimpleGift
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Re: Thoughts on Paul Merriman's Portfolio
You're missing an important disclaimer made in Merriman's fine print (quoted below). His study is simply illustrating the hypothetical effects of adding these less-than-perfectly correlated asset classes in years past — he's NOT showing the actual expected returns for these asset classes, that is, what an investor today might expect from investing in these asset classes. An important distinction!ababs wrote:I agree that it is more complicated than the 3 fund portfolio, his study shows a far greater return as well.
Paul Merriman wrote:This document contains hypothetical results. The data is based on transactions that were not made. Instead, the trades were simulated, based on knowledge that was available only after the fact and thus with the benefit of hindsight. There are tremendous limitations inherent in the use of hypothetical results as portrayed here and you should not assume that your investments will perform similarly or that you will not lose money.
I believe in the concepts presented here and use hypothetical data to educate investors. It should not be construed as actual performance nor should you expect your portfolio performance to replicate our hypothetical results.
Re: Thoughts on Paul Merriman's Portfolio
Of course,
The question is, what is the best risk-adjusted return?
I think, no one knows.
L.
The question is, what is the best risk-adjusted return?
I think, no one knows.
L.
You can get what you want, or you can just get old. (Billy Joel, "Vienna")
Re: Thoughts on Paul Merriman's Portfolio
You are absolutely right in what you say. His portfolio is based on a long history of known results and represents how his own family money is
invested. He shows how this combination of asset classes adds return with less standard deviation but he has said many times that the
future could and will most likely be different. He said that in his over 40 years in the business he was not able to develop a better
diversified strategy based on academic studies. Will the future be different...probably but with the diversity of asset classes
and equal distribution with lots of SCV and ISV you have a reasonable chance of investing success. Remember, he has sold
his business and is fully retired and has no financial gain in offering his solution.
He has invested his families money this way with the exception that he uses 50/50 stocks to bonds in his retirement to
reduce risk.
invested. He shows how this combination of asset classes adds return with less standard deviation but he has said many times that the
future could and will most likely be different. He said that in his over 40 years in the business he was not able to develop a better
diversified strategy based on academic studies. Will the future be different...probably but with the diversity of asset classes
and equal distribution with lots of SCV and ISV you have a reasonable chance of investing success. Remember, he has sold
his business and is fully retired and has no financial gain in offering his solution.
He has invested his families money this way with the exception that he uses 50/50 stocks to bonds in his retirement to
reduce risk.
Re: Thoughts on Paul Merriman's Portfolio
Thoughts on Paul Merriman's Portfolio
Re: Thoughts on Paul Merriman's Portfolio
I think his portfolio approach is just fine but it is a bit more complicated and hard to manage (rebalancing). If you want
to achieve similar results with almost the same diversification and just 4 funds you could look up the TREV H thread
and try his 4 fund method. Now if you just want simple, no fuss no muss, just do the 3fund portfolio or Rick
Ferri's 4 fund portfolio. It all just comes down to how much you want to be involved with your investment
future. Whatever you choose, stick with it through the ups and downs.
Good luck with your investing!
to achieve similar results with almost the same diversification and just 4 funds you could look up the TREV H thread
and try his 4 fund method. Now if you just want simple, no fuss no muss, just do the 3fund portfolio or Rick
Ferri's 4 fund portfolio. It all just comes down to how much you want to be involved with your investment
future. Whatever you choose, stick with it through the ups and downs.
Good luck with your investing!
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Re: Thoughts on Paul Merriman's Portfolio
Paul Merriman's portfolio is the perfect buy and hold investment strategy. The analysis that he provides on his website proves it.
I have first hand knowledge, having benefited from the results of this investment strategy myself.
I have first hand knowledge, having benefited from the results of this investment strategy myself.
Re: Thoughts on Paul Merriman's Portfolio
If you want to learn much more go to his website: http://paulmerriman.com/
He has brokerage portfolios based on his methods, and has looked at over 50
401k's to help investors pick the right mutual funds in their efforts to
design portfolios on his recommendations.
Good Luck with your investments.
He has brokerage portfolios based on his methods, and has looked at over 50
401k's to help investors pick the right mutual funds in their efforts to
design portfolios on his recommendations.
