Merriman buy and hold strategy

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Gemini
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Merriman buy and hold strategy

Post by Gemini » Thu Feb 25, 2016 10:27 pm

http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?

livesoft
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Re: Merriman buy and hold strategy

Post by livesoft » Thu Feb 25, 2016 10:30 pm

Here you go: viewtopic.php?t=38374
Very long thread on the subject, so please enjoy reading.

Wait a minute … you've been a forum member since 2012, so you must've already read it. My apologies, sorry!
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Re: Merriman buy and hold strategy

Post by retiredjg » Fri Feb 26, 2016 8:32 am

I think Merriman's idea would be fine if there were no such things as tax-efficiency or limited fund choices in a person's work plan. Since these things do exist, I don't think Merriman's idea is useful to many people.

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Re: Merriman buy and hold strategy

Post by garlandwhizzer » Fri Feb 26, 2016 12:54 pm

Frankly I think it's too complicated, 10% allocation to each of 10 funds. Taking withdrawals during the retirement phase or adding regular monthly or yearly contributions during the accumulation phase would be complex, lots of buying and selling, as would rebalancing 10 assets as one goes up and another goes down. Having 10 separate funds on the equity side alone may work well in backtesting but is all that complexity worth it? Executing such a strategy with narrow rebalancing bands and/or frequent withdrawals or contributions might be like having a part time job.

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Leif
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Re: Merriman buy and hold strategy

Post by Leif » Fri Feb 26, 2016 8:02 pm

The link pointed to by livesoft, Ultimate Buy and Hold - 8 slices vs 4, shows how you can get similar results to Merriman's portfolio, with fewer funds. I think Garland overstates the work involved, but in any case the 4 slice portfolio makes that easier. You don't need to read all 14 pages. The first couple will give you the idea. I like it since it gives asset class diversification, or as Larry says factor investing.

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privatefarmer
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Re: Merriman buy and hold strategy

Post by privatefarmer » Fri Feb 26, 2016 8:22 pm

Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
there was an interesting thread on there the other day discussing mid cap returns vs small/large cap. i follow merriman's portfolio however if one wanted to simplify it one could probably just invest in equal parts of mid cap blend and mid cap value and get roughly the same return as LCB/LCV/SCB/SCV.

I dont find paul's portfolio to be too complex, however. 10 asset classes, maybe takes an hour or two/year to rebalance. most of the time the asset classes go up/down together so there's really not much diversion. over long periods of time, however, historically speaking his portfolio has done much better than just putting everything into the s/p 500.

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CyclingDuo
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Re: Merriman buy and hold strategy

Post by CyclingDuo » Tue Feb 14, 2017 7:06 pm

Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
That was pretty interesting. Especially interesting to me after having been exposed to a DFA presentation by advisors.

It's also mentioned on the The White Coat Investor blog: http://whitecoatinvestor.com/150-portfo ... han-yours/

For those who may happen to have a brokerage account at Fidelity, you can buy the iShares version commission free. Mr. Merriman has the Ultimate Buy & Hold portfolio on his site, and calls it the Fidelity Tax Deferred ETF Portfolio...

http://paulmerriman.com/fidelity-tax-de ... ortfolios/

ETF Name/Symbol/(ER)

iShares Core S&P 500 IVV (ER .04)
iShares Core US Value IUSV (ER .05)
iShares Core S&P Small-Cap IJR (ER .07)
Russell Micro-Cap IWC (ER .6)
iShares S&P SmCp 600 Value IJS (ER .25)
Fidelity MSCI Real Estate FREL (ER .084)
iShares Core MSCI EAFE IEFA (ER .08)
iShares DJ Intl Select Div IDV (ER .5)
iShares MSCI EAFE SmCap SCZ (ER .4)
iShares FTSE Real Estate ex-US IFGL (ER .48)
iShares Core MSCI EmMarkets IEMG (ER .14)
iShares MSCI Emerging Markets Small-Cap EEMS (ER .71)
iShares Barclays S-T Treasury SHY (ER .15)
iShares Barclays 7-10 Yr Treasury IEF (ER .15)
iShares Barclays 0-5 TIPS STIP (ER .1)

Of course, that link also suggests percentages based on individual investor risk profiles to suggest three versions: aggressive, moderate, and conservative.

The complexity issue is always raised in various threads. For those who have in prior investing years had a diverse basket of 10 or more individual stocks - managing a portfolio of ETF's around the same number shouldn't be too different to manage.

His podcast is here which I listened to as a follow up after reading the article linked above.

http://paulmerriman.com/the-ultimate-bu ... olio-2016/
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Re: Merriman buy and hold strategy

Post by groovy9 » Tue Feb 14, 2017 7:53 pm

CyclingDuo wrote:
Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/
Thoughts? How does it compare to what is recommended here?
That was pretty interesting. Especially interesting to me after having been exposed to a DFA presentation by advisors.
I'm somewhat at a loss as to why most people here and elsewhere default to the S&P500 as a core holding to build on. It does nothing particularly well. People really only want two things: high returns and low volatility. S&P500 doesn't accomplish either.

Seems to me that the core of your portfolio should be things like small cap value stocks or treasuries, which you then diversify in order to get the volatility or returns you need, respectively.

To me, that's the beauty of the Larry Portfolio, for example. It has a laser focus on what you really want and cuts out the crap that doesn't help you get it.

