BiggerPockets Money Podcast - Paul Merriman’s 4-Step Portfolio Strategy for Long-Term Wealth

Episode Date: February 17, 2026

In this episode of the BiggerPockets Money podcast, hosts Mindy Jensen and Scott Trench are joined by Paul Merriman. Paul shares decades of investing wisdom and explains why simple index investing often outperforms complex strategies. We explore the power of diversification beyond the S&P 500, the importance of bonds in a portfolio, and how glide paths reduce risk over time. Paul also breaks down the psychological traps that sabotage investors—and how to avoid them. If you want to: Build wealth with index funds Create a smarter asset allocation Reduce risk while maximizing long-term returns This episode is your blueprint. To go beyond the podcast: Kick start your financial independence journey with our FREE financial resources Subscribe on YouTube for even more content Connect with us on social media to join the other BiggerPockets Money listeners Connect with Paul Merriman: Website: https://www.paulmerriman.com/ Paul’s New Book ‘We’re Talking Millions!’: https://irp.cdn-website.com/6b78c197/files/uploaded/Were-Talking-Millions.pdf Learn more about your ad choices. Visit megaphone.fm/adchoices

Mindy and I are so grateful for the following sponsors who make Bigger Pockets Money possible. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your taxed refund can make the biggest impact. Because the goal isn't just to look backward, it's to actually make progress.

Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and investments, net worth, and future planning together in one dashboard on your phone or your laptop. Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place.

So every decision actually moves in Edle. Achieve your financial goals for good with Monarch, the all-in-one tool. that makes money management simple. Use the code Pockets at monarch.com for half off your first year. That's 50% off at monarch.com code pockets. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group.

Their fund six offers investors exposure to real estate credit, largely for construction and rehab, with loans originated by an experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly and a 70-30 LP-GP split of everything over 10% paid annually. The lock-up period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only. The fund's minimum is typically $100,000, but Pine Financial is able to reduce that minimum for bigger pockets money listeners to a minimum of $25,000. Full disclosure, I am personally invested in this fund through my self-directed IRA. Pine Financial is sponsoring this message and our podcast.

podcast. Go to biggerpocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fun performance. I love Matt, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes, but somehow every small business owner ends up doing it. Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season without you doing the heavy lifting.

You can set aside money for business goals, control spending with virtual cards, and find tax write-offs you didn't even know existed. It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners who say, found makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC.

Don't put this one off. Join thousands of small business owners who have streamlined their finances with found. What if there was an investing strategy so simple, so proven, that you could set it up once and barely touch it for decades and still beat most active investors? Today, we are talking to Paul Merriman, legendary investor and author of a very person. about the ultimate buy and hold portfolio strategy. Whether you're just starting out or you have millions invested already, this conversation will change how you think about building wealth through index investing. Hello, hello, hello, and welcome to the Bigger Pockets Money podcast.

My name is Mindy Jensen. And with me as always is my index investing co-host, Scott Trench. Thanks, Mindy. Great to be here. I'm so excited that my enthusiasm is going to have to be actively managed today. We are so excited to be joined by Paul Merriman. If you aren't familiar with Paul, he is a longtime investor-educated. and a big believer in simple evidence-based investing.

After decades, as a financial advisor, Paul now focuses on helping everyday investors through his nonprofit books and his newest book, we're talking millions. In addition to his Sound Investing podcast, he's all about making long-term investing feel doable for everyone. We are actually going to be doing a crossover, and so this will be released on both the Bigger Pockets Money podcast and the Sound Investing podcast if you are listening on the Sound Investing podcast. Welcome to the Bigger Pockets Money.

Sound investing podcast, Paul. I am equally excited. I've been waiting for this for a long time, and I sometimes ask myself, should I have been more aggressive and invited myself? But thanks for inviting me. Yeah, we should have invited you like five years ago. Eight years ago. Eight years, yeah. Let's kick off things by getting into the background that has generated the philosophy you bring to investing.

So I think you've been in the investing industry for decades. How did you go from active management or traditional active management to becoming one of the biggest advocates in the space for passive buy and hold index investing? My initial start in the industry was in 1966 and I went to work for a brokerage firm. It was one of the cleanest operations on Wall Street because they didn't underwrite. They didn't make markets. All they did was allow the people who worked there to buy and sell securities. So you weren't asked to do the unusual in order to feed the house, but it still was an industry that was just filled with conflicts of interest.

And so I only lasted until 1969, but I learned a lot while I was in the business. And I went through other businesses. I ran businesses, started businesses. I love small business, and I'm in essence still in a small business. But what happened was I was taught by Wall Street initially. So I in some ways thought along the way of active management. When I started my investment advisory firm in 1983, what I knew was for the previous 20 years, people didn't make any money in the market. It went up and then down and up and down.

And buying whole didn't work. And in fact, there was this question in the late 70s about whether or not it was the end of investing. And so I came into it trying to figure out defensive ways to help people, which meant market timing. And then I have to give credit to my son who joined the firm. And I have always been comfortable personally with market timing. I don't advocate it to anybody, but I personally feel okay with it. On the other hand, my son said, Dad, we really need to be able to offer people a buy-and-hold strategy as well. And then I had the magic two or three days at DFA.

They put on a workshop, and I'll tell you, I came out of that two or three days of a good, solid teaching about indexing and how to put portfolios together. to help people. And I was sold and I came home and gave my son a hug and thanked him for pointing me in the right direction. So it wasn't entirely easy to turn the ship, but we got it turned and it has made a huge difference. You just said that buy and hold didn't work for the 20 years between like 1963 and 1983. Why do you think that is? Was that just the crazy 1970s market? Yes. I mean, what happened was you had a run up to a thousand and you had a run down to five, six hundred, and then back up to a thousand and then back down again. And so what happened is people were, they were not learning the lesson that investing works in the long term. And as we

all know, a lot of people, if it doesn't work in the first year or two or three, they don't think it's any good. And so the lesson they were learning was you can't trust the stock market. And Wall Street, of course, they always had something to sell. If stocks weren't any good, they could sell you annuities, or if annuities weren't any good, they could sell you limited partnerships. They always had something that had been recently working. But the market itself hadn't worked well for some time. So do you think that buy and hold was just kind of stuck for a little bit and then continued on? Or do you think that, well, I guess, I guess it's the same thing. Like, for those 20 years, buy and hold didn't work. Do you see that coming again? Oh, well, of course. Great.

Well, what I mean is I can guarantee the people who follow our work that if you do it, that you will have periods of decline and more than like the major declines. And if you're not ready, if you're not trained, if you're not committed to it, then buy and hole, goes out the window. And you know, Wall Street claims that market timing doesn't work. But if you look at what they do, they're constantly market timing, telling people they should have more bonds in their portfolio, they should have more international. They move around as things that have been doing well lately, make people happy because people love being in something that's been doing well lately, but it better do something pretty good for them soon, or they're going to be looking for another way,

to beat the rap. And so it isn't easy being a buy-in holder. That's why we have to train them, I think, to prepare for the worst, hope for the best, prepare for the worst, and diversify and protect yourself every way you possibly can. I want to go back to this concept. You had an epiphany that your, and your son prompted this with this retreat that you went to. I think you said DFA. What were you doing before and what were you doing after? What was the first? What was What was the change? What was that epiphany and how did that actually come together? Well, what I was doing before was a legitimate market timing. We built portfolios where the funds were tracked on a daily basis and using simple trend following kinds of strategies, we would

move in and out of those funds. We had large and small company funds. We had international and U.S. We had all the same asset classes, but we weren't just buying and holding. We were trying to protect people from suffering through a major market decline in the hopes that they would stay the course for the long term. This is what I'm still looking for. Scott, I'm still looking for a way to get people to stay the course, except for trying to get them to do it with buy and hold. And when the market is down and seemingly out of control for a year or two, it really tests people's resolve. And they question the source of the advice. And unfortunately, well, let me say, fortunately, more people look to John Bogle for advice in a sense than looking to Wall Street.