Good Luck with your investments.
Re: Thoughts on Paul Merriman's Portfolio
I've checked out Paul's website a few times and listened to a number of his podcasts. I agree with most of his suggestions, except the market timing piece. While his portfolio has had a good risk/return, I do think the number of funds he suggests is more then necessary. It is based on a sample portfolio developed by DFA (Dimensional Fund Advisors). It is similar to a portfolio suggested by IFA (Index Fund Advisors), which is also based on DFA. I talked to Paul on the phone and pointed out the Ultimate Buy and Hold - 8 slices vs 4 post. He said he would review that and address in an upcoming podcast. If he did I must have missed it.
My portfolio is similar to what Trev discusses. I think you can get the benefits of what Paul suggests with fewer moving parts.
My portfolio is similar to what Trev discusses. I think you can get the benefits of what Paul suggests with fewer moving parts.
Re: Thoughts on Paul Merriman's Portfolio
I agree with you... TREV H did some fine evaluation work back in 2009 and his UB&H 4 fund portfolio is quite nice.
Rebalance once or twice a year and stay the course and you should do just fine in the future wherever it leads us.
I think Paul does a great service for young and novice investors and offers sound advice on how to achieve
your investment goals. I don't follow his market timing ideas and He has said that it is not for most
investors. He has said that as he practices it, it does not add to his portfolio return but does
provide him with addition downside risk protection in his retirement years because he oversaved.
Rebalance once or twice a year and stay the course and you should do just fine in the future wherever it leads us.
I think Paul does a great service for young and novice investors and offers sound advice on how to achieve
your investment goals. I don't follow his market timing ideas and He has said that it is not for most
investors. He has said that as he practices it, it does not add to his portfolio return but does
provide him with addition downside risk protection in his retirement years because he oversaved.
Re: Thoughts on Paul Merriman's Portfolio
I think just the opposite. When you are younger to can handle more things at a time. As I'm getting older I'm starting to simplify. My portfolio use to be similar to Paul's suggestion. However as I age, and the % equity decreases and the % bonds increases, I think it is less useful to break the equity portion into so many parts. So while I'm in the glide path I'm reducing, and eliminating, certain asset classes that I think will not give me as much diversification.Simplegift wrote: Personally, I wish I'd kept things simpler early in my investing career.
- SimpleGift
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Re: Thoughts on Paul Merriman's Portfolio
Good point, Leif. I should have clarified that I started out with an all-taxable portfolio in the 1990s (from the sale of a business) — and now all the slice-and-dice parts of my taxable portfolio have large embedded capital gains that makes it impractical to sell them for simplification. In taxable accounts, one can get locked-in by the embedded capital gains over time and end up stuck with a complicated portfolio that one no longer desires.Leif wrote:I think just the opposite. When you are younger to can handle more things at a time. As I'm getting older I'm starting to simplify. The portfolio use to be similar to Paul's suggestion. However as I age, and the % equity decreases and the % bonds increases, I think it is less useful to break the equity portion into so many parts. So while I'm in the glide path I'm reducing, and eliminating, certain asset classes that I think will not give me as much diversification.Simplegift wrote: Personally, I wish I'd kept things simpler early in my investing career.
Last edited by SimpleGift on Sat Oct 18, 2014 3:28 pm, edited 1 time in total.
Re: Thoughts on Paul Merriman's Portfolio
I see no problem with your logic. I too have simplified my portfolio over the years but Paul has said on many ocasions that
young investors should have 80-90% of their money in stocks and hope that the market goes down bigtime so they can
buy more at the bottom. The problem is that young people don't seem to want complicated portfolios with
that many asset classes to manage. His goal is to get the young to just start the investment process and
achieve some success with it.
young investors should have 80-90% of their money in stocks and hope that the market goes down bigtime so they can
buy more at the bottom. The problem is that young people don't seem to want complicated portfolios with
that many asset classes to manage. His goal is to get the young to just start the investment process and
achieve some success with it.