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Re: Merriman buy and hold strategy

Post by CyclingDuo » Tue Feb 14, 2017 8:24 pm

groovy9 wrote:
CyclingDuo wrote:
Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/
Thoughts? How does it compare to what is recommended here?
That was pretty interesting. Especially interesting to me after having been exposed to a DFA presentation by advisors.
I'm somewhat at a loss as to why most people here and elsewhere default to the S&P500 as a core holding to build on. It does nothing particularly well. People really only want two things: high returns and low volatility. S&P500 doesn't accomplish either.

Seems to me that the core of your portfolio should be things like small cap value stocks or treasuries, which you then diversify in order to get the volatility or returns you need, respectively.

To me, that's the beauty of the Larry Portfolio, for example. It has a laser focus on what you really want and cuts out the crap that doesn't help you get it.
It's a big investing world out there, and as many have said - "there is more than one way to skin a cat". :D
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Re: Merriman buy and hold strategy

Post by willthrill81 » Tue Feb 14, 2017 8:42 pm

Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
I think that it's certainly not a bad investment strategy at all, though I think that it's weighted too heavily in international equities. Merriman likes 50/50, but, like John Bogle, I think that's far too high. Considering that the majority of international equities are companies from Japan, the U.K., and France, I don't think that developed markets, at the least, give you much added diversification.

I actually prefer his 'all value' portfolio: LCV and SCV, to which you could add international value if you so desired. You can then add in however many bonds you need to reach your desired AA. As far as simple goes, I don't think that you can beat that unless you get a target date fund.
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Re: Merriman buy and hold strategy

Post by heyyou » Wed Feb 15, 2017 7:22 pm

To reiterate what livesoft suggested above, his link is to Trev H's four fund Vanguard (VG) version of 8 of the 10 parts of the Merriman portfolio. The remaining two slices are Emerging Markets and REITs, also available at VG.

Trev H's four funds are domestic LB, SV, and foreign ILV, ISB, all available at VG.
LB large blend
SV small value
ILV international large value
ISB international small blend

Other research that supports Merriman's numerous equal slices is at Michael McClung's Living Off Your Money and McClung uses VG funds where he can.
Slice and dice is for those who are trying to capitalize on Fama and French research from the 1990s.

If total market funds are what suits you, then by all means, use them. As Taylor Larimore sagely notes, "there are many roads to Dublin."

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CyclingDuo
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Re: Merriman buy and hold strategy

Post by CyclingDuo » Thu Feb 16, 2017 9:25 am

heyyou wrote:To reiterate what livesoft suggested above, his link is to Trev H's four fund Vanguard (VG) version of 8 of the 10 parts of the Merriman portfolio. The remaining two slices are Emerging Markets and REITs, also available at VG.

Trev H's four funds are domestic LB, SV, and foreign ILV, ISB, all available at VG.
LB large blend
SV small value
ILV international large value
ISB international small blend

Other research that supports Merriman's numerous equal slices is at Michael McClung's Living Off Your Money and McClung uses VG funds where he can.
Slice and dice is for those who are trying to capitalize on Fama and French research from the 1990s.

If total market funds are what suits you, then by all means, use them. As Taylor Larimore sagely notes, "there are many roads to Dublin."
Yes, there are many routes in terms of the diversity used to reach "Dublin". Opening up the hood to see what is under each of them is an interesting exercise. It has been fun reading all of the threads here at BH ranging from the Three Fund Portfolio (2nd Grader's Portfolio) to the Fama French portfolios. Ditto on reading the Oblivious Investor's Blog, The White Coat Investor's Blog, and Paul Merriman's Blog (and his podcasts). A lot of great information and help for those interested in the DIY approach.
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Re: Merriman buy and hold strategy

Post by nedsaid » Thu Feb 16, 2017 10:12 am

I think Merriman has a sound approach, it is pretty much small/value tilting, adding REITs, and having a large allocation to International Stocks. My concern is similar to Garland's, pretty much the pizza is sliced into a lot of pieces and perhaps a simpler portfolio like the Coffeehouse portfolio would work just as well. It isn't enough anymore to have International Small-Cap, you have to have Emerging Markets Small Value. Getting to be too many asset classes and sub-classes.
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Re: Merriman buy and hold strategy

Post by heyyou » Thu Feb 16, 2017 11:33 am

Executing such a strategy with narrow rebalancing bands and/or frequent withdrawals or contributions might be like having a part time job.
Frequent contributions would imply smaller ones. Putting each small one into whatever was down the most would be simple since the allocation slices are equal sized. Would that take much longer than choosing between the stock fund or the bond fund choices? Perhaps the saver could wait, then contribute when two contributions were acquired, to reduce the time spent by half.

The saver could contribute regularly into a balanced fund, then annually move into the slice and dice allocation. That might suit someone who is not spreadsheet literate.

When my first employer opened the 401k in the 1980s, quarterly contributions of weekly pay deductions, and snail mail account activity reports were the norm. Somehow it still worked out, even if my assets today are a fraction of 90 days of growth, less than what they would be using current methods.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Thu Feb 16, 2017 12:39 pm

nedsaid wrote:I think Merriman has a sound approach, it is pretty much small/value tilting, adding REITs, and having a large allocation to International Stocks. My concern is similar to Garland's, pretty much the pizza is sliced into a lot of pieces and perhaps a simpler portfolio like the Coffeehouse portfolio would work just as well. It isn't enough anymore to have International Small-Cap, you have to have Emerging Markets Small Value. Getting to be too many asset classes and sub-classes.
I'm not sure that it's really too many asset classes. Most Bogleheads like diversification, and while Merriman's portfolio has many pieces, it's definitely tilted strongly toward small and value. Only LCB, EM, and REITs don't have at least one of those aspects.
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Re: Merriman buy and hold strategy

Post by CyclingDuo » Thu Feb 16, 2017 2:01 pm

willthrill81 wrote:I'm not sure that it's really too many asset classes. Most Bogleheads like diversification, and while Merriman's portfolio has many pieces, it's definitely tilted strongly toward small and value. Only LCB, EM, and REITs don't have at least one of those aspects.
True that!

