"Index funds have regularly produced rates of return exceeding those of active managers
by close to 2 percentage points." Burton Malkiel

In This Edition

This too shall pass
Latest Podcast
AAII Replay
Testimonial

Dear Friends,

This too shall pass.

For almost 15 years my wife, Zan, and I went to San Miguel de Allende, in the winter, to find the sun she worships. We have many great memories of friends, the arts, beautiful gardens, and long walks in San Miguel.

In fact, it was in San Miguel that I took a class from Aysha Griffin on self publishing, during the annual Writers' Conference. That friendship became a ten year working relationship that changed my life and hopefully the lives of the many people who have followed our work. In fact, Aysha and I were worked, along with Rich Buck, on our 3 original books that were produced prior to the establishment of our Foundation. Those books were published under the name of Regalo Publishing. Regalo is Spanish for gift.

When we arrived in SMA for the first time each year the house was perfect. We would typically arrive after dark and would enjoy a bowl of homemade chicken soup and a bottle of red wine while taking in the lights of SMA. I suspect only a few of you read our 2013 article about SMA. https://www.marketwatch.com/story/top-retirement-city-offers-sun-fun-and-affordability-2013-12-04

Fast forward to October 2023. We are driving to Rancho Mirage to move into our new home in the sun. A few of the reasons for Rancho Mirage over SMA is we can easily drive our 3 dogs, it is easier for the rest of the family to join us and if we need to get back home in a hurry, it’s less than 3 hours.

The trip from Bainbridge to RM with dogs is a two night trip. A stop in Medford, Oregon and Fresno, California (both long drives) followed by a half day drive to RM.

As we neared Fresno, Zan called ahead to the Hilton to see if we could get an early check in. Not only could we not get an early check in, we didn’t have a reservation. It didn’t help that Zan had the confirmation number. I suspect they were simply overbooked. To add insult to injury we even received an automated email saying our room was ready!

So, we drove onto our home in the dark of night. I, like a lot of you, don’t like to drive at night in places I don’t know. We got there safely but there was no chicken soup or bottle of wine awaiting us.

We went to bed looking forward to the new day in our new home.

It seems the Hilton snafu was the start of a series of broken “promises.” In the days following “no room in the Inn” we experienced a series of a homeowners worst nightmares. Nothing worked! The TV didn’t work and still isn’t doing what the Spectrum person promised when they left with a hefty tip. The garage door still doesn’t work as promised by the Garage Medic. The air conditioning, which didn’t cover the whole house, finally totally failed. Happily that has been fixed as they discovered the people who put in the new system didn’t use big enough fuses. And finally an electrician is coming next week to find out why so many outlets don’t work.

And if all that wasn't enough, I just found out the rotator cuff I damaged in a recent fall back home on Bainbridge will likely require surgery. The good news is we live 3 miles from the Eisenhower Medical Center.

What does any this have to do with investing? Maybe nothing. As we have said so many times before, the past is no guarantee of the future. Just as I believe all these machines will be working again, I believe bull markets will follow bear markets, small cap will beat large, value will beat growth and stocks will beat bonds.

Latest Podcast

12 Small Cap Value Q & A's

Paul answers 12 questions from the AAII New York City Chapter October 2023 MeetingThe video can be watched here- ⁠https://www.youtube.com/watch?v=QjFlcDAlH1k⁠

Paul's presentation starts at 08:40 and ends at 56:00.

The following links are used in this presentation: Table ⁠B14B⁠, ⁠ETF portfolios⁠, and ⁠SPIVA Report ⁠

Do you recommend using index funds for international funds?
Since small cap value underperforms the S&P 500 for long periods of time, should SCV be avoided by those who are nearing retirement?
I don’t have small cap value available in my 401(k). Will a small cap blend fund have the same impact?
How can there be such radical return differences between the small cap value indexes?
Are you going to show risk-adjusted returns for the index funds? Treynor ratios? Sharpe ratios? Sortino ratios?
How does one juggle the choice between investing in a higher expense ratio ETF (example AVUV) compared to investing in a lower cost index fund? Would the decision be as simple as going with the lower cost fund?
If everyone invests in small cap value funds will that reduce the premium in the future?
Some say the SCV premium is declining because private equity companies are taking SCV companies private. Any truth to the comment?
How do I rebalance a target date fund and a small cap value fund? What gets rebalanced?
Please recap what the good, bad and ugly of small cap value funds and ETFs.
How long have you been aware of the small cap value premium? Did you know about it before they became popular?
Fidelity Freedom TDF 2035 has an expense ratio of .7%. When the expenses are that high does it change your recommendation of adding a small cap value fund?

AAII Replay-The Case for Small Cap Value: The Good, the Bad and the Ugly!

Watch the replay of our AAII meeting here. Paul's presentation starts at 08:40 and ends at 56:00.

What you'll learn:
1. Why small-cap value deserves a place in your portfolio
2. How and why you need to right-size your small-cap value allocation
3. What to expect when it's combined with a target-date fund in accumulation and retirement
4. How to choose small-cap value funds with the highest expected returns

Testimonials

I have been following Paul for years and the lightbulb went off in my head back in 2009 to follow Paul’s Ultimate Buy and Hold Strategy (10 Fund Approach). Recently with Chris Pederson on board I have transitioned to The Best In Class ETF.

More importantly - I would like to thank both Paul and Chris for educating me. I have relayed their info and have both my young boys doing the simplified 2-Fund and 4-Fund approach. Anyway - I’m just so thankful these guys are around!!!

Beyond the S&P 500: How to supercharge your diversification

12 Small Cap Value Q & A's

The Lifelong Process of Financial Education with Paul Merriman

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In This Edition This too shall passLatest PodcastAAII ReplayTestimonial

In This Edition

This too shall pass
Latest Podcast
AAII Replay
Testimonial

Expect the Unexpected