Re: Thoughts on Paul Merriman's Portfolio
I have about 2/3 in tax preferred and 1/3 in taxable, so I guess I have the luxury of moving things around a bit more. Also, I had a very bountiful tax lost harvest in 2008-9, so I've been selling in taxable to move to CD in prep for retirement without a tax impact (except paying taxes on CD interest, however these days that is low).Simplegift wrote: Good point, Leif. I should have clarified that I started out with an all-taxable portfolio in the 1990s (from the sale of a business) — and now all the slice-and-dice parts of my taxable portfolio have large embedded capital gains that makes it impractical to sell them for simplification. In taxable accounts, one can get locked-in by the embedded capital gains over time and end up stuck with a complicated portfolio that one no longer desires.
However, given your case I would rather have a tilted portfolio to SV then say a 3 fund portfolio. That should do better in the long run IMO. I think the complexity issue is really overblown.
Re: Thoughts on Paul Merriman's Portfolio
The rick adjusted return over the past 50 yrs is impressive.
Re: Thoughts on Paul Merriman's Portfolio
This is what I use. I don't find it complicated as I don't rebalance often, and I only have a 401k plus two Roths to work with. Also, the rest of my financial life is extremely simple-- one checking account shared with my husband, one credit card. So the greater number of funds, to me, is no big deal.
The advantage is the diversification, and the lower standard deviation compared to some other portfolio designs I looked at. It has a moderate tilt to small and value, in both domestic and international, but not so extreme that the tracking error bothers me. I pair this design with Treasuries and Stable Value, so it's not too volatile. In the recent correction, I never got close to hitting my band.
One last thing-- this design has removed my urge to fiddle with the portfolio, because there really aren't any more stock asset classes I can add. I feel I have spread my bets across the board, in a logical way, and that gives me more confidence.
The advantage is the diversification, and the lower standard deviation compared to some other portfolio designs I looked at. It has a moderate tilt to small and value, in both domestic and international, but not so extreme that the tracking error bothers me. I pair this design with Treasuries and Stable Value, so it's not too volatile. In the recent correction, I never got close to hitting my band.
One last thing-- this design has removed my urge to fiddle with the portfolio, because there really aren't any more stock asset classes I can add. I feel I have spread my bets across the board, in a logical way, and that gives me more confidence.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
Re: Thoughts on Paul Merriman's Portfolio
The 2 portfolios shown at the top of the post have 11 and 13 stocks. That seems like such a pain compared to a 2 or 3 funds portfolio.
And the Merriman portfolios have specific percentages so rebalancing these must be a time consuming task with I presume tax consequences. I cannot imagine doing that for any possible, POSSIBLE, incremental return. As an aside, 2hy do we actually think that Paul Merriman knows anything more about the value of assets than the rest of the world does?
And the Merriman portfolios have specific percentages so rebalancing these must be a time consuming task with I presume tax consequences. I cannot imagine doing that for any possible, POSSIBLE, incremental return. As an aside, 2hy do we actually think that Paul Merriman knows anything more about the value of assets than the rest of the world does?
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Re: Thoughts on Paul Merriman's Portfolio
I used to have the Ultimate Buy and Hold portfolio, but have since consolidated down to the 3 fund. Both are great portfolios and will get you to where you need to be. Main reason I switched was because of the ease of rebalancing between accounts. Also, this is easier for my wife to maintain.
Re: Thoughts on Paul Merriman's Portfolio
I think they are over complicating what can be achieved at lower cost with less complexity. There seems to be some incessant desire for people to create portfolios to tinker with, as if their tinkering actually creates something of value. Since more and more people are eschewing actually owning individual stocks, these "asset class" allocation strategies give people something to play with with and talk about, and the finance industry unique products to market. As long as people don't pay too much for them, and keep their emotions in check so that they're not constantly performance chasing and switching strategies at what might be the wrong time, they're probably not harmful.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
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Re: Thoughts on Paul Merriman's Portfolio
I like Paul Merriman, but it seems like you would possibly have to hire him in order to manage those portfolios.
Re: Thoughts on Paul Merriman's Portfolio
If you do annual rebalancing it should take you about an hour to do it each year if you set up a spreadsheet.
If that's too much just do the 3 fund portfolio and let it ride. Actually, unless the year is volatile and several
funds go over the bands, it should only take about 30 minutes to find out how much to move and then
a few minutes to execute the trades.
Easy peasy...lemon squeezy.
Good Luck with your investments.