Coming from managing a portfolio of individual stocks for 25 years covering just about all the sectors, cap size, etc... --- makes managing a basket of Funds seem like an easier move (be it 3 Funds - or a dozen). 8-)
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Re: Merriman buy and hold strategy

Post by nedsaid » Sun Feb 19, 2017 12:10 pm

willthrill81 wrote:
nedsaid wrote:I think Merriman has a sound approach, it is pretty much small/value tilting, adding REITs, and having a large allocation to International Stocks. My concern is similar to Garland's, pretty much the pizza is sliced into a lot of pieces and perhaps a simpler portfolio like the Coffeehouse portfolio would work just as well. It isn't enough anymore to have International Small-Cap, you have to have Emerging Markets Small Value. Getting to be too many asset classes and sub-classes.
I'm not sure that it's really too many asset classes. Most Bogleheads like diversification, and while Merriman's portfolio has many pieces, it's definitely tilted strongly toward small and value. Only LCB, EM, and REITs don't have at least one of those aspects.
Merriman had 6% allocated to REITs in their Ultimate 60/40 Buy and Hold Portfolio. In 2008, they were already splitting that into 3% US REITs and 3% International Real Estate. Larry Swedroe has talked about Emerging Markets Small Cap Value. The pizza is getting sliced into smaller and smaller pieces.
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Re: Merriman buy and hold strategy

Post by Commodore » Sun Feb 19, 2017 1:34 pm

I'm curious but if the Merriman buy n hold is such a great strategy, why hasn't a low cost etf been created to replicate the 10 equal but different holdings w/ annual rebalancing, therefore making it a 1 stop shop?

This being said, is there an low cost etf that provides this simplicity that I may have over-looked? Same question applies for the 3-fund?

Thank you

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Re: Merriman buy and hold strategy

Post by willthrill81 » Sun Feb 19, 2017 2:00 pm

Commodore wrote:I'm curious but if the Merriman buy n hold is such a great strategy, why hasn't a low cost etf been created to replicate the 10 equal but different holdings w/ annual rebalancing, therefore making it a 1 stop shop?

This being said, is there an low cost etf that provides this simplicity that I may have over-looked? Same question applies for the 3-fund?

Thank you
With regard to Merriman's strategy, there's little point in an investment group putting together an ETF capturing everything, especially since Merriman has three versions (aggressive, moderate, conservative), which changes the allocations. It's not difficult at all to implement his strategy with ETFs or mutual funds, and he provides recommendations for these from Vanguard, Fidelity, and Schwab.

Arguably, Vanguard's target date funds are a version of the three fund portfolio, but they have more international exposure than many, including myself, desire.
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Re: Merriman buy and hold strategy

Post by Commodore » Sun Feb 19, 2017 2:45 pm

Thanks. I will consider the Target Date funds although not perfectly correlated to 3-fund. My thoughts is these mutual funds are constantly rebalancing daily versus a portfolio (like 3-fund or Merriman) that should be rebalancing on a annual or semiannual basis, therefore letting the winners run a little bit. Am I off base here?

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Re: Merriman buy and hold strategy

Post by willthrill81 » Sun Feb 19, 2017 2:49 pm

Commodore wrote:Thanks. I will consider the Target Date funds although not perfectly correlated to 3-fund. My thoughts is these mutual funds are constantly rebalancing daily versus a portfolio (like 3-fund or Merriman) that should be rebalancing on a annual or semiannual basis, therefore letting the winners run a little bit. Am I off base here?
You're not off base, but it literally takes five minutes to rebalance your portfolio once a year. The benefits to rebalancing more often than that, if any, are minuscule, according to extensive research on the topic.
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Re: Merriman buy and hold strategy

Post by Kevin K » Sun Feb 19, 2017 7:08 pm

Bob Clyatt, author of the excellent "Work Less, Live More" retirement guide, has a slightly simpler 8 ETF portfolio (all but one are Vanguard) he calls the Sandwich that has performed similarly to Merriman's and seems a bit easier to implement:

http://www.workless-livemore.com/ration ... portfolio/

I like the ultra-diversified approach of this kind of global slice and dice approach but another part of me says why not just opt for simplicity and go 100% Wellesley or half Wellesley, half LifeStrategy Moderate growth (especially since Wellesley in particulart has beaten these complex allocations by ~40% for many years).

