Upcoming Event + What’s New

Before jumping into today’s questions—there are some good ones—I want to share a quick note.

I’ll be at the Annual RetireMeet on March 7 in Bellevue at the Maidenbauer Building. I’ll be there all day at the booth and will be discussing the inside story on diversification, including new thinking on rebalancing that I believe you’ll find useful.

• • Christine Benz —HOW TO RETIRE

    Don McDonald — RETIREMENT EVOLUTION: FROM NONE TO FUN

    Tom Cock — RETIREMENT INCOME: THE 4% RULE & BEYOND

    Kevin Peterson — GETTING THE MOST FROM MEDICARE

    Joe Saul-Sehy — COMMON MISTAKES THAT MAKE RETIREMENT MISERABLE

  The event is available in person and online. In-person attendees receive lunch. Online attendees pay a small fee that supports nonprofits focused on financial education.

  I also spent time this week with Daryl Balls, working on updates to the quilt charts and new tables. We’re excited to share those soon, along with the next Boot Camp series, starting later this month.

  Questions of the Day

  1. How can I avoid getting scammed by a bad financial advisor? 04:03
  2. How can my parents decide when to start Social Security? 07:08
  3. How do I identify my target asset allocation if I am 41 and plan to retire at 65, taking Social Security at 70 and with a pension? 08:47
  4. Can you help me build a sample asset allocation? 11:46
  5. What should I learn first to understand asset allocation? 14:10
  6. How do target date funds fit into asset allocation? 17:42
  7. How does VTSAX fit into this strategy? 17:04
  8. My 401(k) only offers Vanguard Total Market, Mid-Cap Index, and Small-Cap Index. Can I build a good portfolio? 20:40
  9. If I’m contributing monthly, should I rebalance using contributions or make separate trades? 27:59
  10. I have a closed 401(k) with a target date 2050 fund. Is that a good core holding? 28:50

  A Final Thought

  I recently spoke with an investor who realized they didn’t need to draw from their investments at all, thanks to Social Security and a pension—even with nearly $2 million invested.

  When you don’t need the money, you get to choose your medicine—aggressive or conservative.

  We’re excited about the upcoming Boot Camp, new tables, and educational tools. If we can do a better job teaching, our hope is that you’ll do a better job investing—for yourselves and for those who count on you.

  
  

  Links Mentioned in This Episode

  Investor Education

  • ⁠Get Smart or Get Screwed ⁠

  Truth Tellers – Social Security

  • ⁠Social Security Made Simple⁠ by Mike Piper⁠Mike Piper⁠ – Oblivious Investor
  • When to Take Social Security: Pros & Cons – Jim Dahle (White Coat Investor)⁠https://www.whitecoatinvestor.com/when-to-take-social-security-a-pro-con/⁠

  Asset Allocation & Target Date Funds

  • ⁠Two Funds for Life ⁠– Chris Pedersen
  • ⁠Sound Investing Portfolio Series⁠ (Boot Camp – prior year)
  • ⁠Ultimate Buy & Hold Strategy⁠
  • ⁠Fine-Tuning Your Asset Allocation⁠

  Event

  • ⁠Annual RetireMeet – Bellevue (March 7)⁠

  Research & Tools

  • ⁠Quilt Charts and Tables (Paul Merriman / Daryl Balls)⁠

In this week’s Sound Investing episode, Paul Merriman answers a wide-ranging set of listener questions — from choosing ETFs and building portfolios to managing risk in retirement and investing wisely at every age.

One of the biggest takeaways? There is no universally “best” ETF or portfolio. The right answer depends on your goals, risk tolerance, time horizon, and — just as importantly — your ability to stick with a strategy during difficult markets.

Here are some of the highlights from the episode:

What’s the “best ETF”?
Paul explains that for simple exposure (like the S&P 500), the lowest-cost option often wins. But once you move into areas like small-cap value or factor investing, fund construction and index methodology matter far more than expense ratios alone.

Single-fund vs. DIY portfolios
Paul compares all-in-one solutions like AVGV (Avantis All-World Value ETF) with building the same asset classes yourself. While a DIY approach can sometimes produce higher returns, it also requires discipline and comfort with tracking and rebalancing multiple funds.

Portfolios for different stages of life

• Younger investors (30s): Paul favors all-equity portfolios for long time horizons, assuming the investor can tolerate volatility.

• Pre-retirees and retirees: The focus shifts to managing downside risk, withdrawal rates, and behavioral comfort — not maximizing returns at all costs.

Retirement withdrawals and sequence risk
Using historical examples starting in 1970, Paul shows how withdrawal rates (4%, 5%, 6%) and portfolio composition can mean the difference between ending with millions — or running out of money entirely.

Mutual funds vs. ETFs
ETFs have become more tax-efficient, more flexible, and easier to trade — making them ideal for the smaller, diversified portfolios Sound Investing now recommends.