If that's too much just do the 3 fund portfolio and let it ride. Actually, unless the year is volatile and several
funds go over the bands, it should only take about 30 minutes to find out how much to move and then
a few minutes to execute the trades.
Easy peasy...lemon squeezy.
Good Luck with your investments.
Re: Thoughts on Paul Merriman's Portfolio
I agree. Anyone capable of 4 function math should be able to handle it once a year. Be it 3 funds or 10.LittleD wrote:If you do annual rebalancing it should take you about an hour to do it each year if you set up a spreadsheet.
If that's too much just do the 3 fund portfolio and let it ride. Actually, unless the year is volatile and several
funds go over the bands, it should only take about 30 minutes to find out how much to move and then
a few minutes to execute the trades.
Re: Thoughts on Paul Merriman's Portfolio
I don't see the issue as whether or not people can go through the motions of allocating and rebalancing such portfolios, it's whether or not there is any benefit for doing so. You make your bets, and you takes your chances...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
Re: Thoughts on Paul Merriman's Portfolio
The data from his article shows much more an an incremental increase in return. Of course, it doesn't compare the return vs the 3 fund portfolio over the same period of time, so it's difficult to compare. If the return from the 3 fund port, was even remotely close, I would much prefer that.
Re: Thoughts on Paul Merriman's Portfolio
Even 1/2 of 1% additional return compounded over 30-40 years is a substantial amount
of money in the thousands of dollars. It might make the difference in quality of life
in retirement. Wouldn't it be nice to bank this additional return while experiencing
less risk (volatility) over those years. Just saying.
Good Luck with your investing.
of money in the thousands of dollars. It might make the difference in quality of life
in retirement. Wouldn't it be nice to bank this additional return while experiencing
less risk (volatility) over those years. Just saying.
Good Luck with your investing.
Re: Thoughts on Paul Merriman's Portfolio
I own the tax-managed version of that in a taxable account at Vanguard, stocks only so eight funds in all. I rebalance occasionally with new money and haven't noticed any difficulties in doing that. The slices are mostly equal so you don't even need a spreadsheet. If I had it to do over I'd probably put the international portion in VTIAX instead, for the lower expenses.
The approach he takes to bonds is intriguing: 50% intermediate Treasuries, 30% short term Treasuries and 20% in TIPS. It's not an option for me in my 401K plans, but I might try it in the future.
The approach he takes to bonds is intriguing: 50% intermediate Treasuries, 30% short term Treasuries and 20% in TIPS. It's not an option for me in my 401K plans, but I might try it in the future.
Re: Thoughts on Paul Merriman's Portfolio
Yes, he does stick to mostly non-volatile bonds because he feels you take enough
risk on the stock side and bonds are there to provide safety, liquidity & dry
powder in case of a market debacle. The % of bonds is a personal decision based
on a person's risk tollerance and their ability to withstand major market declines
of 25-50% in a lifetime.
Good Luck with your investing...
risk on the stock side and bonds are there to provide safety, liquidity & dry
powder in case of a market debacle. The % of bonds is a personal decision based
on a person's risk tollerance and their ability to withstand major market declines
of 25-50% in a lifetime.
Good Luck with your investing...
Re: Thoughts on Paul Merriman's Portfolio
Calm Man wrote:The 2 portfolios shown at the top of the post have 11 and 13 stocks. That seems like such a pain compared to a 2 or 3 funds portfolio.
And the Merriman portfolios have specific percentages so rebalancing these must be a time consuming task with I presume tax consequences. I cannot imagine doing that for any possible, POSSIBLE, incremental return. As an aside, 2hy do we actually think that Paul Merriman knows anything more about the value of assets than the rest of the world does?
Paul answered a question similar to yours in his Ask Paul section of his website. He clearly states that he doesn't know anything about the future
but with a diversity of asset classes, he feels he can participate whichever way the stock winds blow.
http://paulmerriman.com/2014-new-site/q-massive-losses/
Re: Thoughts on Paul Merriman's Portfolio
It is very hard to perfectly rebalance to get those gains.ababs wrote:I agree that it is more complicated than the 3 fund portfolio, his study shows a far greater return as well.
Re: Thoughts on Paul Merriman's Portfolio
I use his plan with 7 different asset classes.