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Re: Merriman buy and hold strategy

Post by willthrill81 » Sun Feb 19, 2017 11:28 pm

Kevin K wrote:Bob Clyatt, author of the excellent "Work Less, Live More" retirement guide, has a slightly simpler 8 ETF portfolio (all but one are Vanguard) he calls the Sandwich that has performed similarly to Merriman's and seems a bit easier to implement:

http://www.workless-livemore.com/ration ... portfolio/

I like the ultra-diversified approach of this kind of global slice and dice approach but another part of me says why not just opt for simplicity and go 100% Wellesley or half Wellesley, half LifeStrategy Moderate growth (especially since Wellesley in particulart has beaten these complex allocations by ~40% for many years).
I too was attracted to these portfolios with many asset classes not long ago. But now I've seen that you can equate or even improve their performance (higher returns and/or lower volatility) with fewer asset classes. For retirees, I think that some modified version of the Larry Portfolio makes a lot of sense. I've just tested a portfolio for the first time today that uses 40% mid-cap value, 10% emerging markets, and 50% ITT. It barely trails the TSM over the last 21 years (by .34%), but has nearly half the volatility.
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Re: Merriman buy and hold strategy

Post by Kevin K » Mon Feb 20, 2017 3:01 pm

[/quote] I too was attracted to these portfolios with many asset classes not long ago. But now I've seen that you can equate or even improve their performance (higher returns and/or lower volatility) with fewer asset classes. For retirees, I think that some modified version of the Larry Portfolio makes a lot of sense. I've just tested a portfolio for the first time today that uses 40% mid-cap value, 10% emerging markets, and 50% ITT. It barely trails the TSM over the last 21 years (by .34%), but has nearly half the volatility.[/quote]

I, too, have often succumbed to the lure of backtesting. If you're going to go down that rabbit hole, the best one to get lost in I know of (by far) is Portfolio Charts. You can compare the Larry portfolio there with a bunch of others (check out https://portfoliocharts.com/portfolio/golden-butterfly/ compared to Larry's and Merriman's). All of these concentrated portfolios involve huge bets on very limited market segments that have performed well in the past, while (IMO) what Merriman and Clyatt are suggesting incorporate small cap and value tilts while being pretty close to globally agnostic in both their equity and bond allocations.

I went "all in" on the Harry Browne Permanent Portfolio (transitioning from a complex slice-and-dice approach very much like Merriman's) in late '09 after seeing my backtested-to-the-nth-degree "conservative" (40% equity) global portfolio that "couldn't" lose more than 8% of its value go down 23% as all of the "non-correlated" assets tanked in unison. In retrospect I'd have been far better off staying the course, but as William Bernstein and others have been pointing out ever since that market meltdown there's "questionaire" risk tolerance and then there's real-world. I also found it quite difficult to live with the tracking error of the PP and the Larry Portfolio is just as much an outlier. That's why I think something along the lines of the Merriman/Clyatt DFA-inspired thing is great for those who love complexity (or have someone to manage it for them) but also so appreciate the simplicity and broad market exposure at miniscule cost of Vanguard's LifeStrategy and Target Retirement funds.

My mother-in-law is invested two-thirds in Target Retirement Income fund and one third Wellesley and not only does she sleep well but I won't be surprised to see her do better than anything mentioned above going forward.
Last edited by Kevin K on Thu Mar 02, 2017 4:33 pm, edited 1 time in total.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Mon Feb 20, 2017 3:47 pm

Kevin K wrote:
willthrill81 wrote: I too was attracted to these portfolios with many asset classes not long ago. But now I've seen that you can equate or even improve their performance (higher returns and/or lower volatility) with fewer asset classes. For retirees, I think that some modified version of the Larry Portfolio makes a lot of sense. I've just tested a portfolio for the first time today that uses 40% mid-cap value, 10% emerging markets, and 50% ITT. It barely trails the TSM over the last 21 years (by .34%), but has nearly half the volatility.
I, too, have often succumbed to the lure of backtesting. If you're going to go down that rabbit hole, the best one to get lost in I know of (by far) is Portfolio Charts. You can compare the Larry portfolio there with a bunch of others (check out https://portfoliocharts.com/portfolio/golden-butterfly/ compared to Larry's and Merriman's). All of these concentrated portfolios involve huge bets on very limited market segments that have performed well in the past, while (IMO) what Merriman and Clyatt are suggesting incorporate small cap and value tilts while being pretty close to globally agnostic in both their equity and bond allocations.

I went "all in" on the Harry Browne Permanent Portfolio (transitioning from a complex slice-and-dice approach very much like Merriman's) in late '09 after seeing my backtested-to-the-nth-degree "conservative" (40% equity) global portfolio that "couldn't" lose more than 8% of its value go down 23% as all of the "non-correlated" assets tanked in unison. In retrospect I'd have been far better off staying the course, but as Bill Bertstein and others have been pointing out ever since that market meltdown there's questionaire risk tolerance and then there's actual. I also found it quite difficult to live with the tracking error of the PP and the Larry Portfolio is just as much an outlier. That's why I think something along the lines of the Merriman/Clyatt DFA-inspired thing is great for those who love complexity (or have someone to manage it for them) but also so appreciate the simplicity and broad market exposure at miniscule cost of Vanguard's LifeStrategy and Target Retirement funds.

My mother-in-law is invested two-thirds in Target Retirement Income fund and one third Wellesley and not only does she sleep well but I won't be surprised to see her do better than anything mentioned above going forward.
I must confess that I spend too much time on Portfolio Charts already. :D

Merriman's portfolio is definitely not a bad one at all. I actually think that it's one of the better portfolio out there, though I disagree with Merriman that 50% of your portfolio should be international. That just seems awfully high to me.

I agree that focusing your portfolio too narrowly can represent a problem, but there are certain segments that have a long and fruitful history of returns, like value and small caps. Of course there have been times when they lagged the broader market, but that's the case with any asset class. SCV has beaten the S&P 500 in every single 20 period except one, so I see relatively little risk in tilting toward SCV, for instance. As time goes on, I'm also impressed with MCV and am a little surprised why it's so often overlooked.

