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Ultimate Buy and Hold Equity Paul Merriman

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  • Avatar eyes4success 
    Participant
    Status: Physician
    Posts: 17
    Joined: 07/05/2017

    Hi,

    I tried to search the forum board but wondering what you guys thought of Paul Merriman’s Ultimate Buy and Hold Portfolio.

    https://www.marketwatch.com/story/the-ultimate-buy-and-hold-strategy-2018-edition-2018-02-14

    I came up with my current asset allocation in my vanguard roth/taxable accounts my 4th year in residency, I can’t remember how I came up with it but tried to stick with it the past two years. I’m wondering if I should switch to his Portfolio #8 as he’s got some pretty good statistical data. He has a nice table that shows different portfolios from #1 to #8 with #1 being the S& P 500 and #8 having a mix of S&P, US Large cap value, US Small Cap Blend, US small Cap value, US REIT,s +INT’l, and Emerging Markets.

    https://paulmerriman.com/wp-content/uploads/2018/02/UBH-FTYAA-Tables-70-30-0-2017-Returns-Update.pdf

     

    This is my current asset allocation with rebalancing 1 a year and last year was my first attempt at tax-loss harvesting. I’m 32 years old and started off with a 15% Bonds allocation, but thinking of reducing my bonds allocation to zero.

    Stocks 75%
              a) 65% alternating between VTSAX and Vanguard 500 Index Fund , 20% international (50% Vanguard International Growth, 50% Vanguard Total International Stock Index)
              b) small-cap tilt of 15% (vanguard Small Cap Value Index Fund)
     real estate 10% only in REIT’s
      3. Bonds 15% (currently )
           a) Intermediate Term-tax exempt in taxable,  VBTLX in roth

    Please let me know what your thoughts are on Paul Merriman’s Ultimate Buy and Hold Strategy, and if you have any advice/pointers on whether I should make the switch or any good tips on my allocation. Thanks!

    #189053 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4516
    Joined: 05/13/2011

    If you believe in factor investing, Paul’s portfolios are excellent. If you don’t, they’re overly complex.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #189078 Reply
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3024
    Joined: 09/18/2018
    I can’t remember how I came up with it but tried to stick with it the past two years. I’

    Click to expand…

    Two things to consider:

    Do you understand your portfolio allocation and why?

    Do you think two years is sufficient for changing your allocation or did your personal situation change your ability or capacity for risk?

    From your question it sounds like you need to put some work into your process. When do you change it?

    #189085 Reply
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6176
    Joined: 01/12/2016

    I think those kinds of things are fine but definitely can be overly complex. That article is kind of a bummer. All text with no graphs of performance or any visual aid to immediately see things?

    PDF isnt too bad, but what I’d love to see is what the variance of each of these portfolios is from a sector weighting type standpoint compared to the SP or a total market fund. Theres no way there isnt significant overlap that couldnt likely be replicated with fewer funds. It doesnt look bad, its just a lot of funds.

    It would be cool to see what funds would be used to replicate it. Not a terribly difficult strategy, just busier than some.

    I wouldnt switch to any single one of the portfolios, that would be performance chasing and not likely to replicate in the future. The value of this blend is the diversification.

    #189089 Reply
    Jarpee Jarpee 
    Participant
    Status: Physician, Small Business Owner
    Posts: 127
    Joined: 02/06/2017

    If you believe in factor investing, Paul’s portfolios are excellent. If you don’t, they’re overly complex.

    Click to expand…

    Factor investing?

    #189109 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4516
    Joined: 05/13/2011

    If you believe in factor investing, Paul’s portfolios are excellent. If you don’t, they’re overly complex.

    Click to expand…

    Factor investing?

    Click to expand…

    This is the issue. You can’t even have a conversation about this without the background knowledge.

