Sound Investing

Compounding Project Podcast – Episode 36In Episode 36 of The Compounding Project Podcast, legendary investing educator Paul Merriman shares timeless insights on long-term investing, the power of compounding, and how everyday investors can build lasting wealth.Paul explains why starting early is one of the most important financial decisions you can make, how compound growth works quietly over decades, and why low-cost index funds remain the foundation of successful investing strategies.This episode dives deep into portfolio diversification, the hidden impact of investment fees, and the role of small-cap value investing in improving long-term returns. Paul also offers practical, evidence-based guidance for young investors, parents, late starters, and anyone seeking financial independence through disciplined investing.Whether you’re new to investing or refining an existing portfolio, this conversation delivers actionable lessons on building wealth the smart way.Starting early and staying consistent matters more than market timing or stock picking.Low-cost index funds and diversification are the most reliable tools for long-term wealth building.Small-cap value investing and minimizing fees can significantly increase lifetime investment returns.Your Money and Your BrainThe Psychology of MoneyThinking, Fast & SlowSpending Your Way to WealthWatch the full episode for expert insights on investing, compounding, and financial freedom.Follow Paul Merriman On Social Media: ⤵︎📷 Instagram: /   / paulamerriman2012  📱 YouTube: /    / @paulmerrimansoundinvesting  To Know More,Follow Sathish Gajula On Social Media: ⤵︎ 📷 Instagram: /   / compoundingproject  📱 YouTube: /    / @compoundingproject  Timestamps:00:00 Episode Trailer02:00 Intro to Wealth and Index Funds03:20 The Million Dollar Decision07:04 Investing Tips for Young Parents12:47 Saving When Money Feels Tight15:35 Stocks vs Bonds19:58 Rethinking Stock Market Risk24:36 Why Investing Is Easier Today27:06 How Fees Hurt Returns29:08 When Bonds Make Sense32:56 Investing Across Generations34:58 Portfolios by Age35:52 Starting Late in Investing41:05 Defensive Investing Basics42:10 Why Stocks Matter Most43:04 Beating the S&P 50048:09 Market Returns Explained51:22 Why Diversification Matters54:49 Fees and Long-Term Returns58:28 Small Cap Value vs Total Market01:03:25 Equal-Weight S&P 50001:08:36 Handling Market Volatility01:11:05 Picking Small Cap Value Funds01:12:50 Trust in Investing01:16:42 Hotseat Questions

Over the last couple of weeks, I’ve been recording a series of Q&As that came out of a presentation I gave in November for the American Association of Individual Investors — AAII.At the end of that nearly two-hour talk, I promised that I’d do a podcast answering every single question that came in. Well… there were 36 questions. That’s a little too much for one episode, so we broke them into three parts.This is Part 3 — the final 12 questions. If you haven’t heard Parts 1 and 2 yet, we’ll link those in the show notes so you can catch up.Before we jump in, I just want to say: I’m a huge fan of AAII. I started teaching their local chapters way back in 1984, and over the years I think I’ve presented to just about every chapter in the country — sometimes in person, sometimes by Zoom — but always to people who are genuinely committed to learning how investing works.If you’ve never checked out AAII, I’ll include a link in the notes for a low-cost trial membership. Take a look around and see if it’s a resource that fits your investing journey.Alright — let’s get to the last 12.Will you develop strategies using the equal-weighted S&P 500? 01:44Can you recommend advisors who follow your strategy? 07:20Should I move mutual funds to ETFs in taxable accounts despite taxes? 11:26With markets at highs, should I keep dollar-cost averaging or rebalance? 16:17What portfolio fits 10 years to retire and 20–30 years of decumulation? 24:08Will the configurator shift to only Avantis/DFA funds in 2026? 30:37What does “inflation-adjusted fixed withdrawals” mean? 33:56How should I invest an inheritance for kids/grandkids ages 2–45? 38:21Ultimate Buy-and-Hold vs. two- or four-fund strategies — which is better? 49:03Should political conditions change retirement portfolio decisions? 59:12How do I find a fee-based/hourly advisor (Rhode Island question)? 1:05:56Should very conservative 91-year-olds move beyond bonds and cash? 1:13:28Part 1 of the AAII Q&A Series Part 2 of the AAII Q&A Series AAII trial membership offer (the ~$2 first month deal) Boot Camp series hub Fine-Tuning Your Asset Allocation table / lessonSound Investing / portfolio decade return tables — Fixed vs. Variable Withdrawal episode/article H-2A table referenced in Q9 Chris Pedersen Boot Camp presentation (Two-Fund for Life) Garrett Planning Network advisor directory HelloNectarine hourly advisor platform PlanVision / Mark Zoril reference 