On the other hand, I'm reticent toward these portfolios with 10+ asset classes, including classes that only represent 2-3% of the portfolio or those that use gold. I know that backtesting has shown that gold can improve returns by reducing volatility, but owning a non-productive asset still seems counterproductive to me.
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Re: Merriman buy and hold strategy

Post by Commodore » Mon Feb 20, 2017 9:35 pm

Willthrill- since you have run a few portfolio charts before I'm curious if you've compared this...

10% S&P
10% vanguard value
20% Vanguard SCV
10% VAnguard REIT
50% Vanguard Total Int'l Stock fund

Versus the Merriman ultimate Buy n Hold?

You have been a valuable sounding board, I appreciate your insight immensely.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Mon Feb 20, 2017 10:05 pm

Commodore wrote:Willthrill- since you have run a few portfolio charts before I'm curious if you've compared this...

10% S&P
10% vanguard value
20% Vanguard SCV
10% VAnguard REIT
50% Vanguard Total Int'l Stock fund

Versus the Merriman ultimate Buy n Hold?
It's not easy to get international REIT data (Merriman calls for 5%), so I just used domestic REIT data instead. These are the results from Jan. 1995 - Jan. 2017.

Your portfolio:
CAGR = 7.94%
Std. dev. = 15.77%

Merriman's:
CAGR = 8.98%
Std. dev. = 15.78%

Further, the worst years and drawdown periods were virtually identical for both, but Merriman's had a better 'best' year.

While it uses more asset classes, and I genuinely gravitate toward simplicity, it seems that Merriman's portfolio is superior in terms of historical returns.
Commodore wrote:You have been a valuable sounding board, I appreciate your insight immensely.
I'm glad to be of some help. :)

If you're interested, I've been recently working with this portfolio. It incorporates 33% international into its equity portion, so it might be of interest to you. It's 20% mid-cap value, 20% small-cap value, 20% emerging markets, 10% REITs, and 30% ITT. During the same time frame above, it had a CAGR of 9.74% and a std. dev. of 11.63%, so it had both a markedly higher return (despite it being a 70/30 portfolio) than the other two portfolios but with significantly less volatility. If you move 10% from ITT to REITs, it bumps the CAGR up to 10.15% and the std. dev. to 13.35%.
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Re: Merriman buy and hold strategy

Post by hoops777 » Mon Feb 20, 2017 10:20 pm

After reading this thread my idea of 50 pct Wellesley and 50 pct basic Larry Portfolio is looking very,very good. :D
K.I.S.S........so easy to say so difficult to do.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Mon Feb 20, 2017 10:25 pm

hoops777 wrote:After reading this thread my idea of 50 pct Wellesley and 50 pct basic Larry Portfolio is looking very,very good. :D
That would definitely be a defensive portfolio.
“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: Merriman buy and hold strategy

Post by hoops777 » Mon Feb 20, 2017 10:36 pm

I always play good defense and the return on that combo is pretty darn good considering the defensive nature.
K.I.S.S........so easy to say so difficult to do.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Mon Feb 20, 2017 11:47 pm

hoops777 wrote:I always play good defense and the return on that combo is pretty darn good considering the defensive nature.
Have you seen the Golden Butterfly portfolio? It's remarkable. I've never seen a portfolio (especially one with a 39 year history) that has a higher return than it's standard deviation. Just look at the heat map.

https://portfoliocharts.com/portfolio/golden-butterfly/
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Re: Merriman buy and hold strategy

Post by Kevin K » Tue Feb 21, 2017 10:29 am

[/quote] Have you seen the Golden Butterfly portfolio? It's remarkable. I've never seen a portfolio (especially one with a 39 year history) that has a higher return than it's standard deviation. Just look at the heat map.

https://portfoliocharts.com/portfolio/golden-butterfly/[/quote]

Not only the GB but all of the optimal risk:reward allocations on Portfolio Charts have some allocation to gold, which of course drives many Bogleheads crazy. The Golden Butterfly is basically an optimistic (prosperity and inflation focused) tweak of Harry Browne's 4 x 25% Permanent Portfolio, tilting towards equities and including some small caps by shaving 5% off of the other assets. If it appeals to you (as it certainly did/does to me) you might also take a look at this iteration that effectively blends the Larry Portfolio with the PP/GB:

https://www.portfoliovisualizer.com/bac ... 0&Gold1=10

That's a really defensive low fat tails allocation to be sure.

Personally I still prefer the Merriman/DFA/MPT slice-and-dice approach going forward. The GB uses 100% U.S. equities which are at or near absolute peak (historically speaking) valuations, has 20% in 30 year treasuries that are likely to be crushed in a rising interest rate environment and a big slug in gold, the price of which (at least for "paper" gold - the existence of which Harry Browne couldn't have anticipated) seems pretty clearly to be manipulated by central banks and other market makers. Throw in the recent and unprecedented willingness of our politicians to throw the "full faith and credit" of U.S. treasury obligations into question when it suits them (something else Mr. Browne, cynical as he was about government, probably wouldn't have believed could happen) and I come full circle from appreciating the incredible historical performance of the GB and other outlier "bunker" allocations to wanting to own the total worldwide investible universe with as much diversification on the equity side as possible. Merriman's Ultimate Buy & Hold and other similar iterations make that possible.