But we didn't have John Bogle when I was in the industry and I started. And so that was something that had I had that when I started in the industry, I suspect I would have had a different path in the industry. So when you say buy and hold, your work does not talk about just buy the S&P 500 and set it and forget it. There's more to it than that across the body of your work in a lot of cases. There's multiple funds. You have different designs. I think you have up to 10 different funds here that range in complexity or funds that range from two. to 10 different components. Can you tell us a little bit about how that work evolved and why buy and hold,

in your view, seems not to be as simple as buy one index fund and forget it? Well, first of all, I'm okay if people buy one index fund and forget it. And that would be the S&B 500. I don't think that's a bad thing to do. I think a person getting a 10% compound likely. Actually, the 40-year average return is 11% since 1928. And so that's a really fine return. And when I spoke and met with John Bogle in 2017, he agreed with all the things that were doing. He just didn't agree that they were good for the investor because they're confusing. They complicate the process. But what the academics taught us is that not only should we have hundreds and hundreds of stock. in our portfolio, but it's not enough diversification to just have yourself planted in the large-cap

blend category, which is the S&P 500, that there are long periods of time that the S&P 500 has underperformed. And if you diversify amongst the other major equity asset classes that the academics blessed, that's what I was introduced to back in the, and the, and the, and the, and, and mid-90s was the blessing of a whole bunch of equity asset classes. And when you put them together, they aren't guaranteed to kind of offset each other as they go up and down. But I can tell you in 2000 to 2009, when the S&P 500 compounded at a negative 1%, a broadly diversified portfolio of equity asset classes compounded at over seven. kept a lot of people involved and staying the course because they they saw that you didn't have to

have everything go down 50%, which it did. Now, not every bare market is that kind to us that that something's going up when other things are going down. Sometimes everything goes down, and you've got to be prepared emotionally for that as well. So what does that look like in practice? Like, what are the options that someone has to diversify across these baskets of stocks? And what is your research taught you? Where do you bias the starting point for that? We certainly know that we want investors to have part of their portfolio in the S&P 500, because that's the highest quality of all of the equity asset classes.

And so if you are going to have one and only one, that is probably the one you should have. But what happens? And I've got a quilt chart that we've built for investors to be able to see this in color. And that is we look at every year since 1928. And what happens to the S&P 500 and large cap value and small cap blend and small cap value? And you can see year by year how random they're up and down. And sometimes there'll be many years. The S&P 500 is right at the bottom of the group.

And then another period of time, they'll be at the top of the group. It's a random series of events. And people would like to think that these things are predictable. They are not predictable from everything that I have learned. But what happens that is so magic is that when you build a portfolio since 1928, 25% large-cap blend, S-F-P-500, 25% large-cap value out-of-favor companies that sell. lower PE ratios, 25% with small cap blend, and 25% with small cap value. And something truly

magical happens, but it's nothing more than what we learned about the diversification across different equities, individual companies. It turns out that when you combine those four equity asset classes, you get the lowest volatility of any of the four because you got them all. And And so the returns are right in the middle, almost year by 78% of the time, right exactly in the middle. Now, that's okay, but what kind of return did you get? Well, what the academics taught me, and I try to teach others, what we teach is anything that I've made up.

I'm simply sharing what I've learned from the academics. What happens is when you add more risky investments to the portfolio, the risk goes up and so does the return. So for the last 96 years, the combination of all four of those equity asset classes, U.S. only, because we can't go back to 1928

with internationals, but what we know is that the return is about one and a half percent more than the S&P 500. And yet the S&P's up here, it's down here, it's over there, it's out there. But the four fund is kind of

just hanging in there. You're never number one. You're never last. And hopefully that will give people a sense of stability. But it turns out that you can do about the same thing if you only had part of your portfolio in the S&P 500 and part in small cap value. Because the S&P has large cap value, has large cap growth. And small cap value gives you value and gives you small. And so people can invest with two funds and get a little bit higher return. Yeah, you go up about another two-tenths of one percent, I think. But still, and this is, I just think this is so important. If you go back to 1970 and you have a portfolio that is only in the S&P 500, and you have a portfolio that's half S&P 500 and half small cap value, and you look at all of the losing years. And the S&P.

The S&P 500 has a higher total loss factor, if you look at all the losing years, then the combination of the two, which means that you have reduced the risk, and oftentimes the S&P 500 is at the top and the small cap values at the bottom and they flip flop. And that over time lowers the volatility of the portfolio, raises the return, and you can do it with just two funds. And you don't have to be 50-50. We show you the table for 60, 40, 70, 30, 80, 20. This is all being done for do-it-yourself investors.

I'm not an advisor. I'm a teacher trying to help do-it-yourself investors. Nothing more, but I love doing it. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly where your money is going, and more importantly, where your tax refund can make the biggest impact. Because the goal isn't just to look backward. It's to actually make progress. Simplify your finances with Monarch. Monarch is the all-in-one personal finance tool designed to make your life easier. It brings your entire financial life, including budgeting, accounts and future planning together in one dashboard on your phone or your laptop.

Feel aware and in control of your finances this tax season and get 50% off your Monarch subscription with the code pockets. What I personally like is that Monarch, keeps you focused on achieving, not just tracking. You can see your budgets, debt payoff, savings goals, and net worth all in one place. So every decision actually moves the needle. Achieve your financial goals for good with Monarch, the all in one tool that makes money management simple. Use the code pockets at Monarch.com for half off your first year. That's 50% off at Monarch.com code pockets. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experience by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group.

Their fund six offers investors exposure to real estate credit, largely for construction and rehab, with loans originated by an experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly and a 70-30 LP split of everything over 10% paid annually. The lock-up period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only.

The fund's minimum investment is typically $100,000. But Pine Financial is able to reduce that minimum for Bigger Pockets Money listeners to a minimum of $25,000. Full disclosure, I am personally invested in this fund through my self-directed IRA. Pine Financial is sponsoring this message and our podcast. Go to biggerpocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fund performance. Audible has been a core part of my routine for more than a decade. I started listening years ago to make better use of drive time and workouts, and it stuck.

At this point, I've logged over 229 audiobook completions on Audible alone, and I still regularly re-listen to the highest impact titles. Lately, I've been listening to Bigger Leen or Stronger for Fitness, the Anxious Generation for Parenting Perspective, and several Arthur Brooks' audiobooks that have been excellent for mental well-being. What makes Audible so powerful as its breadth. Beyond audiobooks, you also get Audible Originals, podcasts, and a massive back catalog across business, health, parenting, and more, all accessible in one app.

If you're looking to turn everyday moments into real progress, Audible has been indispensable for me over over 10 years. Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at audible.com slash BP Money. You regularly publish, here's what I think is the best fund in this category, which I think is awesome. It's a wonderful resource that you provide to the community. What does that criteria look like?

