#550: Paul Merriman: The 4-Fund Strategy That Beats the S&P 500

Paul Merriman, a former wealth manager turned financial educator, joins us to share investing wisdom that could reshape how you think about your money.

We kick things off talking about portfolio diversification. Paul suggests a simple four-fund strategy that includes large cap, small cap, and value stocks. He says this mix has historically beaten the S&P 500 with lower risk.

We then dive into international investing. Paul explains that while adding international stocks doesn’t necessarily boost returns, it can help smooth out the ride. He keeps half his equity portfolio in international stocks, even at age 81.

Got kids? Paul’s got some advice for you too. He tells us about putting money aside for his new granddaughter, aiming to fund her Roth IRA as soon as she can earn income. He breaks down how investing just a dollar a day from birth to age 21 could turn into millions by retirement age. It’s a powerful lesson in starting early and the magic of compound interest.

We also chat about some common investing mistakes. Paul stresses that young investors often underestimate the power of stocks over bonds for long-term growth. He shares some eye-opening numbers: $100 invested in bonds since 1928 would have grown to about $12,000, while the same amount in small cap value stocks would be worth nearly $15 million.

Paul wants you to think of investing as a partnership with businesses. When you buy a mutual fund, you’re becoming a senior partner in thousands of companies. At first, your contributions drive most of the growth. But over time, market returns take over, and you become the junior partner to a much larger fortune.

We wrap up with Paul sharing his excitement about a 40-hour financial education program he helped create at Western Washington University. It’s designed to teach students essential money skills throughout their college years, from budgeting as freshmen to understanding 401(k)s as seniors.

Throughout our chat, Paul’s message is clear: start early, stay diversified, and think long-term. He believes that with the right education and mindset, anyone can build a solid financial future.

Timestamps:

Note: Timestamps will vary on individual listening devices based on dynamic advertising run times.

0:00 Intro to Paul Merriman and podcast topic

0:57 Two-fund portfolio strategy

3:55 Four-fund portfolio strategy explained

5:31 Large cap performance concerns

7:06 S&P 500 vs Total Market Index

10:59 AI impact on large companies

14:43 Market trends and historical performance

20:41 International equity in portfolios

25:26 ETFs vs index funds

29:41 Non-US investor asset allocation

38:41 Setting up kids financially

43:57 Early investing importance

48:37 Common investor mistakes

50:25 Investing as business partnership

52:51 Evolving financial education landscape

Resourced Mentioned:
Merriman Financial Education Foundation | Financial Education (paulmerriman.com) | Website and Links to Free Books


Thanks to our sponsors!

Indeed
If you’re looking for amazing talent to bolster your team, you need Indeed. Go to indeed.com/paula for a $75 job credit to upgrade your listing and start hiring today.


Shopify
Diversify your business by selling physical and digital products through Shopify’s all-in-one platform. Go to shopify.com/paula for $1/month trial and get full access to Shopify’s entire suite of features.


NetSuite
NetSuite is the number one cloud financial system, bringing accounting, financial management, inventory, HR, into ONE platform, and ONE source of truth. Head to NetSuite.com/PAULA  to download the CFO’s Guide to AI andMachine Learning.


Quince
Quince offers a range of high-quality items at prices within reach. Go to Quince.com/paula for free shipping on your order and 365-day returns.


Wayfair
Wayfair is the go-to destination for everything home, no matter your style or budget. Go to wayfair.com or the Wayfair mobile app to get everything you need for your holiday.


Monarch Money
Monarch is the top-rated, all-in-one personal finance app. It gives you a comprehensive view of all your accounts, investments, transactions, cash flow,net worth, and more. Go to monarchmoney.com/paula to for your extended thirty-day FREE trial.

Source: Afford Anything