As our retirement plans grows it's getting more complicated to rebalance across funds with new money.
For instance, 2 classes are now 3% under target but they're in my wife's Roth which is maxed for the year and nothing's over percentage in her Roth, so I'm adding to my Roth classes that are already over and will catch hers up in early 2015.
As we consider opening a taxable after our mortgage is paid off in a couple of months it will only get more complicated.
As our retirement plans grows it's getting more complicated to rebalance across funds with new money.
For instance, 2 classes are now 3% under target but they're in my wife's Roth which is maxed for the year and nothing's over percentage in her Roth, so I'm adding to my Roth classes that are already over and will catch hers up in early 2015.
As we consider opening a taxable after our mortgage is paid off in a couple of months it will only get more complicated.
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Re: Thoughts on Paul Merriman's Portfolio
I use the Ultimate Buy and Hold (Schwab ETF recommendations) in my IRA and I am happy with it.
Complicated to rebalance? I guess compared to the 5 funds I'd have if I tried to copy a 3 fund using Schwab EFT's, then yes it is.
I liquidated some individual stocks over the summer and have been adding cash every 2 weeks. Using an excel spread sheet
it takes me maybe 10-15 minutes, (or less). I update my current shares on the spread sheet (I dividend reinvest), Google finance automatically updates the price per share information,
I input my dollar amount and I am told how many shares to buy/sell. I enter my orders on Schwab Streetsmart Edge and walk away.
I wish taxes were this easy.
Complicated to rebalance? I guess compared to the 5 funds I'd have if I tried to copy a 3 fund using Schwab EFT's, then yes it is.
I liquidated some individual stocks over the summer and have been adding cash every 2 weeks. Using an excel spread sheet
it takes me maybe 10-15 minutes, (or less). I update my current shares on the spread sheet (I dividend reinvest), Google finance automatically updates the price per share information,
I input my dollar amount and I am told how many shares to buy/sell. I enter my orders on Schwab Streetsmart Edge and walk away.
I wish taxes were this easy.
Re: Thoughts on Paul Merriman's Portfolio
I am a big fan of Paul Merriman and I have used a lot of his suggestions in constructing my portfolio. The case for small/value tilting was pretty compelling to me. The way I look at it is that small/value tilting won't hurt anything. I am unaware of any research that says that large beats small or that growth beats value over long periods of time. If my tilts only achieve market performance then I have lost nothing. If I squeeze an extra 1% a year in performance over time, I will be absolutely ecstatic. An extra 1% would mean a whole lot in retirement.
A fool and his money are good for business.
Re: Thoughts on Paul Merriman's Portfolio
Using all Treasuries is a fairly common recommendation here, but one is still left with deciding on durations and how much to allocate to TIPS. I'm not an expert but Merriman's recommendations seem sensible. Using 100% intermediate Treasuries also shows up from time to time.LittleD wrote:Yes, he does stick to mostly non-volatile bonds because he feels you take enough
risk on the stock side and bonds are there to provide safety, liquidity & dry
powder in case of a market debacle. The % of bonds is a personal decision based
on a person's risk tollerance and their ability to withstand major market declines
of 25-50% in a lifetime.
Good Luck with your investing...
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Re: Thoughts on Paul Merriman's Portfolio
I have read a lot about Paul Merriman's Portfolio, and thought of using it myself, but decided not to do so, due to the complexity of rebalancing. See my topic and more discussions here: viewtopic.php?f=1&t=244151 .
However, now that there is a commission-free M1Finance tool, which allows you to percentage of portfolios and easy rebalancing with ETFs, what exactly is the argument against Paul Merriman's ETF Portfolio? See the gains here: https://paulmerriman.com/wp-content/upl ... Update.pdf . If you held All-value stock portfolio of Paul Merriman for the last 48 years, the returns would be 3.5 times higher than that of S&P500. Annualized return rate is 13.5%, as opposed 10.5% of S&P500.
I already have a 3-fund portfolio of index funds in Vanguard, and a 3-fund ETF portfolio in M1Finance (VTI / VXUS / VTEB). Now that I'm reading more about the combination of Paul Merriman portfolio and M1Finance, I'm still leaning towards his portfolio, but I hesitate to do the move because of all that is written here, mostly about the difficulty of rebalancing, and expense ratio of funds in the portfolio. What is left as the negative side of Paul Merriman portfolio, before I can decide whether to go into this portfolio or not?