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Re: Merriman buy and hold strategy

Post by Taylor Larimore » Tue Feb 21, 2017 11:05 am

Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
Gemini:

Not very good according to MarketWatch:

HISTORICAL RETURNS----------------1-year---3-years---5-years---10-years
Aronson Family Taxable------------20.35% --- 5.68% ---- 7.21% --- 5.05%
Ultimate Buy & Hold-------------- 14.86% ----3.87% ---- 5.59%---- 3.82%
Dr. Bernstein's Smart Money-------17.62%---- 5.61%----- 7.43%----4.54%
Coffeehouse------------------------- 16.92%---- 6.23%----- 7.80%----5.03%
Yale U's Unconventional----------- 15.60%---- 6.67%----- 7.60%--- 4.90%
Dr. Bernstein's No Brainer--------- 18.28%---- 4.81%----- 8.50%--- 4.93%
Margaritaville------------------------16.97%-----4.35%----- 6.25%--- 4.19%
Second Grader's Starter*---------- 21.97%------6.59%-----9.66%--- 5.11%

*The Three-Fund Portfolio

Past performance does not guarantee future performance.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Merriman buy and hold strategy

Post by Kevin K » Tue Feb 21, 2017 11:25 am

I think the tools on Portfolio Charts are a whole lot more useful than looking at the most recent 10 years on MarketWatch, but if we're going to play that game let's just go with 100% Wellesley which handily beats all of these portfolios (6.66% return, #1 ranking) with far lower SD and many decades of outstanding performance.

http://www.marketwatch.com/investing/fund/vwinx

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Re: Merriman buy and hold strategy

Post by willthrill81 » Tue Feb 21, 2017 11:35 am

Kevin K wrote:Not only the GB but all of the optimal risk:reward allocations on Portfolio Charts have some allocation to gold, which of course drives many Bogleheads crazy. The Golden Butterfly is basically an optimistic (prosperity and inflation focused) tweak of Harry Browne's 4 x 25% Permanent Portfolio, tilting towards equities and including some small caps by shaving 5% off of the other assets. If it appeals to you (as it certainly did/does to me) you might also take a look at this iteration that effectively blends the Larry Portfolio with the PP/GB:

That's a really defensive low fat tails allocation to be sure.
The GB still outperforms that portfolio though, likely because it has 10% more in equities.

People talk about how the GB is just a slight change to the PP, but their performance is quite different. The GB has slightly higher volatility but a significantly better return (1.64% more since 1978).

In fact, we could improve the GB's returns (though not the SWR) even more by simplifying it. If we put all of the equities in SCV (40%), merge the STT and LTT into ITT (40%), and leave the gold intact (20%), the CAGR goes up by nearly 1% while the std. dev., worst year, and drawdown hardly budge. Granted, there isn't much gain achieved by combining STT and LTT, but I would argue that ITT achieves pretty much the same effect.

This portfolio really has me wondering whether I and many others are correct in thinking "Gold doesn't have a yield, so it has no place in a good portfolio." I'm not so sure that that's true, especially for retirees. Reducing volatility alone is a worthy goal in the distribution phase because it significantly boosts the SWR, even if the CAGR is slightly lower.

I think that the only reason that the Larry Portfolio hasn't been derided by more people here is because it doesn't use gold. If it did, even just 10%, I strongly suspect that reactions to it, which seem generally positive, would be quite different.
“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: Merriman buy and hold strategy

Post by 9-5 Suited » Tue Feb 21, 2017 1:01 pm

I like Merriman as an educator and orator, and I agree with some of the basic tenets of his portfolio approach. However, like a few posters above, his UBH contains too many slices of pizza for my taste. If your portfolio contains a healthy dose of international and a tilt toward small and value, you will end up with very similar results with likely lower cost and a bit more simplicity.

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Re: Merriman buy and hold strategy

Post by Leif » Wed Feb 22, 2017 12:04 am

9-5 Suited wrote:I like Merriman as an educator and orator, and I agree with some of the basic tenets of his portfolio approach. However, like a few posters above, his UBH contains too many slices of pizza for my taste. If your portfolio contains a healthy dose of international and a tilt toward small and value, you will end up with very similar results with likely lower cost and a bit more simplicity.
If you have not seen it you may want to take a look at the following posts. It is long, but you get the idea in the first few pages. PS - Link also provided by livesoft above.

Ultimate Buy and Hold - 8 slices vs 4

The link to Merriman's portfolio is broken in the above, but you can get the current version in the linked provided by the OP. http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

One time I asked Paul (Merriman) what he thought of this post. Many times he stated if he saw a better portfolio then his "Ultimate" he would adopt those changes. He told me he would address it in a future podcast. I don't know if he ever did. At least I've not heard it. Too bad, I would like to hear his take.

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Re: Merriman buy and hold strategy

Post by raven15 » Wed Feb 22, 2017 3:50 am

willthrill81 wrote:
Kevin K wrote:Not only the GB but all of the optimal risk:reward allocations on Portfolio Charts have some allocation to gold, which of course drives many Bogleheads crazy. The Golden Butterfly is basically an optimistic (prosperity and inflation focused) tweak of Harry Browne's 4 x 25% Permanent Portfolio, tilting towards equities and including some small caps by shaving 5% off of the other assets. If it appeals to you (as it certainly did/does to me) you might also take a look at this iteration that effectively blends the Larry Portfolio with the PP/GB:

That's a really defensive low fat tails allocation to be sure.
The GB still outperforms that portfolio though, likely because it has 10% more in equities.

People talk about how the GB is just a slight change to the PP, but their performance is quite different. The GB has slightly higher volatility but a significantly better return (1.64% more since 1978).

In fact, we could improve the GB's returns (though not the SWR) even more by simplifying it. If we put all of the equities in SCV (40%), merge the STT and LTT into ITT (40%), and leave the gold intact (20%), the CAGR goes up by nearly 1% while the std. dev., worst year, and drawdown hardly budge. Granted, there isn't much gain achieved by combining STT and LTT, but I would argue that ITT achieves pretty much the same effect.

