Jonathan and Brad discuss Playing with FIRE updates and the ultimate buy and hold portfolio.
Playing With FIRE update
Brad and Jonathan just returned from the world premiere of Playing with FIRE in San Diego. Around 250 people showed up to the event and it was an eye-opening experience.
You should not watch this at home on your couch in the living room. Right now, you have the opportunity and need to join the Financial Independence community. You need to watch this. Go to the movie theatre, watch this movie, join your local community of like-minded individuals.
The minimum number of tickets needed for a screening of Playing with FIRE is 70. Many cities are close to their threshold but are a few tickets short. If you live in one of these areas, please grab a ticket and go meet your tribe.
These are the deadlines to reach the minimum ticket threshold for select cities.
- Grand Rapids- June 20th
- Albany -June 20th
- Pittsburgh- June 27th
- Nashville- June 19th
- Portland- June 24th
- Vancouver -June 24th
- Las Vegas- June 24
- Long Beach, CA – June 24
- Pittsburgh- June 27th
- Phoenix-June 27th
- Honolulu- July 3rd
If you are in the area, please attend. Bring along family or friends that might be interested. It is a great way to introduce them to this concept and show that it has a large following.
Bring a friend to the documentary. This is more than just Financial Independence, the whole point is to spread this message as far as we can.
The Ultimate Buy And Hold Strategy
Brad and Jonathan asked William on the show to discuss the pros and cons of this strategy. Plus, they found a way to simplify the maintenance of this portfolio.
Merriman is the ultimate diversified investor. Instead of investing in just the S&P 500 or a total stock market index that holds around 3,000 companies, he has around 12,000 companies in the ultimate buy and hold strategy.
Similarly to most of our thinking, Merriman recognizes the value of low fees.
The lower the expenses, the better the likely returns over the long-term.
In the ultimate buy and hold portfolio, there are eight to ten asset classes to keep track of which can be difficult. However, Merriman realized this was too complicated for the average investor to keep up with after a conversation with John Bogle. So, he found a way to maximize the benefits while keeping it simple with the two funds for life strategy.
With the two funds for life strategy, the two funds are target date index funds and small-cap value funds. Overall, Merriman believes that this combination will outperform the S&P 500 and the entire stock market.
Merriman’s newest strategy, and what he is advising, is the ‘two funds for life’. And now to me, this makes more sense. So, ultimate buy and hold, you look at, there are eight to ten different funds in there… it’s a little bit too much for my own brain, frankly. But with this ‘two funds for life’ [strategy] it really simply is the target date index fund, and then the small-cap value fund.
However, this asset allocation performs better based on increased risk.
Any extra performance is generally because you are taking on more work or more risk. But just because you take on more risk doesn’t mean you are going to get a good return.
Additional Companies In Your Portfolio
Since a total stock market index is thousands of companies, you may be wondering how Merriman is able to add even more to his portfolio. The answer is that his portfolio goes international. It includes developed stocks and emerging market stocks from around the world.
JL Collins countered this point in episode 36. Most large companies within the US have operations and exposure overseas, so he is getting that exposure through the larger companies. In his line of thinking, international stocks can be associated with higher fees and less transparency.
William countered that the higher fees for international stock are largely a thing of the past.
You don’t know where the winners are going to be and that justifies international exposure as well.
If you are interested in following the two funds for life strategy, then you have options for the small-cap value portion. You can choose individual stocks, actively managed funds, or index funds.
The biggest thing that will mess you up is if you switch course. You know, it’s fine to bring in new information and make a change. But if you get emotionally tied to returns and you don’t stay the course for five, seven, or ten years from now, you’re never going to see the outcome projected by the academics 40 years from now.
Simplify With M1 Finance
If you are interested in these strategies but uncomfortable about the amount of rebalancing you need to do yourself, then consider M1 Finance. You can replicate the strategy and get most of the benefits by using this platform. M1 Finance is a brokerage platform that allows you to set up your asset allocation in terms of a pie chart.
You can set up the percentages of your portfolio and M1 Finance will do the rest.
It is the ideal platform for dealing with multiple funds or multiple allocations like the ultimate buy and hold that Paul has defined.
ChooseFI has created a tutorial to help get you started with M1 Finance here.
Simply set up your own strategy based on the risks you are comfortable with and M1 Finance will take care of the rest. You will stay in your predetermined asset classes without breaking a sweat. The platform will allow you to rebalance with new deposits and any dividends to avoid the tax implications of selling within your taxable accounts.
Calling Our Community
Our community places high importance on financial literacy and works to spread it. We have the opportunity to spread it farther through a partnership with Junior Achievements. They have provided the opportunity to teach kids about finance in your local area through finance parks.
So far, Seattle, San Diego, and St. Louis are ready to go.
We are still looking for volunteers to lead this program in Denver, Phoenix, Atlanta, Detroit, Charlotte, Milwaukee, D.C., Minneapolis, and Richmond.
If you are interested in helping out, then send an email to [email protected] choosefi.com
Also, there will be two webinars hosted by Junior Achievements on June 13 at 12:30 EST and 12:30 PST. Head over to choosefi.com/ja to learn more.