    Factors, like small, value, momentum etc might be additional sources of risk and risk premiums for a portfolio. That is, a portfolio that is 75% total stock market fund and 25% small value fund may have better returns than a portfolio that is 100% total stock market fund. The historical data suggests that it is. But whether that pattern will persist in the future, we really don’t know. A factor investor would tilt the portfolio toward small and value stocks. A total market investor (one who doesn’t believe factors are real or worthwhile) would not.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #189118 Reply
    Liked by billy, Zaphod
    Zaphod Zaphod 
    Participant
    Status: Physician, Small Business Owner
    Posts: 6176
    Joined: 01/12/2016
    Splash Refinancing Bonus

    Factors, smart beta, aka things that hedge funds used to know and exploit that everyone knows now.

    Size, value, momentum, etc…thats all it is. As you change your allocation away from whatever benchmark you’re tracking your portfolio moves more or less than the market. Beta.

    The factors that do well historically they call “smart” so they can sell you etps.

    #189126 Reply
    Avatar burritos 
    Participant
    Status: Physician
    Posts: 493
    Joined: 04/23/2018

    Why not BRKB(good for you if you were early into BRKA)?

    #189162 Reply
    Avatar eyes4success 
    Participant
    Status: Physician
    Posts: 17
    Joined: 07/05/2017

    I guess the question is then what are the pros/cons of factor investing then.  I tilted small-cap value based off of reading Dr. William Bernstein’s books Investor Manifesto and 4 Pillars of Investing, as well as reading the whitecoat investor and evaluating other portfolios. Also added 10% of REIT’s to add some real estate and variety to my portfolio. I’m thinking of readjusting my portfolio asset allocation because my situation has changed from when I was a resident to now where I have a lot more money flowing in. I have a good amount of emergency fund saved up, no debt, and I’m starting to feel like the 15% bonds part of  my portfolio is unnecessary as I feel like I can be more aggressive given my situation. Based off Paul Merriman’s tables, although a bit more complex than the simple 3 fund portfolio, it’s still pretty straightforward and based on the past it seems like having portfolio #8 vs just investing in 1 or 2 funds made a BIG BIG difference that it investing in that plan is worth the the time and effort. It still seems like passive investing, just may be a bit more time and effort than the 3 fund portfolio. Thank you everyone for your input

    #189298 Reply
    Avatar frankba3 
    Participant
    Status: Retired
    Posts: 1
    Joined: 07/25/2019

    I’m a big fan of Paul’s.  The charting with statistical information provides the proof needed to be a believer. Having retired from a medical sales career in my mid/late 50’s several years back, I decided to go with the Ultimate Buy & Hold (#8).  My hobby is following the performance of the stock market as well as various ETF’s & mutual funds, both growth and value styles.

    Comparing my choices from Paul’s recommendations, which were virtually all value vehicles, to various growth funds, I noticed that growth funds have been outperforming for quite a while.  While this has probably been obvious to many others, I noticed that value has lagged growth for a decade(+).  Value has outperformed for longer periods but not being in growth or at least being more heavily weighted, performance has suffered in recent years.

    I’ve bailed from the Ultimate Buy & Hold and I’ve taken more of a growth approach to my choices.  The YTD performances are showing improvement in my account values vs. previous holdings.  With our current administration and the low-interest-rate environment in place, I believe growth is and will be the better performer.

    Always keeping a close eye on the performance of value funds, I believe that a turning point will occur and that value will come back with a vengeance proving Paul’s detailed research to be true.

    #233494 Reply
    Avatar saildawg 
    Participant
    Status: Physician
    Posts: 334
    Joined: 01/24/2016

    It is one of many reasonable portfolios, you add some risk (small caps) in exchange for hopefully higher reward/return.  As a starting physician, just know that your ability to create a larger gap between your income and expenses is going to matter much more in creating your wealth.  My personal suggestion is to use a simple market cap indexed portfolio like the simple 3 fund portfolio and call it a day.  As an ophthalmologist spend more time on researching your ASC and optical shop etc, seeing how you can get more returns from an investment you can control.

    #234719 Reply

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