How Does Paul Merriman Keep Getting This So Wrong

This guy is as dumb as he is inarticulate. It is hard to understand what he is saying because of all his diversions and asides. Merriman suggests a tilt to small-cap value will outperform growth, but over a 30-year period. He doesn't suggest small-cap will outperform over any 10-year period picked at random. Merriman is just repeating the research done by Fama and French. Merriman has always emphasized a diversified portfolio with a tilt to value and small cap value in particular. And above all, buy and hold strategy.

I ran across this theory and started to look at the data as I am interested with such high CAPE ratios. I came to a similar conclusion. Who knows what the future will bring, but the data backs the S&P overall. Value could very well go on a real “heater” again. If you do a total stock index (like I do) you get a bit of everything anyway. I saw an interview between Merriman and Big Ern. It reminded me of a political debate with one side telling how they want things to be and the other looking at all the data. Good Video Josh.

Would be more helpful if you provided a recommendation for the long term. If you have videos that recommend something better, please comment with the link. Arguing against "cherry picking" with your own "cherry picked" time range is not convincing or helpful.

Are you kidding me? You accuse Paul of cherry picking to show small cap value is better, yet you sure do go ahead and CHERRY PICK the date range of 2012 to 2021 to try to prove Paul is wrong, with a SMALLER date range, one in which the S&P was to top dog and you freaking already know that like everyone else does. Such a scattered and disorganized video sir. You are not analyzing anything here.

“12 years” ?? This guy has recency bias....Paul already mentions this over and over again - with SCV you might have to wait a long time to see the premium - and looks like this guy cherry picked Paul’s videos ...lol...because Paul shows data from 1920s and tells us that during many time periods (including the last decade) the SP500 has trounced the SCV - but over multiple decades, things start to change.....

Good timing on video. I’ve been listening and reading Merriman a lot recently. I was trending towards his recommendations of SCV. But I was heading that way with a lot of angst. Now I’m really confused. AVUV has about 27% returns over the last 2 years. But it’s down this year. I know. Buy and hold. But buy and hold what?

You are correct with your comments about Dave Ramsey but Paul Merriman is a very well respected person who only is looking out for the best interest of the investor preferably a young investor.

Interesting take on the research from Paul, I think it highlights some potential risks with Paul’s strategy. If his thoughts on small cap value would work, perhaps the time horizon would be very long and one should consider if those perfect storm elements to drive a significant small cap outperformance for an extended time (~10 years) should happen again. My gut tells me that in ‘24 we get a small cap outperformance, I’m not a huge fan of the category though from all the volatility. Funny when the media labels it with a ghost company narrative, that’s inherent of the category long term.

Ive always wondered if Paul gets some kickbacks from DFA or now Avantis. 🤔. At the end of the day no one knows what will do better over an individuals investing horizon. Paul is just so dogmatic in his selling of scv that i can't help but think somewhere he is making money (maybe from his newsletters or ad sales from newsletter subscriber data). I hope I'm wrong, just haven't found many people in life who arent incentived by monetary gain.

There seems to be a misunderstanding of history here. What Paul is saying mirrors the long term research which shows that value and small cap value outperform growth over the long term, so he suggests tilting towards value and small cap. There is further academic research that suggests that there isn't much of a small cap outperformance, but rather that the value premium is stronger in small caps. What that means is tilting towards value and small cap value over the long term should increase your long term performance. There's an even stronger case to tilt that direction currently since growth has outperformed in the past decade or so. Historically when that happens, growth goes on to underperform by quite a bit over the following 20 years. At any rate, I think it's fine for folks to own the whole market (which currently naturally tilts towards growth) so that you have the psychological comfort of getting whole market returns. However, if you want to outperform you'll have to have a different ride than the market, which means some periods of underperformance and some periods of outperformance. It takes a stronger psychological constitution to do this.

Invest in Coca Cola because it it Long term best.

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In some seasons growth does better, in some season value does better.

Whew.... little ADHD ya think!?

Thank you for the analysis - you hit the nail on the head - always ask the question: "What if I am wrong?" So - to better position oneself for the future - would the safest 'bet' be VTI or a combination of VTI and VUG? I wonder if the exceedingly low interest rate environment had something to do with the Value underperformance (low interest rates tend to favor growth - or so I have heard). I have traditionally invested in Target Retirement funds - but suspect a similar pattern of underperformance given their bond weighting. Time for me to get to work and use Portfolio Visualizer on those compared to alternatives (like VTI + VUG).

I’ll trust Merriman et al research, yours, not so much. Just silly and a disservice to anyone that watches. Stop please

Sir, you’d make a good used car salesman. The way you communicate doesn’t instill ANY confidence

What is your anti Merriman portfolio then for the long term?

If you’re trying to learn with the intent of deciding what to do with your own money, I advise you not to listen to this guy. The assumption that recent events are more likely to be repeated than remote events is called recency bias. If the next ten years is going to be like the last ten, the s and p 500 will outperform just about everything else. However, the next ten years will almost certainly not be like the last ten. Since 1926, there have been decades where the s and p 500 beat small cap value, but that has never occurred two decades in a row. Also, note that investing in two things that perform better AT DIFFERENT TIMES improves returns and risk adjusted returns. There are more problems with what’s said here, but I’ll stop. Just find another source of financial education. I recommend Ben Felix.

Gotta say, mad props for pinning to the top a negative comment.

I think for most investors you should have a 500 index , some international, some large cap value ; some small cap blend and govt bonds

Yes, but if you take the mutual fund versions of these ETFs and you back test them to 1999, a 23 year period, the small cap value radically outperforms on a whole. that is more representative of what small-cap value can do over the S&P.

