Started a Merriman “lazy portfolio” 15 years ago

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Cuzfuzz
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Started a Merriman “lazy portfolio” 15 years ago

Post by Cuzfuzz »

Decided to do it myself when I started working and at the time Paul Merriman had a popular indexing podcast so I followed his advice. 15 years later I have $900,000 in a taxable vanguard account and it’s a mess: random funds here and there, old Roths scattered about, and a large amount in value funds and international funds. His recommendations have underperformed the s&p, and I’ve made mistakes as well. My question is this: I work a lot and really don’t have time to put into this stuff so I’m considering letting a vanguard advisor take over. At the least they will tighten up the mess I’ve made, and at the most they might get me on the right track as I head into my late forties. At 0.3% fee a year Is this the right call?

47 year old medical professional. Own my house, no debt. $500k in a profit sharing plan. $100k in wife’s 401k and $50k in a “wedding account” for my daughters which is basically stocks. Partial owner in a medical practice that will eventually sell for 1.5 mil. Yearly salary varies but typically my household brings in $500-$600k a year (small business loan and mortgage paid off in 2020 so only just recently started actually realizing these amounts).

Thanks in advance!
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Outer Marker »

Cuzfuzz wrote: Mon Jul 04, 2022 6:19 am My question is this: I work a lot and really don’t have time to put into this stuff so I’m considering letting a vanguard advisor take over. At the least they will tighten up the mess I’ve made, and at the most they might get me on the right track as I head into my late forties. At 0.3% fee a year Is this the right call?
That's certainly a reasonable way to go. You could hire them for a year or so, then take over again yourself once they've got it sorted out. Alternatively, if you don't mind doing a little work, you can post your situation here, and we'll help you do it yourself. viewtopic.php?t=6212 It's not that hard. I'm not particularly fond of the standard Vanguard PAS portfolio which, not surprisingly, basically mirrors their Target Date funds. Too much international for my taste, and I don't like international bonds at all.
mholdi1540
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by mholdi1540 »

A physician friend of mine did it (use Vanguard advisor) and has been very happy. He has been retired for 2.5 years and states he has no intention of using any other except Vanguard. According to him, the fee is minimal, the advice and follow up is good and he gets a monthly deposit into his bank account. Regardless of what other do it yourself independent individuals tell you on this site, if you feel you need tried and true expert advice at a minimal expense then Vanguard is probably the way to go !!
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by bertilak »

mholdi1540 wrote: Mon Jul 04, 2022 8:55 am Regardless of what other do it yourself independent individuals tell you on this site, if you feel you need tried and true expert advice at a minimal expense then Vanguard is probably the way to go !!
Agreed.

It is possible, and easy, to do it yourself but there is something to be said for focusing you attention and energies elsewhere by delegating, if that can be done safely and for a reasonable fee. Vanguard's PAS qualifies.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Motostash »

If you're contemplating Vanguard's PAS, just dump it all in target date funds and be done. Or pay them to make pretty graphs for you.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by livesoft »

Just know that if one goes with Vanguard PAS, then reports are that they will sell positions in your taxable account that do not follow their ideology thus realizing capital gains and capital losses.

15 years ago is around 2007 although presumably not all your shares were purchased then. I have shares from 2009 that are up more than 370%, so selling them this week would be a terrible tax burden for me.

If one is charitably inclined, then one could use a Donor-Advised Fund and donate appreciated shares held long-term to avoid capital gains taxes and get a tax deduction.
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dbr
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by dbr »

A long time messy portfolio is going to have lots of unrealized gains. I admit I don't know for sure, but I don't think Vanguard PAS has either the know how nor the charter to navigate a tax problem. Designing a portfolio with some generalized tax considerations might be ok for them but getting out from under capital gains when selling a large portfolio is not going to be something they can manage, I am pretty sure
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by donaldfair71 »

Motostash wrote: Mon Jul 04, 2022 9:22 am If you're contemplating Vanguard's PAS, just dump it all in target date funds and be done. Or pay them to make pretty graphs for you.
Definitely for the tax deferred accounts, no brain move.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Outer Marker »

livesoft wrote: Mon Jul 04, 2022 9:29 am Just know that if one goes with Vanguard PAS, then reports are that they will sell positions in your taxable account that do not follow their ideology thus realizing capital gains and capital losses.
Wow. I hadn’t heard that. If true that’s really disappointing and I wouldn’t use them.
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CyclingDuo
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by CyclingDuo »