Because you're regularly updating this and providing opinions. We are going through a transition this year, and it's a big deal to me. I'm 82, and I know my days are numbers. And so if I'm going to actually help people for the rest of their life, I know what I've got to do is to figure out a way to get them in a fund, whether it's large or small or value or U.S. or international, get them in an ETF that I believe they can hold for the rest of their life and not be forcing them to reconsider what might be better this next year. And so there's something really good that's happened in the industry that not everybody knows about. DFA dimensional

funds were a family of funds that only people with a lot of money could get into because you had to have an investment advisor who was approved by DFA offer their mutual funds. And many of those advisors, their minimum size account was a million dollars. So it wasn't for the public. But the work they do is fantastic. But now, because several years ago, back in 2019, actually, a group of people left DFA and they started a new mutual fund family and they offered that work as an ETF where anybody could put their money into it. And if you look at AVUV, which is our number one, recommendation for small cap value. And you compare that. Its return is virtually the same as what DFA has been able to accomplish. Because Avantus came on the market with these ETSs, DFA had no choice, I believe,

but to follow and come make their funds available to everybody. So now my feeling is, if I could get a young person or an old person, depending on how much equities they want in their portfolio, into, I don't care whether it's Avantus, ETFs, or DFA's ETFs, or both of their ETFs. I truly believe that is a position they could take for a lifetime. The idea of the S&P 500, what Bogle brought us was to invest in something for a lifetime. Well, it worked, and now we need to figure out

what can we recommend that you, as an individual investor, could do for a lifetime. And I have high confidence that DFA and Avantus will fulfill that for their investors. And that is what Frank Vasquez put me in when we had him walk me through creating a risk parity portfolio. As soon as you said AVUV, I'm like, oh, Uncle Frank gave me that. And we've been recommending Avantis for some years, but we had to make sure they could, in fact, replicate the work of DFA. And that work is mind-blowing. You talk about small, here's a fund that's been around as a traditional index fund since 2000. It's the fund IWN that follows the Russell 2000 small-cap value. If you compare that track record with DFA's small-cap value fund that's been in existence

since the same time, the work of DFA has almost doubled the work of the traditional Russell 2,000 small cap value. Most people do not realize that there's good small cap value and there's, I'll call it bad. There's a small cap value that is not built to make as much money as others. So now that sounds like a big fat sales pitch, I think, to far a lot of people, but because Wall Street is filled with them. What is it that makes an ETF good? Like what are we investing in? Like we have this concept of small cap value. I think that. that's been being much more popular lately. People intuitively understand the core underlying philosophy.

But I don't think people understand the mechanics. What makes AV-U-V good relative to what you said, IWN or another ETF? This is a great topic because it isn't discussed very much, and that is the difference between a traditional index fund and a non-traditional index fund. It's actually what the U.S. government calls funds like AVUV and DFSV. They are non-traditional index funds. The traditional index fund like the S&P 500, if you look at all the different S&P 500 funds, they are built just the same.

What's going to be the difference in return is going to be the expense ratio. That's it. Now, there are a few equal weighted S&P 500 funds, but only a couple, and they're fine too. But if you go, I don't care whether you go to Vanguard or Fidelity or Schwab, the S&P 500 is the S&P 500. And again, look at the expense ratio. That's what you should use as your guide to choose the one you're going to have in your

portfolio. Now, this is not true with small cap value. Understand that if Swab has an S&P 500 fund or Fidelity does or anybody does, they're paying in the S&P company, Standard & Poor's, a licensing fee. And it's not cheap. What happened was when small cap value funds started to be the rage. They built their own. Morning Star has one.

Morgan Stanley has one. The Center for Security Prices from the University of Chicago, there's one there. There are six very different small cap value funds. But understand the difference between the S&P 500 and small cap value funds. value. The idea with the S&P 500 is truly, truly buy and hold because they would like to be able to find 500 companies and keep them in the portfolio doing what they do well forever. They don't have to change the companies, but they change the companies because some companies don't do well and then you take those companies out of the S&P. But basically, you're counting on those companies

that survive long-term to make you the money in the S&P 500. That is not true with small cap value. Those companies are only in there for a relatively short period of time because they may be out of favor. Their P.E. racial may be price to earnings ratio may be very low now. But if some group of people starts buying those and they push those out of the value group and into the growth group, no longer in the fund. There's a lot more turnover expected in small cap value. In fact, the whole

idea is to get the companies out of it because when they are out of it, they've made some money for the shareholders. So then they take that money and they go buy another company that's out of favor. Small cap value is not about finding the companies that might be the future, the videos, or Facebooks or whatever. No, because if one of those companies does well, they're out of the club. They're in the growth club, not in the value club. So now it is a big question.

How are you buying those? What kind are you buying? For example, with a traditional, like the Russell 2000, they don't require the companies to have good financial statements. They have lots of companies in the Russell 2000 that those companies are not likely to say. succeed. And they know it, but they're small. And people like DFA and Avondas are building portfolios and not including them. They have a higher quality underlying portfolio. There's a certain cutoff

for price to earnings. I think that is going to be one of the foundational principles in determining whether something is a value stock or not. What does debt to capitalization look like in the context of that as well, right? Because you're not a value stock if you make a million bucks, but you have 10 million in debt, right? That's a very, arguably. So how are the rules set up for these? Here again, the rules can be set up by whoever says this is an index that we have built, and it wouldn't be unusual that that is being built to look for companies that have low price to their book value. The academics found early on that not P.E. ratio, but that book, to value ratio is more important in being able to predict, is this going to be a good small

cap value company? It boils down to how they buy and sell, when they buy and sell. Every step they take to manage that portfolio is got a fork in the road. You can have a portfolio that every company is based on their cap waiting. So when you buy the S&P 500, the big companies are going to represent a major portion of that index. On the other hand, when you are building your own small cap value strategy, you can decide you're not going to be cap-weighted. You can decide, if you want to, that you're going to buy, without telling anybody you're going to buy,

and try to get the prices for the investors who are serving at a lower price, as opposed to regular indexes that declare in a week we are going to be buying these and we're going to be selling these, and all of a sudden you've got the problem with, public front running or a professional front running where the shareholders don't get the break they should get. Now, I'm not saying that regular index funds are bad. I'm just saying that everything that we know from the past indicates that these non-traditional index funds are likely to produce better returns because they do so much more than the traditional.

So in the case of AV UV-UV, right, at that Avantus Fund, what are their rules that govern it that make it better, in your view, than their competition? Well, they're going to have intern rules about the size. They're going to have intern rules about when they sell. They're going to have internal rules about what conditions do they look, what kinds of things in the balance sheet are important to them. They are taking an academic look at all these different ones. This is what came out of DFA, was this, the idea of factor investing. So they're looking at quality. They're looking at momentum.

They're looking at size. They're looking at liquidity. And each of these companies, DFA does not have the same set of requirements when to buy, when to sell. That's one of the reasons I think if people wanted to put money into both DFA and of honest, I think that'd be great because they don't hold all. all the same equities. They aren't mere images of each other. But I do know they're coming to work every day trying to use every factor they know to help their investors, which is not true of the

S&P 500 or most of the traditional index funds. Paul, you just gave us a portfolio, 25% large cap blend, 25% large cap value, 25% small cap blend and 25% small cap value. Does this portfolio hold hold for a lifetime, or is this more towards the beginning of your investing career and then as you age or get closer to retirement, you switch this up? Well, this is about the glide path, and everybody should have a glide path. And can you define glide path for our listeners who aren't quite sure what that means? Let's just talk about a target date fund, which I think is one of the greatest inventions, investment invention made. And that is that when you go in, into a target date fund, like the Vanguard fund, it is 90% in equities and 10% in bonds.