However, now that there is a commission-free M1Finance tool, which allows you to percentage of portfolios and easy rebalancing with ETFs, what exactly is the argument against Paul Merriman's ETF Portfolio? See the gains here: https://paulmerriman.com/wp-content/upl ... Update.pdf . If you held All-value stock portfolio of Paul Merriman for the last 48 years, the returns would be 3.5 times higher than that of S&P500. Annualized return rate is 13.5%, as opposed 10.5% of S&P500.
I already have a 3-fund portfolio of index funds in Vanguard, and a 3-fund ETF portfolio in M1Finance (VTI / VXUS / VTEB). Now that I'm reading more about the combination of Paul Merriman portfolio and M1Finance, I'm still leaning towards his portfolio, but I hesitate to do the move because of all that is written here, mostly about the difficulty of rebalancing, and expense ratio of funds in the portfolio. What is left as the negative side of Paul Merriman portfolio, before I can decide whether to go into this portfolio or not?
Re: Thoughts on Paul Merriman's Portfolio
Paul is The Man with the investment plans! I’m good with it, but now have just 6 stock index funds in the taxable folio along with 3 tax exempt bond funds and a Prime MM that I am loading up on for @1.87% yield. Plus 4 bond funds in the T IRA. Works well and am averaging 6.7% annual return says Vanguard. All of that for just an 0.09% ER. Can’t beat it in my average guy kind of investing...capacity.
SeeMoe..
SeeMoe..
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
- willthrill81
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Re: Thoughts on Paul Merriman's Portfolio
The ending balance may have been 3.5x more, but the returns were absolutely not 3.5x more.ThisJustIn wrote: ↑Thu May 24, 2018 7:27 pmIf you held All-value stock portfolio of Paul Merriman for the last 48 years, the returns would be 3.5 times higher than that of S&P500. Annualized return rate is 13.5%, as opposed 10.5% of S&P500.
A big question is whether the value and small cap value premiums will continue to persist going forward. But SCV has had higher returns than the S&P 500 in every 20 year period on record save one, and I doubt that that will change going forward. Even here, there is enough skepticism about it that I think it won't be arbitraged away.ThisJustIn wrote: ↑Thu May 24, 2018 7:27 pmWhat is left as the negative side of Paul Merriman portfolio, before I can decide whether to go into this portfolio or not?
The bigger question is whether you are sure enough that you can stick with this portfolio through thick and thin for a long-term period. Merriman's portfolio is going to have periods in the future where it will underperform the broad market; I guarantee it. Will you be able to tolerate such underperformance? For how long? A decade?
The Sensible Steward
Re: Thoughts on Paul Merriman's Portfolio
I discovered Merriman a few years ago and converted what had been a jumbled mess of a portfolio into a modified version of his Ultimate. I regard him as the sensei who (belatedly) taught me how to invest properly, meaning Boglehead-style stay-the-course, buy-and-hold investing - not necessarily just slice-and-dice.
I'm still tinkering with my own asset class percentages because I had a substantial "legacy" position in SCV that I'm now very gradually dialing-back.
It is a bit more complicated, but I enjoy that at this stage of my investing career just a few years out from retirement. One downside is the temptation to "peek" at how the different asset classes move against each other from day to day, which I find endlessly fascinating.
When I reach an age where this is no longer easy and fun I'll probably transition gradually to something simpler - or pay someone to manage it for me.
~~~~~~~~~~~
It's curious that every time Merriman comes up there are individuals who rush to point out that past performance in the various asset classes is no guarantee of future success - as if that does not apply equally to every system that is not Paul Merriman's! What's with that?
(I'll guess: It's a response the enthusiasm expressed by Merriman fans. Fair enough.)
~~~~~~~~~
60/40 stocks/short term bond fund, 60/40 US/International
The first two below are target percentages and the others are actual:
S&P 500/TSM - 20%
SCV -20%
LCV -10%
REITs - 10%
ISCV - 8%
ISC - 8%
EM - 8%
VFWAX - 12% (All-World ex-US)
I'm still tinkering with my own asset class percentages because I had a substantial "legacy" position in SCV that I'm now very gradually dialing-back.