This portfolio really has me wondering whether I and many others are correct in thinking "Gold doesn't have a yield, so it has no place in a good portfolio." I'm not so sure that that's true, especially for retirees. Reducing volatility alone is a worthy goal in the distribution phase because it significantly boosts the SWR, even if the CAGR is slightly lower.

I think that the only reason that the Larry Portfolio hasn't been derided by more people here is because it doesn't use gold. If it did, even just 10%, I strongly suspect that reactions to it, which seem generally positive, would be quite different.
fyi gold looks unrealistically good in Portfoliocharts because of a single year or two in the early 70's when it was illegal for individual investors to own gold. A sharp price rise as it became tradable by institutions coincided perfectly with the bear market to create a likely unrepeatably rosy sequence. Every period PC analyzes passes through those years unless it says otherwise, and unless you can throw them out the result is basically untrue and you would have chosen a different allocation. You can make a case for gold ownership using data since 1975 when it was actually legal to own, but it is IMO a more tenuous case and for a smaller amount.
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Re: Merriman buy and hold strategy

Post by Coato » Wed Feb 22, 2017 4:40 am

It appears that if this is too many slices, you could cut the TrevH four down to two.

I ran the four versions of the LCB (Vanguard S&P 500 VFINX), SCV (Vanguard Small Cap Value VISVX), ILV (Dodge and Cox International DODFX), ISB (DFA International Small Company DFISX)... These are what I have available in my 403(b) and 457(b) plans.

Split into four parts (LCB, SCV, ILV, ISB) it came out as 8.99% CAGR since 2001.

Split into just LCB and ISB it came out as 8.99% CAGR since 2001.

Split Into ILV and SCV it came out as 8.95% CAGR since 2001.

The standard deviations changed a bit but the lines basically move together. There is a lot more value on the Dodge and Cox/Vanguard SCV side of course so that can change. It would probably hew more closely to Merriman with the Schwab Fundamental International Small or something that has more value in it than the DFA International Small but that is what I have.

Anyway, not perfect but probably a simple way to run the general philosophy of Merriman (1/2 large/small, blend/value and US/Ex-US) with only 5 total slices (adding Reits, EM and Treasuries)... Good enough probably. I guess you could even run it as a three fund if you have an international fund with enough EM in it.

One edit: None of these funds are that "valuey" and I understand that may explain why an "ILV" and "SCV" can act the way an "LCB" and "ISB" do... If you have more "valuey" funds available results may be better.

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Re: Merriman buy and hold strategy

Post by CyclingDuo » Wed Feb 22, 2017 6:25 am

Taylor Larimore wrote:
Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
Gemini:

Not very good according to MarketWatch:

HISTORICAL RETURNS----------------1-year---3-years---5-years---10-years
Aronson Family Taxable------------20.35% --- 5.68% ---- 7.21% --- 5.05%
Ultimate Buy & Hold-------------- 14.86% ----3.87% ---- 5.59%---- 3.82%
Dr. Bernstein's Smart Money-------17.62%---- 5.61%----- 7.43%----4.54%
Coffeehouse------------------------- 16.92%---- 6.23%----- 7.80%----5.03%
Yale U's Unconventional----------- 15.60%---- 6.67%----- 7.60%--- 4.90%
Dr. Bernstein's No Brainer--------- 18.28%---- 4.81%----- 8.50%--- 4.93%
Margaritaville------------------------16.97%-----4.35%----- 6.25%--- 4.19%
Second Grader's Starter*---------- 21.97%------6.59%-----9.66%--- 5.11%

*The Three-Fund Portfolio

Past performance does not guarantee future performance.

Best wishes.
Taylor
No disrespect, but some of us have 30 - 45 year investing time spans ahead to plan for, so looking back at returns during the past 1/3/5/10 years may not be the most fortuitous time frame. Hence, the bolding of the most important statement in your post.
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Re: Merriman buy and hold strategy

Post by willthrill81 » Wed Feb 22, 2017 10:54 am

raven15 wrote:
willthrill81 wrote:
Kevin K wrote:Not only the GB but all of the optimal risk:reward allocations on Portfolio Charts have some allocation to gold, which of course drives many Bogleheads crazy. The Golden Butterfly is basically an optimistic (prosperity and inflation focused) tweak of Harry Browne's 4 x 25% Permanent Portfolio, tilting towards equities and including some small caps by shaving 5% off of the other assets. If it appeals to you (as it certainly did/does to me) you might also take a look at this iteration that effectively blends the Larry Portfolio with the PP/GB:

That's a really defensive low fat tails allocation to be sure.
The GB still outperforms that portfolio though, likely because it has 10% more in equities.

People talk about how the GB is just a slight change to the PP, but their performance is quite different. The GB has slightly higher volatility but a significantly better return (1.64% more since 1978).

In fact, we could improve the GB's returns (though not the SWR) even more by simplifying it. If we put all of the equities in SCV (40%), merge the STT and LTT into ITT (40%), and leave the gold intact (20%), the CAGR goes up by nearly 1% while the std. dev., worst year, and drawdown hardly budge. Granted, there isn't much gain achieved by combining STT and LTT, but I would argue that ITT achieves pretty much the same effect.

This portfolio really has me wondering whether I and many others are correct in thinking "Gold doesn't have a yield, so it has no place in a good portfolio." I'm not so sure that that's true, especially for retirees. Reducing volatility alone is a worthy goal in the distribution phase because it significantly boosts the SWR, even if the CAGR is slightly lower.