By the time you are 40, it's still 10% in bonds and 90%. But from there on, slowly over the years, they are adding more and more bonds to the portfolio. That's a very conservative glide path. But you could develop your own personal glide path based on Vanguard. based on Black Rock, based on fidelity. They all have slightly different glide paths, but the thing that they're trying to do is to help people get more defensive as they get older. On the other hand, I recommend everybody spend some time with an hourly advisor and go through this,

because this building of a glide path is a very personal thing. And while I come up with a glide path for conservative, for moderate, and for aggressives, but I'm not the one that's talking to these people individually and getting them headed in the right direction. I can tell you this, I'm 82 and I'm half in bonds. If I were had that money in a target date fund at Vanguard, they would have me 70% in bonds. But the fact is, is that my wife and I are mostly investing for charities and for children. And yes, we're going to live off it.

But we really have to invest more aggressively than have all our money there to take care of us if we happen to end up in an old folks home. And so it's a personal decision. And of course, when I'm talking to somebody who's just getting started and they want to retire early, well, you're talking my language because I really push young people to go all equities from day one. Because you can't lose. And by the way, when I say, all equities, I'm not talking about individual companies, I'm talking about diversified portfolios.

Whether it's a four-fund strategy or the S&P 500, you don't want any bonds in that portfolio because they're holding you back from getting to do the one thing you want to do, and that is buy more shares when the market's down. So every penny, that's got to be there. Now, here's the reason you can't lose. There are two things going to have. happen to a young person who starts investing early. And that's so important. They're earlier. Earlier the better, obviously. But if you happen in the first five years to invest in a terrible market, your grandparents may be complaining. Your parents may be complaining. But you are buying cheap shares of great companies. Again, if you're buying a diversified portfolio and you're getting

them cheap, one of the greatest periods historically, 40-year periods, was for people. who started investing in 1932 because you got into stuff that was really cheap and you benefited over the long term. On the other hand, maybe, just maybe, instead of picking the most terrible five years, you could imagine, you get five years like 1995 to 1999. The S&P 500 compounds at 28 and a half percent for five years. You have just hit a bonanza with your early dollars. And there's a couple of reasons it's a bonanza. Not only did you make a lot of money, but every time that market's going up,

it's patting you on the back saying, you made a good decision. And we need those paths on the back because if we get them, we're more likely to stay the course. Okay, you are speaking my language because I just looked at the total amount of my portfolio that's in bonds and it's $2,600. And the only reason it's in bonds is because Frank Vasquez made me do it when he set me up with my risk parity portfolio.

So I'm 53 and I have a rounding error, not even a rounding error of my portfolio in bonds. At what age are you starting to think that people should get into bonds a little bit more? You're at, what did you say, 50% at age 82? Yes. It's so tricky to try to give. cheap advice, and that's what my advice is. It's free. And so it does not know the investor. But here's what I do know. Every one of us needs to have enough money to last a lifetime. Now, the big difference between John Bogle and me, when I met with him in 2017, I learned

a lot about him in 90 minutes. And the one thing I know, he had enough on his mind. That's all he could think about was enough for the people who followed his work. And I told him, you know, the difference between us is I want more than enough. And the reason I want more than enough is not because I'm greedy. It's because in my life, having been giving advice for many years, I can't believe how many plans I've seen that didn't work out the way people planned them. And that's because they didn't plan for more than enough. And so when I think about you, at 53. Now, I'm not going to ask you for numbers, but I'm going to tell you that if I sat down with you when I was an investment advisor before I retired in 2012, we'd have an hour to talk about

where you are, where you're trying to go, how much money do you want in retirement, what are you thinking about inflation? I mean, all these things are part of that plan. And sometimes it takes an hour or a two to work with a planner to make sure you've got all that in place because like it or not, we're all making decisions based on faith here and based on trust in somebody. You are trusting, Frank, with the risk parity. I would choose my strategy over his. He would choose his strategy over mine, but the fact is they're both going to work just fine, I think, over the long term.

But if you don't address how much to put in bonds, you are saying right to the day that you don't move to bonds, I am willing to lose half of my money. I am sitting here right now knowing that there's a high probability that I'm going to lose half of my money. It happened in 73 and 74. It happened in 2002 and it happened 2007 to early 2009. You had a chance to lose half of your money and prove that that is the risk that is, likely in your portfolio. How do you feel at age 60 taking the risk of losing half of your money? You might not like that.

My thoughts about losing half of my money is I'm only losing it if I sell. So if the market drops by 50%, I'm going to figure out a way to keep my money in the stock market until it recovers, which I truly believe it will do because I have faith in the U.S. system. That's fine. but I will tell you, if you have the ability to adjust your cost of living, what we're moving towards is the day that you retire, and now you're taking money out. We have almost 250 tables on our website. Scott, evidently, you saw a bunch of them. I saw about 30 of them. Yeah.

So there's a real deep dive. A lot of them are about distributions. Are you taking 3%, 4%, 5%, 6? Are you taking fixed distributions or variable distributions? Every time you look at one of those tables, you could say, oh, if I had all my money in equities, I would run out of money before I ran out of life if I had to meet a certain cost of living. Right now, you're doing well enough financially, evidently. You're not worried about having to take money out to live on. You're putting it away, and you love what you're doing. I loved what I did until I was 70 and I sold the company and I kept doing the same thing except doing it for free.

I mean, I love what I do and you love what you do. You're changing people's financial futures and you may do it for another 30 years, in which case you don't ever have to take money out of your investments. And you could be all equities all the time forever. I know lots of people who have pensions and Social Security and they don't touch any of the other money. money and it's all inequities, pedal to the metal until the day they die. And their kids get all that stuff on a stepped up basis. So as long as I am not withdrawing from my portfolio, it can still be in equities. Like, I am perfectly comfortable with risk. I have some individual stocks that are very growth. We're tech heavy in our stock portfolio. I do still have some individual stocks because

they've done really well. I still believe it. in the future of the company. I do have S&P 500 index funds that are just, as I'm selling individual stocks, I'm putting the money into the S&P 500 just to be more diversified. But it's only sort of more diversified. I'm still really tech heavy in everything that I have. But I'm also comfortable with a lot of risks. So since I have other money to live off of in the form of income, I'm a real estate agent. So I, you randomly sell houses and that funds my life. So what I'm hearing you say is that if you're comfortable with risk and you have other sources of income, you're not withdrawing, you can keep your money in the equities as much as you're comfortable with.

I think so. And here's when I was an advisor, I had the same tables that we update every year for the people who follow our work. They're called fine-tuning tables. And they will show you the S&P 500, all equities, 9010, 80-20. It will show you the returns year by year since 1970 of of different combinations of equities and fixed income. And down at the bottom of that page, it shows the worst six months, the worst year, the worst three years, the worst five years. And when I was an advisor, I wanted to make sure that the person I was helping was willing to accept that kind of loss.

And oftentimes it was a couple. The person who was in control, yeah, all the way, equities all the time. And the other person is scared to death of equities. And I would try to get them to compromise, and they had plenty of money. I mean, there's a psychological end of this business that you can't answer with numbers. But when I could show them, if you follow my advice, if you're 50-50, you must be ready to lose 25% of your money. Now, my wife and I are 50-50.

So we're willing to lose 25% of our money. We take 5% out of our portfolio in the first week of the year. That's our money for the year to live on. and to give away, and whatever happens, happens. And if it goes down 25%, we're going to take a cut and pay. It'll be 5% of a lower number because the number we've got is already too high to begin with because we over-saved. I worked until I was 70.

I sell the firm and do well in selling the firm, and I don't spend money easily, and my wife does. These are the things that we struggle with, and the problem is for people, They don't start struggling until the problem is right in their face. And it's actually happening to them. And we do not make good decisions when we are under stress. I've always done my best to try to help people prepare for the worst, hope for the best, and make sure they're being legitimate in their expectations. Because too many people have unrealistic expectations.