It is a bit more complicated, but I enjoy that at this stage of my investing career just a few years out from retirement. One downside is the temptation to "peek" at how the different asset classes move against each other from day to day, which I find endlessly fascinating.
When I reach an age where this is no longer easy and fun I'll probably transition gradually to something simpler - or pay someone to manage it for me.
~~~~~~~~~~~
It's curious that every time Merriman comes up there are individuals who rush to point out that past performance in the various asset classes is no guarantee of future success - as if that does not apply equally to every system that is not Paul Merriman's! What's with that?
(I'll guess: It's a response the enthusiasm expressed by Merriman fans. Fair enough.)
~~~~~~~~~
60/40 stocks/short term bond fund, 60/40 US/International
The first two below are target percentages and the others are actual:
S&P 500/TSM - 20%
SCV -20%
LCV -10%
REITs - 10%
ISCV - 8%
ISC - 8%
EM - 8%
VFWAX - 12% (All-World ex-US)
"I know nothing."
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Re: Thoughts on Paul Merriman's Portfolio
I 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.ThisJustIn wrote: ↑Thu May 24, 2018 7:27 pm I have read a lot about Paul Merriman's Portfolio, and thought of using it myself, but decided not to do so, due to the complexity of rebalancing.
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Re: Thoughts on Paul Merriman's Portfolio
I started my investing career 5 years ago approximating his ultimate buy and hold as well as I could with Vanguard ETFs in my Roth IRA.
Eventually I found it frustrating to have leftover money from ETFs (can only buy whole shares of ETFs except on dividend reinvestments), as well as the difficulty of keeping my allocations approximately correct when buying whole shares only. Mind you back then I was investing my summer internship savings, so it wasn't exactly like I was working with large enough sums of money to instead buy the index fund versions of these ETFs (much less the admiral class versions to get to the similarly low expense ratios the ETFs had!).
So I started simplifying, first by looking at that long Trev H thread on 4 vs 8 slices. I simplified my US equity tilt to just TSM + SCV rather than LCB( SP500)+LCV+SCB+SCV. Incidentally this also let me pick up the mid cap stocks in TSM which were too small for LCB/LCV and too big for SCB/SCV. It didn't hurt that I also got around to reading the Mel's Unloved Midcaps thread.
For 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.
My EM+REIT tilts are untouched though (10%EM, 5% REIT). They have lower correlation with TSM and TISM than SCV or international small cap, so I consider these my most important tilts for the purpose of diversification.
For SCV... I retain some tilt despite large reservations about future outperformance. I know in the common backtest periods that BHers use it outperforms (see aforementioned Trev H thread). However it is very correlated with US TSM, and if the SCV sector outperformance is so well known and established (blah blah Fama French blah blah) then I would not be surprised if it's been priced at a premium since it has become common knowledge, that price premium wiping out much of the expected outperformance.
In a nutshell I went from roughly 9-10 equity ETFs approximating Merriman's UBH to TSM+TISM admiral index funds as well as SCV+EM+REIT ETFs. My performance over the backtest periods I have looked at is quite similar, and it's a heckuva lot easier to manage!
TL;DR: I think Merriman's portfolio is too complicated and has too many moving parts. Many of his tilts can be simplified to holding fewer funds (i.e. 4 slices vs 8 slices TrevH), which should simplify rebalancing. Which then implies that you are holding a large bundle of highly correlated assets which can be approximated by a smaller bundle of highly correlated assets (eg. LCB+LCV+SCB+SCV vs. LCB+SCV).
Eventually I found it frustrating to have leftover money from ETFs (can only buy whole shares of ETFs except on dividend reinvestments), as well as the difficulty of keeping my allocations approximately correct when buying whole shares only. Mind you back then I was investing my summer internship savings, so it wasn't exactly like I was working with large enough sums of money to instead buy the index fund versions of these ETFs (much less the admiral class versions to get to the similarly low expense ratios the ETFs had!).