Get to the point, we don't need the DRAMA!

most of the changes occurred over a 2 to 3 year run at the end of the decade you looked at. means virtually nothing unless you're planning on living only 10 years and invest for 10 years. not sure your points are valid. i've been invested for 40 years and diversified us, international, small and large. growth and value. different bonds at different times and i've made money in all of them when all is said and done. Merriman makes valid points backed by real numbers over many time frames of investing. i think in my lifetime of investing in mainly a diverse group of mutual fund i was probably close to his ultimate buy and hold portfolio given their diversity. Not saying it s the best, but i know its not the worst. And i dont think he's wrong. Publish YOUR tables and numbers for 50 plus years and your portfolios and stack them up if you think you're right. Maybe you are and if you're portfolios make money for people who follow your advice then God bless you. But understand this...for investing....no one REALLY knows what the future brings but learn from history.

What if we replaced the 2 blend funds with growth fund's then much closer to 25,25,25,25

thanks

This guy is an idiot. Paul does not cherry picking. If you go to Paul's website, he uses data going back 100 years and looks at value, small cap value, large cap blend and small cap blend. His antics and attention deficit detours are extremely annoying.

You make a good point for investors with a time frame of 10 years or less. I suspect Paul would even agree with you on that, given his warning about possible decades of underperformance. For investors with a time frame of multiple decades, value and more so small-cap value have consistently produced positive risk premiums in their returns.

“Stop cherry-picking!”
proceeds to cherry-pick for half the video

Question- Why do you say “Paul is cherry picking” when the only funds you used, you picked, except for VTI which he recommends at the end? It’s a dishonest comparison and accusation to the work they put out!? Unless you actually compare their recommendations to your own or what they already compare it to this whole argument you placed is nothing but trying to build off someone else’s name

Josh I am confused. In another one of your videos you said you were aggressively buying VTV.

Cherry picking...so he's just like Al Gore...

I think an important takeaway from those comparisons (growth vs. value) is the spread that increased dramatically when technology started maturing from its infancy around 2000+. Technology (computer science to be more precise) is going to drive all aspects of life in a few years and life will just get better and easier each day. It is already doing it and will be there forever. Technology (again computer science to be specific) was by far the most impactful discoveries in human history that was ever made. If you are selling your tech stocks now to rotate into other sectors watch out.

VFIIX=GNMA,... VFINX?

Not many people are able to catch something like that. Thanks again for clearing the road. Good to have an honest man on your side.

I love cherries, but I'll stop pickin' 'em! Almost time for blueberries and raspberries around Intel Country, however. 😄

I haven’t followed Dave Ramsey on this — is he also a heavy small cap value tilter?

Ramsey's 12% rate of return when the historical stock market is 8% is ridiculous! The last over 100 years has averaged 8%, period. Overall, I like Ramsey's message but his investment returns are WRONG, WRONG WRONG. Its easy to score with a four fund COMBO if you choose it AFTER the FACT. Love, love, love Jeremy Siegel's work. To anyone who hasn't read his stocks for the long run, you need to get that book and read it! I often pick his book up used at thrift stores and hand them out to others that want to learn about investing.

Thanks Josh. Funny how YT puts in an advert with this vid so many times when you were ready to emphasize a point.

Not disagreeing with you, but I know he has some charts on his website that don’t cherry pick dates because they look at all 20 year periods since the early 1900s. May want to look at those.

Thanks again Josh! Don't know where I'd be without your honesty and straight talk! (In the poor house for sure!)

This is why I quit reading the lay press money magazines years ago. Most of the so-called gurus are liars, and everybody talks their book. There are very few honest financial advisors, and very few good financial advisors....and very, very, very few financial advisors who are both good and honest.

I was born in ’55...so that example is a pretty good one for me.....that could have been me....had I worked a crappy corporate job like the one I left in 1978. I might be looking at 22K/year and thinking I’d done okay. Or 33K if I’d invested with a crook like Merriman maybe. lol.

I have many assets that give a decent return....but I have one single asset, a small boat storage facility, that I bought for chump change in 2009, that flows more cash than either of those sad plans. And the dirt it sits on protects me from inflation. I run it on a laptop with no employees and it takes 2 hours a month or so of my time. I guess that’s unconventional to most people’s way of thinking.But I can do it until I drop.

I have a question for you. You’re obviously an experienced and reliable fiduciary. How many clients even stay the course with a plan like that for 35 or 40 years, and don’t get wiped out by divorce or bankruptcy....or end up tapping the retirement plan for a downpayment on a house, or for kid’s college or some other “important” reason? Is it more than half that start a plan early in their career?

I've tried to listen to Merriman on podcasts in the past but he's so unbelievably boring and non-focused that it takes him forever to get to making his points.

I guess I have a question that might have been answered before but simply put should I have all of my money in the tsp S fund, C fund, or 50/50? The S fund has done fantastic since the pandemic. But I don't know if I should keep it there or not.

Thank you Josh...You're honesty and integrity in the financial world is refreshing.

My Mid Cap Value fund did not so well over the past 8 years, but I balance that against some specific style funds in Health Science and Small Cap Growth. I keep a Capital Appreciation Fund as the basic core, and it keeps just marching along at about 7% year over year. Lately my Value Fund is doing better while the other engine drivers have started getting a bit shakier. How has this all worked out over the course of the last 17 years. Bought a house, a car, a knee, a 4 wheeler, a motorcycle...all depriciative assets, and still am up in value. Not rich, but steady money flow, which makes my taxes a bit of a hassle every year.

USMV=25, VGT=25%, SCHP=20%, SCHR=10%, SPTL=20%