I think that the only reason that the Larry Portfolio hasn't been derided by more people here is because it doesn't use gold. If it did, even just 10%, I strongly suspect that reactions to it, which seem generally positive, would be quite different.
fyi gold looks unrealistically good in Portfoliocharts because of a single year or two in the early 70's when it was illegal for individual investors to own gold. A sharp price rise as it became tradable by institutions coincided perfectly with the bear market to create a likely unrepeatably rosy sequence. Every period PC analyzes passes through those years unless it says otherwise, and unless you can throw them out the result is basically untrue and you would have chosen a different allocation. You can make a case for gold ownership using data since 1975 when it was actually legal to own, but it is IMO a more tenuous case and for a smaller amount.
I've also looked at the performance of the GB and other portfolios that have some gold from 1978 to current, avoiding the period you refer to. The outcome doesn't change substantially.
“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: Merriman buy and hold strategy

Post by Johnnie » Wed Feb 22, 2017 11:17 am

Taylor Larimore wrote:
Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
Gemini:

Not very good according to MarketWatch:

HISTORICAL RETURNS----------------1-year---3-years---5-years---10-years
Aronson Family Taxable------------20.35% --- 5.68% ---- 7.21% --- 5.05%
Ultimate Buy & Hold-------------- 14.86% ----3.87% ---- 5.59%---- 3.82%
Dr. Bernstein's Smart Money-------17.62%---- 5.61%----- 7.43%----4.54%
Coffeehouse------------------------- 16.92%---- 6.23%----- 7.80%----5.03%
Yale U's Unconventional----------- 15.60%---- 6.67%----- 7.60%--- 4.90%
Dr. Bernstein's No Brainer--------- 18.28%---- 4.81%----- 8.50%--- 4.93%
Margaritaville------------------------16.97%-----4.35%----- 6.25%--- 4.19%
Second Grader's Starter*---------- 21.97%------6.59%-----9.66%--- 5.11%

*The Three-Fund Portfolio

Past performance does not guarantee future performance.

Best wishes.
Taylor
Whoa there! If I recall correctly from the last time that Paul Farrell collection was posted here, those portfolios all have different equity/fixed asset allocations. Meaning they are not apple-to-apple comparisons.
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Re: Merriman buy and hold strategy

Post by Kevin K » Wed Feb 22, 2017 11:23 am

I've also looked at the performance of the GB and other portfolios that have some gold from 1978 to current, avoiding the period you refer to. The outcome doesn't change substantially.
When using Portfolio Charts (or Portfolio Visualizer) to backtest allocations using gold I always start in 1975 to fully eliminate the one-time effects of Bretton Woods. Portfolios like the PP and GB that have a slice of gold still do superbly (much better in terms of risk:return and drawdowns during market crises) than ones that don't.

Oftentimes people who focus on the fact that private ownership of gold only became legal in the U.S. in 1974 not only fail to take into account the metal's thousands of years of history as a storehouse of value but also that the ability of individuals to invest in many of the other asset classes we use in our backtesting and portfolio construction is even more brief. Small cap, emerging market, international (let alone international value, SCV, EMV) Reit indexes both domestic and international, international bonds, on and on - all have so little history that one could make a pretty strong argument for discounting the value of what little history of them we have.

As Tyler from Portfolio Charts has said repeatedly you don't need to have gold in your portfolio to have outstanding results, and Merriman's Ultimate, the Larry Portfolio and a bunch of others showcased on his site both demonstrate the truth of that statement AND show that allocations containing gold have offered a much smoother ride, higher safe withdrawal rates during retirement and much better protection against sharp drawdowns during times of crisis.
Last edited by Kevin K on Wed Feb 22, 2017 11:25 am, edited 1 time in total.

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Re: Merriman buy and hold strategy

Post by willthrill81 » Wed Feb 22, 2017 11:24 am

Johnnie wrote:
Taylor Larimore wrote:
Gemini wrote:http://paulmerriman.com/ultimate-buy-ho ... tegy-2016/

Thoughts? How does it compare to what is recommended here?
Gemini:

Not very good according to MarketWatch:

HISTORICAL RETURNS----------------1-year---3-years---5-years---10-years
Aronson Family Taxable------------20.35% --- 5.68% ---- 7.21% --- 5.05%
Ultimate Buy & Hold-------------- 14.86% ----3.87% ---- 5.59%---- 3.82%
Dr. Bernstein's Smart Money-------17.62%---- 5.61%----- 7.43%----4.54%
Coffeehouse------------------------- 16.92%---- 6.23%----- 7.80%----5.03%
Yale U's Unconventional----------- 15.60%---- 6.67%----- 7.60%--- 4.90%
Dr. Bernstein's No Brainer--------- 18.28%---- 4.81%----- 8.50%--- 4.93%
Margaritaville------------------------16.97%-----4.35%----- 6.25%--- 4.19%
Second Grader's Starter*---------- 21.97%------6.59%-----9.66%--- 5.11%

*The Three-Fund Portfolio

Past performance does not guarantee future performance.

Best wishes.
Taylor
Whoa there! If I recall correctly from the last time that Paul Farrell collection was posted here, those portfolios all have different equity/fixed asset allocations. Meaning they are not apple-to-apple comparisons.
I've made the same comment before, but it seems to fall on deaf ears. Some people don't seem to have a problem comparing portfolios with different levels of bonds, international, etc., though why I don't know.
“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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