Sound Investing

Aloha from Oahu! I recorded this one from our hotel room in Hawaii, where my wife and I came to celebrate our two birthdays — three days apart, if not the same year. I promised Zan I’d only work from four to seven each morning on this trip, and this was the one podcast I wasn’t willing to miss.
It kicks off something I’ve wanted to do for a long time: an honest, practical look at one of the biggest forks in the road a do-it-yourself investor ever faces — whether to manage your money yourself or hire someone to help, and if you hire help, what kind.
This first episode is the view from 30,000 feet. Over the coming weeks and months I’ll dig much deeper, including interviews with organizations like Hello Nectarine, NAPFA and the Garrett Planning Network.
In this episode:
07:29 — Why every investor is really starting a business, and why “hiring” index funds and ETFs is step one
15:29 — Why the future you’re paying an advisor to predict is one they can’t predict any better than you can
27:40 — The difference between commission salespeople, assets-under-management (AUM) advisors, and hourly or flat-fee planners
36:25 — The conflict of interest almost no one talks about, and why it reaches all the way to the day an advisory firm is sold
47:10 — How a $5 million investor paying 0.8% ($40,000 a year) might get the same help from an hourly or flat-fee planner for $8,000–$12,000
54:34 — Whether you’re a few years from retirement, already there, or just want to make this decision with your eyes open, I think you’ll find something useful
54:53 — Why I recently paid $3,400 to test an hourly advisor myself, and why I’m glad I did
This is the first of at least two or three episodes on this topic. I’d love your feedback and your questions for the ones ahead — email me at paul@paulmerriman.com.

As Paul turned 83 last week, he recorded this podcast in his studio office surrounded by piles of articles and notes for future recordings and a good deal of gratitude. He says this may be his favorite podcast he's ever made.
He starts with the two biggest paydays of his life. The first was December 31, 2012, the day he sold his part of the firm he'd started in 1983 and walked into retirement with a promise to his wife that he'd never work for money again. The second happened in the last 48 hours, and not a dollar changed hands. He also has a word of caution for anyone who credits him for what their portfolio has done.
Then an epiphany. After reading a recent Adam Grossman piece in HumbleDollar, Paul began to question whether John Bogle's "stay the course" really belongs as the number one rule for being a successful long-term investor. He took the question to ChatGPT, shares the whole conversation, and comes away with a new rule number one, plus a line he thinks an 18-year-old might still remember at 65.
The third topic is bonds. Paul has been reading a lot of negative commentary about them lately, so he goes back to Table B1 and walks through 56 years of history: how many losing years the S&P 500 had since 1970, how many the short-to-intermediate bond portfolio had, what the worst 12 months and worst 60 months looked like, and why he and his wife hold the mix they do at 83. He also explains why long-term bonds are not the answer, and what the numbers since 1928 say about the premium you get for their extra risk.
LINKS
Market Risks by Adam M. Grossman, HumbleDollar

In this special office-hours session, Albert and I answer the questions teachers have been sending in across our four NGPF classroom sessions — more than 500 educators strong.
We move fast and cover a lot of ground:
1. How a young person can open a first investment account (and why $1 is all it takes to start at Fidelity) 02:36
2. My favorite books on saving, investing and index funds 10:58
3. The best free websites and videos for teachers and students 12:51
4. How to make inflation real in the classroom — yes, the bubble-gum story 19:19
5. Why asset classes like small-cap value and large-cap growth behave so differently 25:15
6. A live walk-through of Morningstar’s style boxes and the chart function 34:45
7. Advice for reaching first-generation and lower-income students 47:24
8. What would be the job to suggest to a middle schooler to get them more interested in math and economics?
Whether you teach this material or you’re just getting started yourself, I think you’ll find something here you can put to use.

Watch video

WATCH THE VIDEO

This is the fourth of five presentations I recorded for Next Gen Personal Finance (NGPF.org) and am sharing with Sound Investing listeners.
I titled this one “The $5 Million Payoff for a Financially Literate High School Graduate” — but I could have called it the $42 million payoff, and by the end you’ll see the math that makes it believable. I walk through the single biggest decision of all (stocks vs. bonds), 100 years of market history, why the first five years of investing matter most, and how low costs, low taxes, and automation turn small savings into a fortune over a lifetime.
FREE BOOK THIS WEEK
Spending Your Way to Wealth (see Appendix E)
https://investorship.com/wp-content/uploads/2023/10/SYWTW.pdf
TABLES AND RESEARCH
https://www.paulmerriman.com/data-tables
QUESTIONS
paul@paulmerriman.com (put “NGPF” in the subject line)
Join us next week for the final session: Financial Literacy Office Hours with Paul Merriman.

Harry Markowitz called diversification "the only free lunch in finance." In this session, part of Paul's series for Next Gen Personal Finance educators, Paul Merriman explains what that means in practice, and why a well-diversified portfolio can help investors stay the course through good markets and bad.
Paul covers the history and math behind diversification, from Don Quixote's "don't put all your eggs in one basket" to Warren Buffett, Charlie Munger, and Sir John Templeton. He explains the three kinds of risk investors face (company, market, and asset class), and shows how the "lost decade" of 2000–2009 hit S&P 500 investors hard while more diversified portfolios kept growing.
You'll also hear:
How adding small "baby steps" of large cap value, small cap, and REITs added about 1% a year to returns since 1970
Why the two-fund strategy (half S&P 500, half small cap value) may be less risky than it looks
What a young investor putting away as little as $1,000 a year could build over a lifetime
A simple "ultimate buy and hold" for hands-off investors: a target date fund plus a slice of small cap value
Plus, Paul shares a free book from market historian Bill Bernstein.
Watch on YouTube: youtu.be/MDqaIojI8TE
Free book: If You Can: How Millennials Can Get Rich Slowly
Tables and research: paulmerriman.com/data-tables
Send your questions to Paul at paul@paulmerriman.com (include "NGPF" in the subject line)