They just haven't been bit badly yet. but they will. History just shows too much of it. I've got some questions here because Mindy is very aggressive and is fine losing 50% of her money. And I am not fine with that. I'm very cautious. I have an entrepreneurial it. I'm very happy to go and do those types of things and roll up my sleeves and work and all that.

So it was Mindy and a lot of other people. But that's where I'm happy to apply more risk tolerance, if you will. My thought was, you know, last year when I stepped down as a CEO, and began to actually need my portfolio to generate some income that I'm going to spend. It was, hey, I'm so heavily concentrated in stocks. I'm going to sell a big chunk of stocks and move it into a rental property that's paid off. And the reason I'm not going to put it into bonds is because I'm 35 and I know bonds is a losing bet for me over a very long period of time. You are an academic.

I'm an amateur in the concept of portfolio theory, getting the privilege of talking to masters like yourself. I would love some feedback on that particular one, selfishly, while we're on the show here, before we turn into the broader international stuff that I want to get to as well. It would be fun to go through that conversation at length. But here's the bottom line. What I might have said to you, if you're really uncomfortable with the market, but you want to maintain liquidity, if you could look at the chart, having 20 or 30 percent in the market has been very low risk and yet has made a much higher return historically than real estate,

and you would have one-day liquidity if you needed it. So there are different paths that you can take. I have never owned real estate to try to make a profit on it. So it's just I like one-day liquidity. I really do. And I like knowing that there's something there to stabilize it, which is the fixed income. I'm maybe as conservative as you are, Scott.

When I was 40, I got to a number that I had shot for since I was age 19 and got married. I wanted to have a certain amount of money. I didn't have it at 30, but I had it at 40. We didn't have the fire movement going on then, but it was the same thing. And so I decided to start a business. But I was so conservative that the only I was willing to invest and risk. $15,000. That's it.

I'm not putting any more than $15,000 into this company because the chance it's going to survive and be worth anything is very, very small. And I was so stupid as to give over half of the company to my kids because I didn't think it was going to do anything. And so that became my investment management company. And that's the only money I ever put into it was that $15,000. I worked really hard. I was the first one in in the morning and I was the last one out at night. I didn't get paid for years, but it paid off.

But my risk capital was $15,000 because I was afraid of it. I didn't want to lose any more than $15,000 in a self-funded entrepreneurial idea, wanting to be an investment advisor. I wasn't an investment advisor. No, I love it. I think there's a very similar mentality into various approaches here. I'll move off that real estate topic here. So we have a lot of research on how you improve return profiles by moving into separate different funds here.

I think underlying that is the value thesis, that the value just outperforms to certain extent over very long periods of time in many different types of cycles. Is that an underpinning of the core research in this? If I may just talk about that small cap value, it is not an easy investment to have. And I'll tell you why. If you dig into the long-term return since 1928, it has had, I think, six periods, long periods where it underperformed the S&P 500, maybe it was only five periods, but underperformed for 16 to 19 years. And at what point do you say, who convinced me about this? Well, is Paul Mirman?

Well, he's dead. I'm getting out of this thing. I mean, small cap value, you wait around. it stays in there and then it explodes. Like this month, small cap value is up maybe 7, 8%. Last year, the whole year, it was up about 8% except for the international small cap value, which was up about 40, which is why I think it's smart

to have some U.S. and some international. And fortunately, both DFA and Vannas have them. Okay, I'm glad you brought up international because I'm starting to hear a lot of investment advisors, suggesting that you have some international exposure. But international is literally everything but America. There's got to be some countries that are better or perform better than others. Do you have any favorites?

Well, my favorites are to own basically all of them. You have choices. You have emerging markets as an asset class. You have international large blend, international small blend, international large value, international small value. And as a matter of fact, when you add those to that famous 10 fund strategy, the return by adding these four asset classes internationally and emerging markets, it's over a half a percent.

Remember, a half a percent is a really big deal. A half a percent is for a young person, another million and a half dollars over their lifetime, even if they only put away $6,000 a year. It's huge, a half a percent. Both small cap value and U.S. International have paid a premium over large cap blend and large cap value. But again, they come in streaks. Now, I just have to, inside, I just, I'm howling because many, when you tell me about people are starting to say you should get into internationals, that's not the way it's supposed to work. You're supposed to know the international, I don't mean you, but I mean the industry. They sell to the path of least resistance.

Every salesperson I've ever known sells to the path of least resistance that gets them to the quickest yes. And the quickest yes is to tell people, hey, you ought to have some money in this thing that's been making a lot of money. Look at this shiny nickel over here. I mean, it's not fair because it's so ungodly wrong. What we should do is say, look, I don't want to own 10 funds. What four funds could I have? And you say, I might say, well, do you want international for the rest of your life in the portfolio or not? You might say, yep, I do.

Well, then I can suggest a portfolio that's 25% in large-cap blend, 25% in small-cap value. I can give you the other 25% in international large-cap value and international small-cap blend. Now I've got the same four equity asset classes, but I've got my portfolio, half you, as half international. And you'll get almost the same return a little better, actually, than my 10 fund strategy than my wife and I own. International is not about should we be in it this year. International is a great place to be in for the long term. But then if you tell me, but it didn't do well recently? Well, what do you do with the S&P 500 when it goes down 1% a year for 10 years? Do you decide I'm never going to have the S&P 500 in my portfolio?

No, if you did that and you had all your money in equities and you were retired and an advisor did that to you and didn't have a letter in the file that said, I tried to get them to put some fixed income in the portfolio. Otherwise, they're acceptable to getting a lawsuit because that's what these things do. So we can treat it lightly in a way. but when you're actually helping people manage money, which is why, by the way, most advisors tend to get very conservative. I'm trying to help do it yourself, people and investors, be a little more aggressive longer in their life. I think they can do that. When we think about these allocations,

you're talking about, hey, you know, internationals pot all the rage right now because it went up, you know, a bazillion percent in 2025. And that's not a good reason to invest in it. It's a good reason to invest in it. It's a good reason to invest in because of the principles over very long periods of time. What about the inverse, though, where you have something that is approaching all-time high price to sales, price to earnings, price to book, you know, what you pick your metrics in terms of pricing? Does that begin to change the math at all? Or is that something going to totally ignore the approach that you bring to long-term investing? Well, this is one of those things, again, that tends to be a kind of personal, and that is how often we rebalance because the whole idea of rebalancing is so counterintuitive. Take from the rich

and give to the poor. Take from something that's really felt good lately. You see, and once it starts down and we see that, oh, it can go down too, we start thinking, well, maybe it can go down a lot. And maybe I should be selling. I mean, if you don't have a strategy as to how you're going to take the risk out of your portfolio of being caught with too much of your money in an asset class, that takes a big nose dive. And they do. And remember that in 1987, on October 19th, the market went down 22% in one day. And by the way, this is not a reason to do market timing. But I was a market timer then before we had the buy and hold. My clients were all in cash when that happened. And I was a hero. In fact, that was what got me on to be the special weekly guest for Lewis Ruccott.

on a show that nobody knows anymore called Wall Street Week. And it got me a nightly business report. And it got me in a three-page spread in U.S. News and World Report about my work. Because I was out, and I would try to tell people, I did not call the crash. I happened to be out when it happened. Nobody wanted to hear that. They wanted to hear somebody new. I didn't know.

