Ep. 130 — Paul Merriman Introduces The Ultimate Buy And Hold Portfolio

Most investors settle for market returns—but what if deliberately tilting your portfolio toward historically undervalued, overlooked companies could tilt the odds in your favor? Brad and Jonathan sit down with investment educator Paul Merriman to explore his "ultimate buy-and-hold portfolio" approach and how it differs from the single-fund simplicity championed by J.L. Collins and the Bogleheads. The conversation unpacks small-cap value investing, the emotional discipline required to stay the course during downturns, and why owning everything guarantees you capture the top performers.

Chapters

• Introduction to Paul Merriman 00:01:27
  Background as a stockbroker and investment advisor; transition from traditional brokerage to teaching DIY investment strategies.

• Paul's Investment Philosophy 00:06:07
  Emphasis on simplicity and client empowerment; understanding emotional challenges in investing.

• The Importance of Understanding Risk 00:09:25
  Identifying personal risk tolerance to align with investment strategies; the critical emotional hurdle is staying the course.

• Dollar Cost Averaging Explained 00:15:14
  Benefits of regularly investing fixed amounts, especially during market downturns; historical examples showing improved returns.

• Defining Value and Growth 00:19:11
  Differences between value and growth stocks; value stocks' historical performance and the benefits of investing in out-of-favor companies.

• Merriman's Ultimate Buy and Hold Portfolio 00:32:55
  Discussion of a diversified portfolio strategy incorporating small-cap value and other asset classes; comparison with traditional single-fund strategies emphasizing broader allocation.

• Conclusion and Key Takeaways 01:12:00
  Recap of Merriman's strategies, including the importance of decision-making and staying informed; encouragement to consider diversification and small-cap value for enhanced returns.

Key Takeaways

• Review your current investment portfolio for diversification 00:36:14
• Implement dollar cost averaging into your investment strategy 00:15:14
• Evaluate target date funds based on their glide path, focusing on those that limit bond exposure in younger age brackets 00:52:23
• Understand your risk tolerance to align with investment strategies
• Small-cap value has historically been a top-performing asset class

Notable Quotes

• "Investing is easier, cheaper, and more diversified than ever." — Paul Merriman 00:12:41
• "Always prepare for the worst while hoping for the best outcome." — Paul Merriman 00:31:15
• "Keeping it simple often yields better returns than complexity." — Paul Merriman 00:49:23
• "Owning all guarantees access to the top performing 4%." — Paul Merriman 00:42:00
• "Investing regularly during downturns can enhance long-term gains." — Paul Merriman 00:15:14

Resources

• Paul Merriman's Website 01:12:16
• Your Money and Your Brain by Jason Zweig 01:10:03

Terminology

• Small Cap Value 00:19:11 : Stocks of relatively small companies that are trading at a price lower than their intrinsic value.
• Dollar Cost Averaging 00:15:14 : Investing a fixed amount regularly to reduce overall impact of market volatility.
• Target Date Fund 00:52:01 : A mutual fund that automatically adjusts its asset allocation according to the target retirement date.