Sound Investing

This week I want to look at what the first ten months of 2026 can teach us about how we invest — and why broad diversification keeps looking like the smartest seat in the house.
I start with a Ben Carlson piece from November 1. If you’ve been picking individual tech and AI stocks lately, it has felt like a bloodbath: Google down more than 30% from its highs, Intel off 54%, Netflix down more than 50%, and a long list of others in the penalty box. And yet the S&P 500 is still up almost 12% on the year, with two-thirds of stocks higher. That gap is the whole case for index funds — and the same logic applies to equity asset classes.
From there I go down my favorite rabbit hole: the year-to-date numbers for Vanguard, Avantis and DFA across large, small, value, REITs, international and emerging markets — and what the differences between “traditional” cap-weighted indexing and the factor-based approach at Avantis and DFA may, and may not, be telling us.
I also dig into combination funds. How did a 70/30 Ultimate Buy and Hold compare with Vanguard’s global VT and with an all-in-one like Avantis’ AVGE? Why does holding these asset classes under one umbrella make rebalancing more tax-efficient in a taxable account? And I walk through a new Avantis study, Risk and Return of Tilted Portfolios, that estimates how much adding value and profitability tilts — and small-cap value — may have added to long-term returns.
Finally, I talk honestly about the hardest part of all of this: tracking error, the temptation to measure yourself against the S&P 500 or your neighbor, and why your willingness to stay the course matters more than any single fund choice. Plus a preview of my upcoming Boglehead Conference debate with Jim Dahle — total market index versus small-cap value.
One nice surprise was an email from Feedspot, a huge database of just about every corner of media — podcasts, blogs, influencers and YouTubers. We were pleased to be included in their Top 26 Mutual Funds Podcasts. We came in 3rd, and it was great to see Don and Tom at Talking Real Money sitting right at the top of the list. Tom and Don have been doing this work for more than 25 years, and they were my teachers when the three of us worked on a weekly radio show and, later, the Sound Investing podcast. If you know their work, you can imagine how much fun it was — some of the best days of my life!
As always, thank you for your feedback, your birthday wishes and your generous support of our work. I hope this one helps.
Timestamps
00:57 — Thank-you for feedback, birthday wishes, and donations
03:04 — The Ben Carlson article: tech/AI stocks down while the S&P 500 is up
05:52 — The case for index funds and broad diversification
06:55 — Our approach: Vanguard vs. Avantis and DFA (traditional vs. factor investing)
09:19 — 10-month performance across the asset classes
15:34 — Combination / all-in-one funds (AVGE, AVGV, Ultimate Buy and Hold)
19:56 — The tax advantage of all-in-one rebalancing
21:17 — How the 2-, 4-, and 5-fund strategies began (Bogle, 2017)
21:53 — Preview of the Boglehead debate with Jim Dahle
22:52 — Seth Godin’s “Not Yet” and the evolution of indexing
29:16 — The Avantis study: Risk and Return of Tilted Portfolios
32:24 — Value, profitability, and focusing on financially strong companies
33:11 — The Bessembinder study
41:33 — Tracking error and the patience test
46:30 — A simple three-way framework for a retiree’s equities
46:11 — Staying the course

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.