And the only reason I didn't get on the front page of Money Magazine is because, Because Elaine Garzarelli did too. She was a market timer. She had her clients out, and she was ever so much better looking than I was. After that night on Rue Kaiser's show, I got 400 phone calls. People wanted to have me help them with their money. We weren't ready for that at all. And what happened?

My performance for the next couple of years wasn't as good as just being a buy and holder. And that's the problem with chasing asset classes, chasing returns. And by the way, if returns are what you're really about, you are so at risk of things like cryptocurrency where people know how to manipulate markets. And pump and dump is just part of the game. And I know I'll get more hate mail. But to answer your question, Scott, the answer is rebalance. How often?

Once a year, if you want. Some people rebalance. If you read Larry Swedril's work, one of our truth tellers, Larry will tell people if it gets us 5% out of line, I mean, he's got rules. I think it's a good idea to have some rules. Or never rebalance. But have your portfolio diversified over a whole bunch of different holdings. So then you know something, I'm not so sure that it's a good thing to do. Rebalancing the fixed income doesn't mean. make you more money. Rebalancing. As matter of fact, if all you own is the S&P 500 and small cap value, rebalancing is going to help because so often they're at the top or the bottom. You just said rebalancing is taking from the rich and giving to the poor. Exactly. Let me ask you one more question here. Are there any valuations of these types of asset classes where you'd say that is now so ridiculous that it's time to break some rules or I put some rules in place. And conversely, like, one of the things I'm interested in is a view on bonds when interest

rates are literally zero. And there's almost no conceivable case where they can go that much lower in there. Does that then change the rules for bond ownership, for example, from a few years ago? Are there any extremes that you would, you would say, you know what, take this, this academic theory and the historical research seriously? And of course, we move away from it in these extreme scenarios. Bonds are there for one of two reasons generally. One is that you want the income from the bonds, in which case, we recommend a whole bunch of different bond funds, bond funds that are likely to get you to more income, but maybe give you more volatility. But if you've got bonds in your portfolio because you're stabilizing your portfolio with the bonds, so when the market goes down 50%, you go down 25, for example, then instead of these income generating bonds, what you're looking for are short to intermediate term governments. I never go any longer with that money that's stabilizing money than intermediate.

So they don't go wild and crazy when interest rates flip-flop around. They will some, but not bad, like long-term bonds do. But I still need the stability. And in a money market fund might be paying more than I can get on a bond maybe. But the fact is the risk, my equity risk is being stabilized with the bonds, even if they don't pay me anything. You said rebalancing, right? But when we rebalance in practice early in the journey, that just means investing in whatever one, you know, putting the additional dollars into the fund to rebalance here.

New money goes in to bring it back in balance. Yep. Now let's talk about decumulation. So someone builds their portfolio for a very long period of time. It's an S&P 500 index fund, simple path to wealth kind of philosophy. Now we're thinking, okay, I'm going to actually get more into portfolio theory because you can't just be in this kind of simple path. of index fund and decumulate safely unless you're going to, you know, go so far beyond

these rules of thumb from a withdrawal sequence, you're going to need some kind of bond exposure, some kind of different fund exposure. Could you give us your not just your fund strategy we talked about here, but also the withdrawal strategy, where should these assets be placed in a relative sense for asset location in the context of the frameworks you've built? We have tables where we take out 3% and adjust for inflation. We have tables where we take out 3% variable. So whatever the portfolio is worth, you take out 3%.

If it goes up, you get more because you're taking 3% of a higher number. If it goes down, you get less because you're taking 3% of a lower number. We have the same table for 4%, 5%, 6%. We have it for the equity being the S&P 500 only or the 2 fund strategy or the 5 fund. I mean, we have nine different equity strategies that people can choose from along with all those different combinations in 10% increments so that you can actually see what have looked like had you retired in 1970 and tried to live off of that money, taking out the different amounts of money. And I will tell you, there's nothing wrong with having an all equity portfolio all of

your life. If you just look at the table, if you take out 3%, it even works at 4%. But I can tell you, at 5%, you're broken about less than 30 years. At 6%, you're broke even sooner. And yet, my wife and I are taking out 5%. And the reason we can and not worry about it is because we're not adjusting for the inflation. So when you have more than enough money that you can take out 6% a year, you could, but when it goes down, you're going to take 6% of a lower number. And, of course, it also depends how long you have to live.

if somebody retired at age 40, you've got to have a little longer conversation than somebody retiring at age 82. There's more to consider. Because there's also, like, when I retired, I promised my wife that I would never work for money again. And I have absolutely kept that promise to this day. I had not been paid one penny since 2012. Unfortunately, what she thought I said was, I'm not going to work again. He comes back to my little, place there in, are you ever coming out? These are big decisions and decisions that mostly should be made with a couple, if that's what it's about, your saving rate, the rate you take it out. We have tried to build a table for every major decision you're going to make. Try to give you the ETFs to use

to fund those decisions, whether it's fixed income or its equity. And there are things, I have differences of opinion. Frank likes commodities, likes gold. I think that's great that he does. Long term, that's not something that I use. So you're going to run into these small differences. But I think most of us, if we get you diversified, it's going to have large and small in value and growth. And everybody needs to say no to bonds or say yes and no why and when. It's just that simple. Any good hourly advisor should be able to take a look at your plan and say, in fact, this happened. When I was an advisor, nine out of ten times people had way more money than they needed for the rest of their life. Those are the kinds of people that tend to come and ask for an

advisor's help. The people who are underfunded, they won't do it because they've been making these decisions on their own, their whole life, and by God, I'm not going to trust some bozo who's going to make money off me? Well, you know, it used to be 200 bucks an hour. Maybe it's 400 bucks an hour now, but I will tell you that is money well spent if you don't really know what you're doing. I love it. And I want to say something here that you're not saying, but I'm reading between the lines here, which is an indirect challenge to the 4% rule in the context of early retirement planning here. And I think that first, that assumes a reasonably sophisticated portfolio strategy. Second, it assumes that your spending is going to be consistent and fixed with

inflation over a very long period of time, which many people don't have that level of precision against. Third, I think it does not model in certain risks and cost escalations specific to the early retirement space. And there's a couple other things. But again, but the offset to it is that there are real offsets to it. If you own a house that has a mortgage that's going to amortize and pay off, that's a real offset to those things that I talked about. If you're going to get an inheritance, that's a real offset. If you're going to get Social Security, that's a real offset to it. So it ends up in practice being actually very reasonable for many people in many situations, but it's dangerous because of the simplicity does not reveal that complexity beneath the surface

that can really blow you up if you're at risk of those escalators and don't have any of the offsets that I just discussed there. Is that kind of, should I be reading that correctly? Am I reading too much into what you're saying? I agree that how much you take out has to do with it. least a dozen factors, your health, your desire to leave money to kids. My wife and I have to fund a program when we're dead at Western Washington University that is underwriting an education for every student who goes through. They'll be obligated.

They'll have to. They're required to take a financial literacy. It's costing us money. We have to save so that money is theirs so that it can be paid. That's in my plan. If I didn't have that, and my kids got half of the company, over half the company, when I didn't even know it was going to be a company, really. And so my life is still about trying to arrange what happens after I'm gone. And it's not all about children anymore because they don't need it.

They probably don't feel that way. But the bottom line is there are all these variables. You said something, though. You said that there are these complex strategies. An academic might understand him. I am not an academic. I have never in my life used an Excel spreadsheet ever in my life. I am not an academic.

I'm somebody who reads books and is willing to go to class and learn and then share it with other people. It isn't that complex. There is nothing magic. Let me tell you what the business believed in 1926. In 1926, people believe stocks were not good for the long term. You should not invest in stocks. And a professor came, he wrote a book, and it became a very popular book. It was the first time in 1926 that somebody made a public case as stocks for the long term.

