Q&A Follow-up to “Simple & Effective Balanced Portfolios for Lifetime Investing Success”

In a live AAII webinar on Oct. 21, 2020, Chris Pedersen, Director of Research at The Merriman Financial Education Foundation (paulmerriman.c..., presented some very simple portfolios that achieve massive diversification and how to apply a variety of approaches during both working years and retirement. Following this presentation ( • Simple & Effective Bal... , Chris, Paul Merriman and Daryl Bahls, Director of Analytics, met (virtually) to address additional questions received during the event.
1. What withdrawal strategies do you recommend? Should I take money equally or draw from the fund that has grown the most? How do RMDs change things?
2. How do you manage a do-it-yourself 2 Funds for Life (paulmerriman.c...) portfolio using only a U.S. Total Market Fund and a U.S. small-cap-value fund?
3. What percent of investors can sustain a strategy the means experiencing a 50% decline?
4. Why did the Trev4 Portfolio do so much better in Chris’ presentation compared to Paul’s presentation?
5. Why don’t you mention mid-cap funds?
6. How can an investor determine what factors their stocks and bonds fall in to?
7. How can an investor add some value and size factors to their portfolio without exposing them to too much risk?
8. What mix of assets are suggested to a retiree with the goal of asset preservation that keeps up with inflation?
9. In the Vanguard TDF example, why is there a disproportionately lower increase in return as you go up in the stock exposure?
10. how much will taxes from rebalancing hurt my returns in a taxable account?
To view the graphics from this Q&A session (thanks to Daryl Bahls), click here (paulmerriman.c....
For a free download of the original presentation slideshow (by Chris Pedersen), click here- paulmerriman.c....
This video is also available as a "Sound Investing” podcast- paulmerriman.c....
This video is part of the educational offerings from The Merriman Financial Education Foundation, a registered 501(c)3. If you found value in this video, here are four ways to support these videos and our foundation:
1) Hit the thumbs up, subscribe and share the link with your social media and friends.
2) Sign up for our biweekly newsletter at PaulMerriman.com
3) Use our M1 Finance affiliate link if you are interested in setting up a brokerage account, using our portfolio suggestions. The Foundation will receive a one-time small fee at no cost to you. m1finance.8bxp...
4) Consider making a tax-deductible donation to the Foundation (paulmerriman.c...) to support our mission to provide financial education to investors. Thank you!

[@dmsoundcollective6746]

Hey Chris I don't know if you go back and look at this comments or not but I thought you should know that I don't know all three of you I thank you really resonate most with the younger crowd. I'm really glad you joined Paul and deral ... Keep up the wonderful work

[@70qq]

ty

[@Sylvan_dB]

A 50% drawdown is only a notional "half the money". You still have 100% of the shares, owning just as much of the economy, valued perhaps at 50% of the previous dollar value. That doesn't matter unless you are selling though. If the "risk" of concern is "risk of loss" then the risk seems real, but the investor can control that by ensuring no need to sell depressed assets for reasonable periods (e.g. using the bond portion, or cash "buckets" or dividends ...). On the other hand, if the "risk" is "risk of drawdown" otherwise known as volatility, then the real risk isn't the drawdown, but in one's reaction to it. This makes "risk" extremely hard to measure, much less forecast. Hence the reliance on "volatility" equated as "risk".
This is where I find it easier to live with individual companies that pay ever increasing dividends. The dividend yield of the stocks in my diversified portfolio is between 3.5% and 4% and increased every year since I started focusing on this approach in 2002. Yes, companies have cut. 2008-9 was hard because so many banks, but with diversification even then my intrinsic growth of dividends was positive, and of course reinvesting dividends and new money added to the increase. This year the intrinsic increase is over 5% and I expect a few more increases before the end of the year. And so far still adding new money and reinvesting the dividends.
Since so much of investing depends on behavior, perhaps investors all need counselling in understanding emotion.

[@trade0714]

Thanks for the video Paul. Having some of these podcasts in video form is a nice addition. As a recent retiree, living in the time period after retirement but before RMD's start, my favorite question was #8. I'll be looking into portfoliocharts.com and running some scenarios. Thanks to Daryl for that.

[@InvestingwithKurt]

Love that you all continue to make those video Q&As. Packed with great advice!

[@isnasucks]

Where can I get more information about the (UPDATED) best in-class ETFs and mutual funds portfolio number 8 for 2020? I believe you alluded to updated information in this video.

[@isnasucks]

Thank you for the invaluable content and the time you have spent preparing and putting out this amazing wonderful information.

[@alanross4235]

Morningstar video would be great.

[@Sylvan_dB]

Is there any "engine" left in fixed income any more? Or simply a guaranteed loss against the Fed's "long term average 2% inflation" target?