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The Meb Faber Show - Better Investing

Paul Merriman - “The People That Have Come Out Ahead Are the People Who Have Put Their Trust in the System Over the Long-Term" | #101

The Meb Faber Show - Better Investing

The Idea Farm

Investing, Management, Business

4.8978 Ratings

🗓️ 11 April 2018

⏱️ 85 minutes

🧾️ Download transcript

Summary

In Episode 101, we welcome the great educator, Paul Merriman. We start with Paul’s background; specifically, the story of an early trading experience with commodities. He doubled his money in days…and then lost everything on the very next trade. Then the guys dive in, with Meb bringing up something Paul wrote called “The Ultimate Buy & Hold Portfolio” and asking for more detail. Paul starts with the S&P which, even with all its up-and-downs, has done great over the years. But then he walks us through some tweaks – adding large cap, then small cap – he notes the various percentage returns added by each, as well as the effect on volatility. He eventually arrives at a final portfolio, showing us the power of this diversification. Meb points the conversation toward the behavioral benefit of diversification and says how some listeners will wonder how much money to put into each of the asset classes Paul had identified. Paul tells us he originally put 10% into 10 different asset classes – after all, if each asset class is worthy, then he wants it to be in his portfolio; especially because there’s no way to be certain which one(s) will shine going forward. Agreeing, Meb touches on being “asset class agnostic” and notes that the problem with being, say, a “gold guy” or any die-hard type of investor, is you get wedded to that asset class. This emotional bond can lead to bad behavior. This leads to a discussion about implementation and the challenges of emotional investing. Paul tells us “I don’t want my emotions to have anything to do with how (my) money is managed.” The conversation drifts toward the benefits of investing early, yet the challenges of educating young people as to its importance, as well as different investing needs over a lifetime. The guys note how the best thing for a young person would be the markets tanking for 10 years. Of course, that would be terrible for an older investor in/near retirement. This bleeds into a conversation about formally educating the younger generation about investing. A bit later, Meb asks about the older investor who might have been burned in ’08, is now near retirement, thinks the U.S. market is expensive, yet needs results. What about him? Paul walks us through the realities of losses and gives us his overall thoughts. This morphs into a common question we get – invest everything at once, or drip it in over time? Paul has some thoughts on how to do this in a way that balances math and emotions. There’s tons more in this episode (it’s one of our longest to date): the challenge of investing in the “shiny object”… how to avoid getting screwed by your advisor… investment newsletters… buy-and-hold versus market timing… the critical nature of understanding past performance… giving money to grandkids… and of course, Paul’s most memorable trade; his involves the ’87 crash. What are the details? Find out in Episode 101. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0

Welcome to the Mebb Fabor Show, where the focus is on helping you grow and preserve your wealth.

0:12.7

Join us as we discuss the craft of investing

0:15.6

and uncover new and profitable ideas,

0:18.4

all to help you grow wealthier and wiser.

0:20.8

Better investing starts here.

0:23.0

Mepp Faber is the co-founder and chief investment officer at Cambria Investment Management.

0:31.0

Due to industry regulations, he will not discuss any of Cambria's funds on this

0:35.5

podcast.

0:36.8

All opinions expressed by podcast participants are solely their own opinions and do not

0:41.0

reflect the opinion of Cambria Investment Management or its

0:43.6

affiliates. For more information visit cambria Investments.com

0:49.7

Welcome podcast listeners today we have a fantastic show. Our guest is a

0:54.6

nationally recognized authority on mutual funds, investing, asset allocation, all sorts

0:58.9

of market strategies. He's founded, run his own billion dollar investment advisor, also one of the most prolific content creators out there.

1:05.8

Certainly his research was the early inspiration for a lot of the work we've done. He's written multiple books.

1:11.2

Has a podcast,

1:12.5

created tons of informative videos,

1:15.0

contributes frequently to marketwatch.com,

1:17.1

and has even created an educational foundation

1:19.8

a few years ago which provides

1:20.9

comprehensive financial education to investors.

1:23.4

It's our pleasure to have him on the show.

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