Bonds were an investment. That's something you could put money into for the long term, but certainly not stocks. They were pure speculations. Then fast forward to the late 20s, we have mutual funds, built for the kids of rich people at that time. That's where they started. and we have to go all the way to John Bogle to make a huge, a huge change in the industry with index funds. And it took decades for people to understand, oh, my God, that's what an index.

But in fact, for 20 years, a lot of people still thought the S&P 500 was an index, the index, the only index. And it wasn't the only index. But that's what people learned. So now index funds aren't, they're not complex anymore. People understand, you get the best diversification, lowest cost, lower turnover, the highest tax efficiency. It's all there and it's not complex. But it wasn't believed in in the beginning.

They laughed at it. They tried to run them out of the industry. So today, because of Dr. Phama and Dr. French and others, we understand the idea of small versus large, of value versus growth. And we certainly have the greatest products to put them into Roth, IRIS. I didn't have that when I started. I didn't have IRAs when I started, as a matter of fact. And target date funds.

That's like being able to have somebody who manages pension funds, managing your money for retirement. That's really good. And so I want to try to change that idea that it's complex because you might put together of funds. What you need to do, I think, Scott. Mindy is you need to look at those pages that say, okay, what changed when I used the four fund strategy? Because it's a little more risky.

Am I willing to take the additional risk with half of my portfolio? Because in retirement, I'm going to be 50-50. What does a market over that period of 56 years? Which doesn't mean the future will look like that. But how would it have held up with the amount of money I want to take out? because it would be different than the S&P 500. And we build the table so you can look at them and you can run your fingers out of them and you can say, whoa, I see here, I wouldn't want to lose that amount of money. I know what my spouse would be saying.

We're going to have to change our lifestyle, move in with our kids. I mean, those are decisions that come up if we don't take this stuff seriously. Absolutely. And I think I'm using the wrong language in determining the, maybe in the world of complex. it's not as simple as buy this one fund and set it and forget it forever. There is more to it than that that you have to, I think, think through and you have to and the way you have to really be precise or smart is how much do you want to spend. That's, I think, the real challenge for a lot of folks.

And then there are many right answers to the portfolio design problem in there that you, folks like Frank, you know, many other people, Bill Bingham, have really pioneered and thought and thought through and evolved to give a lot of really good answers to that question of what is the right portfolio for me to last a lifetime under these constraints. But yeah, the hard part, the complex part is the spending, I think, for especially for people that are younger. That's where I'm work in progress trying to still think through exactly how each of those map to the lifetime journey. God, I think it's about trust. At the end of the day, when I started investing, I trusted Wall Street to educate me. And I learned that without any

question, the house was more important than the client. As a matter of fact, you are in essence a fiduciary when you work for the firm, first and foremost to the firm, not to the client, to the firm. That's an important thing to understand, which is why we really want to try fiduciaries who have an obligation to us personally and why it's nice to do business for somebody who is the firm. But the bottom line is, you may trust me because of my speech pattern. I've had people come up to me twice after one of my six-hour workshops that I used to give free to the public. Two people said, I loved your presentation. You sound so much like Professor Harold Hill and the music man. First time I heard that, I was taken back. And when I got home, I told my wife,

and we both cracked up. But when it came a second time, I thought, well, I must have a speech pattern that they trust. Because how we speak, people trust or don't trust, how we shake hands. and you trust Frank. Frank's a very trustworthy kind of guy. I get to work with Frank this summer at a event in Florida, and I'm thrilled to do it. And we have truth-tellers. I don't know if you have truth-tellers on your website,

but we have truth-tellers people like Ben Carlson and others who we think are telling the same story we are, but maybe you'll trust them in a different way than you trust us, because we want you to get in good hands. I have two kind of last questions for you here, Paul. One is, could you boil down the essence of what your philosophy is into maybe two or three simple rules for investing? And then second, on the other extreme, what is the best way for someone to get started going down a really deep rabbit hole that you have gone down? Like, are there these six-hour workshops or, you know, is there,

what is the best way for someone who loves this and wants to get another six hours or 12 hours of Paul, in his philosophy. Where can they go to find that? That one's real easy. We do a thing called boot camp. I'm now starting to record for 2026. And I have to re-record when we update the tables. We have 10 boot camp presentations.

In each case, there will be an article, there'll be a podcast, and there'll be a video. You can learn three ways. And each one of those will be an opportunity for me to try to convince them, okay, we've come to a fork in the road. What are we going to do here? Stocks versus bonds.

Certainly is one of those forks in the road. Okay, what stocks? I'm going to like, give them the 10 equity asset classes that the academics, the real academics gave me. Then how do you put those together? We show them how to put them together and we show them the historical impact of putting them together. And then we take a look at the process of accumulating.

Should I be all equity? what's the implication? With all of our portfolios, we're showing them how to do each one of these steps on their own. And I would just love it if I never got any questions because we answered them all, but because there is so much to learn, we do get questions. Then we get into the distributions. We go into the fix. And then we go into target date funds. And then my last one this year, it's a new one I've done, I'm going to talk about newborns. I love strategy. for children and grandchildren. I have a strategy that I can't wait to present it because it's so much fun, but it only takes $365, and that's all you ever have to put away for that child

for a year. And if you love them, you'll do another year with 365. Anyway, I'll let you know when I've got this because I think you might enjoy it. When they finish those 10 things, they know what I know. they may throw up their hands and say, I don't know what to do. But here's what I do. I do know. Easy. And I don't think this is going to be new to you. Start as early as you possibly can.

I even encourage people if they have access to it to go to their parents and show them, the table four, of starting five years sooner. You've seen these kind of studies, I know. If you show that to a parent or a grandparent that's got some money for the long term or maybe money that they were going to leave to you anyhow. What a blessing to be able to have that money go into your Roth IRA when you're 18, 19, 20, 21 years old. It's a big deal.

And I know people will take a second job in order to have the money that they're saving for the future like that. And my recommendation is that as early as you can get going, get it, wherever you can get that money to save it for the future. I'm even in compromising, saving that emergency money somewhat. If you've got a really good job and you think you're okay, I'd even have you getting some of that money you're putting aside on the table into your Roth IRA instead.

I also think you have to learn right up front. What can you control? And if you learn you can control expenses and you can control the equity asset class and you can control taxes and you can control when you put the money in and all those things you can control and make sure that you don't allow somebody else to take control of those things and that money ending up in their pockets, not your, I love the term pockets. And I think this is what this is about is more in your pocket. And if you keep those things you can control in your pocket, that is going to get you more than you're going to get from small cap value.

Okay? In other words, bigger pockets. Bigger pockets. And people just do not seem to understand the long-term impact of little incremental advantages. It's start early, easy, own the market. Forget about every story you ever hear from Wall Street or something that smells like Wall Street because Wall Street knows people love stories. You sell the sizzle, not the steak.

the sooner you understand that the important thing is to realize how the market works and how you can put it to work for you by you're controlling all these things that you know you can control. And none of them. I mean, they're in the free book that we offer on our website that we're talking millions. And I think those are basically going to be it. And that is, by the way, not only to control the expenses, but control your bad behavior. I want you to be on your best investment behavior for the rest of your life. And we all know what bad behavior looks like. And it has to do when we allow the emotions to take over. In the back of we're talking millions is a 16-page appendix that I did not write.