How to self-manage a portfolio
Paul walks through how to:

• Choose equity asset classes

• Use best-in-class ETF recommendations

• Rebalance intelligently

• Invest weekly without overcomplicating the process

Resources mentioned in the episode:

• Sound Investing Boot Camp
  https://paulmerriman.com/bootcamp/

• Ultimate Buy & Hold Portfolio
  https://paulmerriman.com/ultimate-buy-and-hold-portfolio/

• 2025 Sound Investing Portfolios
  https://paulmerriman.com/sound-investing-portfolios/

• Avantis Investors & AVGV
  https://www.avantisinvestors.com/

• Morningstar Fund Comparison Tools
  https://www.morningstar.com/

• Ben Felix (Canadian investing insights)
  https://www.pwlcapital.com/profile/benjamin-felix/

• REIT background and tax considerations
  https://en.wikipedia.org/wiki/Real_estate_investment_trust

Paul closes the episode with a reminder that diversification means always owning some underperformers — and that’s not a flaw, it’s the price of long-term success.

Thanks for listening, and we’ll see you next week.

For first-time listeners, welcome! In this opening episode of the year, Paul Merriman—founder of the Merriman Financial Education Foundation—looks back at 2025 to uncover what the markets taught us and how those lessons can help do-it-yourself investors make better decisions going forward.

Despite endless predictions about what markets should do, Paul reminds us that his role isn’t to forecast the future—but to help investors understand risk, return, and how to build portfolios they can truly stick with.

In this episode, Paul explores:

• A surprising result from the “Magnificent Seven” stocks

• Why diversification mattered more than ever in 2025

• How different equity asset classes really performed

• What 56 years of data (1970–2026) tells us about staying the course

• Why portfolio structure matters far more than chasing winners

• Two very different—but valid—approaches to fixed income investing

If you want perspective instead of predictions—and data instead of hype—this episode is a powerful way to start the year.

The following are Dr. Pass’ note to his podcast:

This week we end 2025 with a Pediheart tradition - an episode on personal finance for medical professionals with noted authority on index investing and personal finance, Mr. Paul Merriman.

Paul is a retired investment advisor who now has a popular podcast "Sound Investing" and website in which he offers advice on investing for 'do it yourself' investors. In this week's episode, the 5th of his visits to Pediheart, Mr. Merriman discusses 'factor investing' via index-like ETF's and funds.

He also reviews who he believes might benefit from a financial advisor, what sort of advisor most should seek out and why he believes that many do not need one if they can 'stay the course'.

Resources mentioned in today's podcast are below. Wishing all a happy and healthy new year in 2026.
Paul's website:
https://www.paulmerriman.com/#gsc.tab=0
'Best In Class' ETF's:
https://www.paulmerriman.com/Best-in-Class-ETF-Recommendations2025#gsc.tab=0
Sound Investing 'Quilt Charts':
https://irp.cdn-website.com/6b78c197/files/uploaded/(K)_Quilt_Charts_(1928-2024)_-_2024_Returns_(1).pdf
DFA 'Turn Out The Noise':
https://www.dimensional.com/film
As a reminder, all of the information provided in this week's episode should be considered entertainment and all financial decisions should be vetted with professionals or knowledgeable and trusted friends/family.

In this episode, Paul shares the thinking behind what he believes may be one of the most important projects of his career—a project guided by a single goal:

That every investor who follows our work will know how to invest for the rest of their life.

To explain why that goal matters, Paul walks through the forks in the road every investor eventually faces—from betting on individual companies to owning entire markets, from chasing excitement to embracing simplicity.

Drawing on real experiences, including private investments that went to zero and one that unexpectedly turned into millions, Paul explains why diversification beats prediction, how a simple portfolio decision may quietly add about 1% a year over time, and why many academics draw a clear line between investing and speculation.

This episode isn’t about chasing returns.
It’s about building a plan you can live with—through good markets and bad—for the rest of your life.

If you’re looking for clarity, discipline, and a framework that helps you stay the course, this conversation is a powerful place to start.

Next week, I’ll be reviewing what we learned in 2025—and what those lessons may mean for 2026 and beyond.

Thank you, and happy holidays to you and your family.

Paul continues his three-part series responding to questions from his November 8 AAII presentation. In this episode, he digs into risk-parity portfolios, the role of gold, how the 10-Fund Strategy compares to the S&P 500, growth vs. value, rebalancing discipline, and how to choose the right bond allocation in retirement. If you were at the AAII event, you’ll find the exact 12 questions listed below so you can jump straight to your topic.

12 AAII Questions Covered

1. Thoughts on risk-parity portfolios during retirement distributions? 2:12

2. Was the 10-Fund Strategy originally meant to mirror 60/40? 14:51

3. Should investors add gold (IAU) after its recent streak? 21:40

4. What is a double-rung bond ladder? 24:03

5. Which of the nine portfolios has the best return per unit of risk? 26:36

6. Analysis of growth funds outperforming over the last decade? 31:36

7. How to invest new money when the economic outlook looks uncertain? 36:40

8. Will the AAII slide deck be available? 38:54

9. How often do you rebalance? 39:25

10. How do you tune out the noise and stay the course? 41:13

11. How to choose your bond allocation in the distribution phase? 45:25

12. Can you share ETFs for the bond portion of a retirement portfolio? 52:12

Resources Mentioned

AAII presentation slides

10-Fund vs. S&P long-term comparison

Fine-Tuning Your Asset Allocation tables

Sound Investing tables

Retirement withdrawal tables

Lifetime Investment Strategy calculator

Best-in-Class ETF recommendations