So I started simplifying, first by looking at that long Trev H thread on 4 vs 8 slices. I simplified my US equity tilt to just TSM + SCV rather than LCB( SP500)+LCV+SCB+SCV. Incidentally this also let me pick up the mid cap stocks in TSM which were too small for LCB/LCV and too big for SCB/SCV. It didn't hurt that I also got around to reading the Mel's Unloved Midcaps thread.
For 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.
My EM+REIT tilts are untouched though (10%EM, 5% REIT). They have lower correlation with TSM and TISM than SCV or international small cap, so I consider these my most important tilts for the purpose of diversification.
For SCV... I retain some tilt despite large reservations about future outperformance. I know in the common backtest periods that BHers use it outperforms (see aforementioned Trev H thread). However it is very correlated with US TSM, and if the SCV sector outperformance is so well known and established (blah blah Fama French blah blah) then I would not be surprised if it's been priced at a premium since it has become common knowledge, that price premium wiping out much of the expected outperformance.
In a nutshell I went from roughly 9-10 equity ETFs approximating Merriman's UBH to TSM+TISM admiral index funds as well as SCV+EM+REIT ETFs. My performance over the backtest periods I have looked at is quite similar, and it's a heckuva lot easier to manage!
TL;DR: I think Merriman's portfolio is too complicated and has too many moving parts. Many of his tilts can be simplified to holding fewer funds (i.e. 4 slices vs 8 slices TrevH), which should simplify rebalancing. Which then implies that you are holding a large bundle of highly correlated assets which can be approximated by a smaller bundle of highly correlated assets (eg. LCB+LCV+SCB+SCV vs. LCB+SCV).
Re: Thoughts on Paul Merriman's Portfolio
This is what I learned from TrevH famous thread. I ended up with a bit different, however. TSM, SV, REIT, ISV, EMV, and EAFE. This is because I had access to DFA funds for the SV, ISV, and EMV. Simple is good, but I think way over promoted here by some. If you can find your way around a spreadsheet then rebalancing is not an issue. Even if you don't know spreadsheets, the math is not very complex. Rebalancing once a year is enough.EngineerEd wrote: ↑Fri May 25, 2018 1:49 pm TL;DR: I think Merriman's portfolio is too complicated and has too many moving parts.
If is called Merriman's portfolio, but really it is the DFA portfolio. It is based on a sample portfolio they provided to advisors authorized to use their funds.
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Re: Thoughts on Paul Merriman's Portfolio
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.Leif wrote: ↑Fri May 25, 2018 3:22 pmThis is what I learned from TrevH famous thread. I ended up with a bit different, however. TSM, SV, REIT, ISV, EMV, and EAFE. This is because I had access to DFA funds for the SV, ISV, and EMV. Simple is good, but I think way over promoted here by some. If you can find your way around a spreadsheet then rebalancing is not an issue. Even if you don't know spreadsheets, the math is not very complex. Rebalancing once a year is enough.EngineerEd wrote: ↑Fri May 25, 2018 1:49 pm TL;DR: I think Merriman's portfolio is too complicated and has too many moving parts.
If is called Merriman's portfolio, but really it is the DFA portfolio. It is based on a sample portfolio they provided to advisors authorized to use their funds.
- Taylor Larimore
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Re: Thoughts on Paul Merriman's Portfolio
zadie:
Not according to Market Watch.
The winning portfolio is the Second Grader's Three-Fund Portfolio.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Thoughts on Paul Merriman's Portfolio
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 portoflio is 10% bonds.Taylor Larimore wrote: ↑Sat May 26, 2018 8:44 pmzadie:
Not according to Market Watch.
The winning portfolio is the Second Grader's Three-Fund Portfolio.
Best wishes.
Taylor
- willthrill81
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Re: Thoughts on Paul Merriman's Portfolio
He's been told that more times than I can count using both my fingers and toes.Jags4186 wrote: ↑Sat May 26, 2018 9:08 pmTaylor 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 portoflio is 10% bonds.Taylor Larimore wrote: ↑Sat May 26, 2018 8:44 pmzadie:
Not according to Market Watch.
The winning portfolio is the Second Grader's Three-Fund Portfolio.
Best wishes.
Taylor
Further, a single 10 year period is far too inadequate to properly judge the results of any portfolio.
The Sensible Steward