Paul continues his three-part series responding to questions from his November 8 AAII presentation. In this episode, he digs into risk-parity portfolios, the role of gold, how the 10-Fund Strategy compares to the S&P 500, growth vs. value, rebalancing discipline, and how to choose the right bond allocation in retirement. If you were at the AAII event, you’ll find the exact 12 questions listed below so you can jump straight to your topic.12 AAII Questions CoveredThoughts on risk-parity portfolios during retirement distributions? 2:12Was the 10-Fund Strategy originally meant to mirror 60/40? 14:51Should investors add gold (IAU) after its recent streak? 21:40What is a double-rung bond ladder? 24:03Which of the nine portfolios has the best return per unit of risk? 26:36Analysis of growth funds outperforming over the last decade? 31:36How to invest new money when the economic outlook looks uncertain? 36:40Will the AAII slide deck be available? 38:54How often do you rebalance? 39:25How do you tune out the noise and stay the course? 41:13How to choose your bond allocation in the distribution phase?  45:25Can you share ETFs for the bond portion of a retirement portfolio? 52:12Resources MentionedAAII presentation slides10-Fund vs. S&P long-term comparison Fine-Tuning Your Asset Allocation tablesSound Investing tablesRetirement withdrawal tablesLifetime Investment Strategy calculatorBest-in-Class ETF recommendations

Recorded from our new home on Bainbridge Island and released on Thanksgiving, this episode is equal parts gratitude and practical investing help. I open with my annual tradition of writing a fresh Thanksgiving list—people, communities, and institutions that have shaped my life and this work. I’m especially thankful for you, the DIY investors who keep showing up to learn, ask thoughtful questions, and hopefully staying the course.I also share appreciation for the resources that support disciplined investing—Morningstar, the Bogleheads community, and the American Association of Individual Investors (AAII). After a recent AAII presentation (over 150 attendees), we ran out of time for a live Q&A. I promised to respond to every legitimate question, so this episode kicks off a multi-part series answering them in depth.Here are the first 12 AAII questions covered in today’s episode:(9:42) What alterations in portfolio construction do you recommend in transition from accumulation to distribution in order to maximize diversification of uncorrelated assets, safe withdrawal rates, and spending? ⁠Table h2a (21:21) I’m a huge fan of your U.S. two-fund portfolio. Why is diversification between large-cap growth and small-cap value so important, while diversification between VTSAX and AVUS (within the same asset class) is not? Should we diversify fund selection within the same asset class? Table K2b(26:49) Have you considered creating a quilt chart for the Ultimate Buy-and-Hold portfolios with a 70/30 U.S./international split? Table K1a and H2a and H2b(32:04) You appear to have avoided any mention of mid-cap. Should we be ignoring mid-cap funds?(33:35) What do you think about adding alternative investments to the portfolio (for example, managed futures)?(38:39) Are your recommendations for everyone, or does the game change when you have a pension for life?(43:07) I was fighting with the Zoom link and arrived 25 minutes into the presentation. Will a video recording be available to participants?(44:08) What would you expect the difference between the S&P 500 cap-weighted index (VFINX)and the S&P 500 equal-weighted index (VADAX)  to be?(49:53) The four-fund portfolios are equal-weighted across their asset classes, which results in a value tilt overall. Why weigh them equally?(54:35) One might think that adding international large-cap growth and international small-cap value to the two-fund approach would improve results. Does international allocation mainly reduce volatility/drawdown length, or also increase returns?  H2a and H2b(56:26) Can you buy DFA and Avantis funds at Charles Schwab?(58:40) What should you do if you have a lump sum to invest today, but current market highs make entry uncomfortable? https://awealthofcommonsense.com/2025/11/do-we-need-a-long-bear-market/

Paul Merriman brings 60+ years of investing experience to the Retire Today podcast, breaking down what really determines retirement success. Most investors think it’s about picking the right fund or timing the market—but Paul says the biggest threats aren’t headlines. They’re costs and emotions.In the 1960s, investors routinely paid 8.5% to buy a mutual fund. Today fees are far lower, but the impact is still huge. Paul notes that even a 1% difference in expenses “can cost you about $3.5 million over a lifetime” because compounding works both for you and against you.Behavior can cost even more. “When the market goes down, people panic,” Paul explains. Selling in a downturn—the “I just can’t take it anymore” moment—means locking in losses and missing the recovery. His advice: don’t time the market. Build a plan you can actually stick to.When asked what separates retirees who thrive from those who struggle, Paul’s answer is simple: education. What you learn and who you learn it from shapes your decisions—and helps you stay calm when markets get rough. That’s why his nonprofit work focuses on teaching diversified, simple, low-cost strategies through guides like Sound Investing Portfolios and We’re Talking Millions!Paul once promoted a 10-fund “Ultimate Buy-and-Hold” portfolio, but even John Bogle told him it was too complex. After testing simpler versions, Paul found that two-, four-, and six-fund portfolios often matched or beat the original. You can explore these models at PaulMerriman.com/portfolios. The takeaway: simplicity makes discipline easier.We also discussed retirement withdrawals. Paul recommends a flexible approach: take a bit less after down years and a bit more when markets are strong. This can reduce stress and help your portfolio last. “If you know how long you’re likely to live and how much you have,” he says, “that knowledge gives you freedom—not fear.”If you’re approaching retirement, here’s Paul’s short list:Diversify with low-cost index funds. Focus on the right mix, not the perfect pick.Match risk to reality. Choose a stock/bond split you can live with in bad markets.Use flexible withdrawals. Adjust spending based on market conditions.Keep behavior boring. Automate rebalancing and ignore predictions.Invest in education. Knowledge keeps emotions from running the show.You’ve worked hard to build your savings. Now build a plan that works just as hard—quietly, efficiently, and with confidence. Watch the full conversation on YouTube for more on fees, behavior, portfolio design, and practical withdrawal strategies.