It is a listing of the 48 biases that Daniel Connaman covers in his book, fast and slow. These are 48 biases that we have to deal with in life overconfidence, for example. We know that's a problem with investing. People think they know more than they do, control more than they do. Recency bias. Home bias. Those 48 biases are explained in 16 pages in the back of the book. If people don't read my book and they just go to the last 16 pages and they under understand the biases, and if I could recommend another book, Your Money and Your Brain by Jason Zweig. It's a masterpiece. It's written decades ago, one of the brightest people in our business, and it's all about how crazy we are when it comes to money.

And boy am I. I can be so frugal at sometimes and out of control at others. And we all have these problems to chase and to corral. and to control. Get better saving habits, get better spending habits, get better investing habits. And let the businesses do the hard work. They will do it. You don't have to do anything to help them. IBM will take care of the future. The video will take care of the future. All those companies will take care of the future. Some will fail. Part of the process. Love it. Well, this has been fantastic, Paul. I'm excited to go and check out more of the boot camp stuff. I have not, I have not,

gone through the entire boot camp from last year, but I look forward to doing that when it's complete for 2026. I have that your money and your brain book here in my shopping cart on Amazon, helping pump up the S&P 500 right there. And then I look forward to to check it out. We're talking millions as well. So thank you so much for coming on the show today and sharing your wisdom with us for almost an hour and a half here. Really appreciate it. It's been a true privilege. Thank you, Scott. And thank you, Mindy. Paul, thank you so much for sharing your time with us. It was fascinating to learn all of these things that you have.

And I'm going to go read that book, so I'll know everything that you know in 10 short lessons, right? Good luck, you guys. And let me know if I can ever help in any way. I hope getting this out to other people, the people that we reach. I wish that all 50,000 people would open their mail every week, but enough do that it makes it worth the effort. Well, before you go, let's tell people where they can find you online. Oh, Paul merriman.com. Well, that's easy.

That's where the boot camp is, guys, as well, that we were just talking about. And if you want to email me with a question, Paul at Paulmerman.com. There you go. All right. Paul, thank you so much for your time today. And we will talk to you soon. All right. Good luck to both you.

All right, Scott, that was Paul Merriman. And I am so excited. I was very proud of myself for not fan girling over him. But holy cow, we had Paul on the show. That was awesome. What did you think of what he had to say? I thought it was fantastic. What a treat it is to, you know, study in the space for for a decade and then get to just meet these pioneers in the fields of personal finance and investing. We're so lucky to be able to do that, Mindy, and it's, and thank you to everyone who listens to Bigger Pockets Money as part of our community because it enables opportunities like this for Mindy and I. And we hope that that's the nice and a virtuous cycle for you guys. But it's just a, what a privilege to meet folks like this and get to pick their brain and learn over the course of an hour and a half. Yes, I am so excited to talk to Paul, so excited to dive into those boot camps. I can't wait until his 2026 boot camp is up and running.

Just what a wonderful masterclass in the concept of money and investing. He gave us a taste of this, but one of the things that I'm looking forward to diving in the next level of depth into is what makes AVUV better than the other small cap value funds. what makes a good ETF in that next level of detail. And so I'm really interested in exploring that with you. And I think that'll be a really fun episode to say, okay, there's different funds. What are those mechanics? And by the way, you know, something that I think will give people a little bit of a pause here is the fire community has really developed a taste for passively managed low fee, broad-based market index funds, right? Like Vanguard funds, for example, are particularly popular.

but a fund like AVUV, which we are not recommending necessarily, by the way. We do not recommend specific investments here on Bigger Pockets money, but a fund like AVUV is actually considered an actively managed fund and would have an expense ratio that's many times what you'd find on a S&P 500 index fund like a VOO or a VTI, common acronyms for the ETFs that many people in the fire community prefer or seem to prefer. The fee structure, for example, on a VTI might be 0.03, 0.04.04.4. 5%, but on AVUV, that fee will be 0.25%. That's four or five, maybe six times higher, depending on which version of those ETFs are using. And so something is happening. It's not like

a human is necessarily making individual decisions on stocks. There's an algorithm that's picking it, but there is an active managed component to that. And that's, you know, that's actually, you know, a little bit of a brain reset that some people may have to go through as they look into the types of portfolios and strategies that Paul Merriman, that Frank Vasquez, that other other researchers in this space who are getting increasingly sophisticated or pushing the limits of academic theory for investing to the next frontier, those folks are beginning to turn to some of these things, which I think is an interesting observation in the world of investing right now, something that I'm not an expert in and look forward to learning about over the next couple of years with

you. Yeah. And I think it's really interesting when we do talk about these funds. I I'm going to ask our guest, at what point does it make sense to go with the higher expense ratio funds because you're getting such a better return? If you want to get exposure to a value stock to Paul's point, at some point it has to select value stocks and then exit when they're no longer value stocks. There has to be some definitional line in the sand. And that becomes really important. And there becomes an active process to filter for that.

That's what makes this so interesting and never ending, this world of investing. Yeah, passively managed funds cost less, but they can have a lower return. So, yeah, you're going to have to start rethinking how you want to invest your funds and, you know, do the math for yourself. Don't just listen to one person say, oh, you should do this and then do that. Start getting information from a bunch of different sources and see which one you identify with or, you know, which one speaks to you in a way that makes the most sense. And maybe that is going to be actively or passively managed index funds. But then you're making the choice informed as opposed to, well, I heard this one guy this one time and that's good enough for me. But even better than that, all that is just investing in the first place.

Love it. And starting early. Start as early as you possibly can. Quote from Paul Merriman. All right, Scott, should we get out of here? Let's do it. That wraps up this excellent episode with Paul Merriman of the Bigger Pockets Money podcast. He is Scott Trench.

I am Indy Jensen saying, Tudaloo, kangaroo. When I evaluate debt funds, I look for things like first position loans, personal guarantees, deep experienced by the fund operator, low fund leverage, fast liquidity, and consistent returns. These are some of the reasons why I'm excited to partner with Pine Financial Group. Their fund six offers investors exposure to real estate credit, largely for construction and rehab, with loans originated by an experienced originator with over $1 billion in origination volume. They offer investors an 8% preferred return paid monthly in a 7030 LP split of everything over 10% paid annually. lockup period is nine months with liquidity available within 90 days after that nine-month commitment. The fund is open to accredited investors only. The fund's minimum investment is typically $100,000, but Pine Financial is able to reduce that minimum for Bigger Pockets Money

listeners to a minimum of $25,000. Full disclosure, I am personally invested in this fund through my self-directed IRA. Pine Financial is sponsoring this message and our podcast. Go to biggerpocketsmoney.com slash pine, P-I-N-E. Please note that returns are not guaranteed and may vary based on fund performance. I love math, said no one ever. Nobody starts a business thinking, you know what would make this more fun? Calculating quarterly estimated taxes. But somehow, every small business owner ends up doing it.

Your dreams of creating, selling, and growing get replaced by late nights chasing receipts, juggling invoices, and wondering if that bad sushi lunch with Scott counts as a write-off. Change all that with Found. Found is a business banking platform built to take the pain out of managing money. It automatically tracks expenses, organizes invoices, and even preps you for tax season, without you doing the heavy lifting. You can set aside money for business goals, control spending with virtual cards and find tax write-offs you didn't even know existed.

It saves time, money, and probably a few years of life expectancy. Found has over 30,000 five-star reviews from owners who say, found makes everything easier, expenses, income, profits, taxes, invoices even. So reclaim your time and your sanity. Open a found account for free at found.com. That's fowundd.com. Found is a financial technology company, not a bank. Banking services are provided by lead bank, member FDIC.

Don't put this one off. Join thousands of small business owners who have streamlined their finances with found