Cuzfuzz wrote: Mon Jul 04, 2022 6:19 am Decided to do it myself when I started working and at the time Paul Merriman had a popular indexing podcast so I followed his advice. 15 years later I have $900,000 in a taxable vanguard account and it’s a mess: random funds here and there, old Roths scattered about, and a large amount in value funds and international funds. His recommendations have underperformed the s&p, and I’ve made mistakes as well. My question is this: I work a lot and really don’t have time to put into this stuff so I’m considering letting a vanguard advisor take over. At the least they will tighten up the mess I’ve made, and at the most they might get me on the right track as I head into my late forties. At 0.3% fee a year Is this the right call?

47 year old medical professional. Own my house, no debt. $500k in a profit sharing plan. $100k in wife’s 401k and $50k in a “wedding account” for my daughters which is basically stocks. Partial owner in a medical practice that will eventually sell for 1.5 mil. Yearly salary varies but typically my household brings in $500-$600k a year (small business loan and mortgage paid off in 2020 so only just recently started actually realizing these amounts).

Thanks in advance!
Post up your portfolio. Maybe it’s not as messy as you think and fellow board members could take a look and provide feedback.

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goingup
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by goingup »

I haven't used PAS, but I have never gotten the impression they'll sell someone's holdings and generate a big tax bill.

OP, contact them and let them give you a proposal for how they'd clean up your portfolio. It's likely a very good time for clean-up because the market slump has lessened capital gains in nearly all funds.
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retiredjg
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by retiredjg »

I think it is the right call if you are not willing to do this yourself.

If you want someone to manage your money, Vanguard is the only place I would recommend. That said, you may need to give them some guidelines about what is acceptable to you.

As far as I know, you can still request mutual funds instead of ETFs (if you have a preference), you can decline the actively managed funds they may suggest, and you can tell them just how much you are willing to put up with capital gains tax.

The problem you have is a large taxable account that sounds like chaos. If you want them to clean this up, it will not be cheap. But there may be ways to manage it it to a certain extent. Well, maybe not with your income....your cap gains will be at 20% plus the 3.8% in the NITT.

This may be a "pay it now or pay it later" situation.

There is one other alternative...leave the taxable account a mess and let your children inherit the mess without paying the taxes. If you do this, you can still clean up the scattered Roths and 401k and whatever. And invest the profit from the practice in a wiser manner.

If you go this route, I would leave instructions to them about how to clean up the mess immediately after inheriting it.

I suppose there is third alternative...leave the taxable account a mess until you retire and then clean it up. In the meantime, you can stop reinvestment of dividends so it does not get worse. You can make charitable donations through a donor advised fund instead of cash.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Abe »

livesoft wrote: Mon Jul 04, 2022 9:29 am Just know that if one goes with Vanguard PAS, then reports are that they will sell positions in your taxable account that do not follow their ideology thus realizing capital gains and capital losses.
Do you mean they can sell your holdings without your permission?
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Outer Marker »

Just post the whole mess and let the board take a whack at it! Might not be that hard. Be sure to include the unrealized gains and losses from the “cost basis” view.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by livesoft »

Abe wrote: Mon Jul 04, 2022 3:41 pm
livesoft wrote: Mon Jul 04, 2022 9:29 am Just know that if one goes with Vanguard PAS, then reports are that they will sell positions in your taxable account that do not follow their ideology thus realizing capital gains and capital losses.
Do you mean they can sell your holdings without your permission?
I doubt it means that, but read the brochure: https://personal.vanguard.com/pdf/vpabroc.pdf which has some words on this.
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nedsaid
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by nedsaid »

One of the issues with the Merriman Ultimate Buy and Hold Portfolio is that there are a lot of holdings in it. So after having let such a portfolio more or less ride for 15 years, I can see why you think you have a mess. The other thing is that we were in a Growth oriented Stock Market from 2008 through about mid-2020, so yes a Value oriented portfolio like Merriman would have underperformed. There are simpler portfolios that would have done much the same thing, the Coffeehouse Portfolio comes to mind and one of the Bogleheads did much the same thing with just four funds. But what is done is done.

