Paul Merriman's Best in Class Portfolio vs SP500 Index ?

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pkjr
Posts: 35
Joined: Thu Aug 09, 2018 7:01 am

Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by pkjr » Thu Mar 14, 2019 10:31 pm

Can anyone explain to me if I am missing anything here.. so here is the link to the article:
https://paulmerriman.com/best-in-class- ... hold-2019/
and here is that portfolio: Backtesting

It looks like the portfolio is dramatically outperformed by SP500. Is there a reason why would one take Best Of Class ETF portfolio over the SP500?

Thank you

andrew99999
Posts: 291
Joined: Fri Jul 13, 2018 8:14 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by andrew99999 » Fri Mar 15, 2019 4:03 am

I found this response to my similar question last year useful.

Jags4186
Posts: 3035
Joined: Wed Jun 18, 2014 7:12 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by Jags4186 » Fri Mar 15, 2019 4:35 am

pkjr wrote:
Thu Mar 14, 2019 10:31 pm
Can anyone explain to me if I am missing anything here.. so here is the link to the article:
https://paulmerriman.com/best-in-class- ... hold-2019/
and here is that portfolio: Backtesting

It looks like the portfolio is dramatically outperformed by SP500. Is there a reason why would one take Best Of Class ETF portfolio over the SP500?

Thank you
The reasoning is that while the SP500 has performed very well since 2009 it has not performed well over all time periods. Indeed, if you look at the SP500 from 2000-2018 it has only returned 4.8% nominal, 2.6% real. From 2000-2009 the SP500 returned -1% nominal, -3.4% real. Because of the ETFs he has chosen you’ll see the backtest you’re looking at only goes to 2011.

Merriman’s strategy puts you in 10 asset classes with the hope that whatever is performing well at that moment in time you have enough exposure for it to make a meaningful difference.

There is no guarantee it will outperform the SP500 in the future.

averagedude
Posts: 542
Joined: Sun May 13, 2018 3:41 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by averagedude » Fri Mar 15, 2019 5:06 am

The biggest reason why the S&P 500 has done better during this time period is because US stocks have vastly out performed International stocks.

sabtastic
Posts: 98
Joined: Tue Dec 03, 2013 1:00 am

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by sabtastic » Fri Mar 15, 2019 7:56 am

Merriman believes strongly in diversification, so I think he is roughly 50/50 on domestic/international. Even more fun, check out Merriman's vs VTWSX.

Jags4186
Posts: 3035
Joined: Wed Jun 18, 2014 7:12 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by Jags4186 » Fri Mar 15, 2019 8:29 am

You can look at his tables to see how his portfolio compares to the SP500 year by year:

https://paulmerriman.com/wp-content/upl ... ldwide.pdf

Since 1970 performance in his portfolio at a 60/40 AA was slightly better than the 100% SP500 over that time period

Comparing his 100% equity portfolio to the SP500:

Did well vs the SP 500 in the 1970s and 1980s
Lagged in the 1990s significantly (1993 was a standout but 1997 and 1998 were not happy years for the Merriman investor in comparison to SP investors)
Crushed the SP500 in the 2000s
Lagged the SP500 since 2010

Forester
Posts: 31
Joined: Sat Jan 19, 2019 2:50 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by Forester » Fri Mar 15, 2019 9:23 am

I don't understand why he doesn't simplify it to

US market cap
ex-US market cap

US small value
ex-US small value

drk
Posts: 1192
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by drk » Fri Mar 15, 2019 9:39 am

Forester wrote:
Fri Mar 15, 2019 9:23 am
I don't understand why he doesn't simplify it to

US market cap
ex-US market cap

US small value
ex-US small value
That’s effectively Trev H’s Simplified Ultimate Buy and Hold Portfolio, which you’ll find on this here board.

harvestbook
Posts: 629
Joined: Sat Mar 18, 2017 7:12 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by harvestbook » Fri Mar 15, 2019 10:57 am

Diversifying means always winning and always losing to something else.

I use a modified Merriman (I've lost faith in large value but just holding what I have because i recognize it is recency bias even if the logic seems sound) and lighter on international. I don't see any point in comparing it to S & P 500 any more than I would to a bond fund, because I know I'll never consistently pick the best index. I compare it to "Is it doing what I need?"
I'm not smart enough to know, and I can't afford to guess.

heyyou
Posts: 3338
Joined: Tue Feb 20, 2007 4:58 pm

Re: Paul Merriman's Best in Class Portfolio vs SP500 Index ?

Post by heyyou » Fri Mar 15, 2019 2:33 pm

There is significant wisdom in this. My emphasis is underlined.
by harvestbook
Diversifying means always winning and always losing to something else.
.......... I don't see any point in comparing it to S & P 500 any more than I would to a bond fund, because I know I'll never consistently pick the best index. I compare it to "Is it doing what I need?"

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