“Wealth is largely the result of habit.” John Jacob Astor

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Ben Carlson- Truth Teller

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Dear Friends,

I enjoyed putting together this week’s podcast. I am always looking for ways to present information that will help investors develop a better set of expectations regarding returns. I hope this one helps.

Ben Carlson, one of our Truth Tellers, motivated this idea. He built a set of graphs that represents the growth of $1 over 20 year periods starting in 1930 and ending in 2000.

As someone who would like to count on my investments to do something good for me, past history makes it very clear it’s hard to guess what’s going to happen next.

Ben’s results were focused on the S&P 500. The $1 investment produced a very small $2.39 (1930-1949) to rip roaring $26.83 (1980-1999). At the end of the winning 20 year period investors believed that future returns would be 20% or better. In fact, the next 20 years produced $3.24.

Of course I had to compare the S&P 500 with our 4 Fund Portfolio. It won’t surprise you to find out that the 4 Fund Portfolio performed better as the risks of the additional equity asset classes are all higher than the S&P 500. But what may surprise you is that the 4 Fund Portfolio beat the S&P in all but one 20 year period. From 1980 through 1999 the S&P $1 grew to $26.83 while the 4 Fund combination was beat by a nose—$28.58.

The other number I hope you will remember is the average additional return of the more diversified portfolio was 42%.

What shocked me was the return of the NASDAQ. There were only 3 20-year periods to compare (1980-1999, 1990-2009 and 2000-2019), but the 4 Fund Portfolio outperformed the NASDAQ in 2 out of three of the periods. The average advantage was about 40% for the 4 Fund Portfolio.

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New Study: S&P 500 vs 4 Fund Portfolio

Paul begins the podcast by noting a recent interview he had with Andrew Giancola of Master Money and the Personal Finance Podcast. The topic is “⁠Simple Financial Steps With Massive Payoffs⁠.”

In this podcast Paul discusses a new study that compares long term returns of the S&P 500 and the 4 Fund Portfolio. The study was motivated by an ⁠article written by Ben Carlson⁠.

Paul discusses the same 20 year periods starting in 1930 and compares the results of The 4 Fund Portfolio to that of the S&P 500. He also makes the case, using one of ⁠his favorite quilt charts⁠, that the 4 Fund Portfolio is not only more profitable but is less risky on an annual basis.

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"I just finished listening to your podcast episode on The Personal Finance Podcast with Andrew Giancola. I loved it! I appreciate your advice and your approach to teaching people about investing. You are an excellent teacher." JB

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3 ways investors are tricked — and 6 ways to protect yourself

New Study: S&P 500 vs 4 Fund Portfolio

The Lifelong Process of Financial Education with Paul Merriman

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In This EditionBen Carlson- Truth Teller Latest PodcastTestimonialsThank you

In This Edition
Ben Carlson- Truth Teller

Latest Podcast
Testimonials
Thank you

Building reasonable return expectations