My concern is that you will undo your Value tilts just as Value has been outperforming again.

I feel your pain. I attended Merriman seminars in 2007-2008 and made changes in my retirement portfolio in response to their recommendations. I didn't invest with Merriman but did some things on my own. Turns out I picked exactly the wrong time to further tilt my portfolio towards Size and Value, I did this about the same time as you did. So I have felt the pain of underperformance, the portfolio did well but less well than if I had just left things alone.

So what happened is that the things Paul Merriman recommended went out of style right after you bought them. Value and International both underperformed thereafter and this is making you feel bad now. Again, my concern is that now you will be repeating your 2007 mistake in reverse, undoing your Value tilts just at the time that Value is coming back. So you face a potential double disappointment, regret at having listened to Paul Merriman in the first place and then regretting undoing the whole thing 15 years later.

This is why I counsel that Factor tilting is a long term commitment. I also counsel that investors not switch investing strategies. What often happens is that strategies start working again after investors give up on them. So it is sort of like you bought high in 2007 and want to sell low in 2022.

Another thing you could do is just look forward and forget the past. Ditch the tilts, go to a more standard Boglehead philosophy, pay the capital gains tax, and not look back. At least now you realize that you will pay the capital gains tax and possibly face investor regret yet again. If you do this, don't start reading books and articles on factor investing and wondering what could have been. In other words, if you go to something like a Taylor Larimore 3 fund portfolio, don't post in 2037 about the gains you missed out on by ditching your tilts in 2022. Whatever investment approach you take needs a long term commitment.

Investor regret is a powerful negative force. I suppose I could regret not having put all of my money in Microsoft stock after it went public, I would likely be long retired. Or regrets about not having thrown all my money into Tesla a few years ago. I am using extreme examples, but you get my point. Merriman's portfolio was well designed and well thought out, the market just didn't go his way. But both Value and International may well outperform in the future, you just never know. One puts down his money and takes his chances.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Living Free »

I wouldn't worry so much about having underperformed the S&P 500 in the past decade or so - value and international just haven't done that well compared to US large cap this past decade or so. That's fine, there's always some laggard asset in a diversified portfolio, just the way it is. The Merman portfolio is a reasonable one to use. It's too complex for my taste though. It's fine to change to simplify, but I'd probably keep at least some component of the tilt/tilts (such as keep some extra value or whatever in my portfolio) just so that I'm not selling low and "chasing" the asset class that outperformed recently.

I agree with others it would be helpful to see what you're invested in within the taxable account specifically (and cost basis for your holdings). Dealing with the retirement accounts is easy given there are no tax consequences for changing your portfolio within those.

What sort of portfolio do you plan to change to? I presume a lazy portfolio of some sort...
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by dbr »

nedsaid wrote: Mon Jul 04, 2022 4:18 pm
Investor regret is a powerful negative force. I suppose I could regret not having put all of my money in Microsoft stock after it went public, I would likely be long retired. Or regrets about not having thrown all my money into Tesla a few years ago. I am using extreme examples, but you get my point. Merriman's portfolio was well designed and well thought out, the market just didn't go his way. But both Value and International may well outperform in the future, you just never know. One puts down his money and takes his chances.
On the occasions I have read a bit from Merriman I worry that he seems more sure of himself than the "market not going his way" would justify. The bugaboo about small and value factor investing and other concentrations is that even if it is so that the expected return of such a portfolio is greater the unpredictable variability of investment returns makes it highly possible the results will not materialize. In addition it is also possible the expected return from the investors starting point forward is not greater than the total market portfolio or some other portfolio. In the latter case it could also happen that what materializes in any specific time frame actually would be better even if it "shouldn't" be.

Your last sentence is the real lesson here.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by like2read »

I wonder what a mess means; is it a bunch of funds, or a bunch of funds that, looking backwards, underperformed because you had a value tilt. Or, some crappy funds mixed with some good ones.

A bunch of funds may not be a bad thing, when weighed against paying capital gains in order to have a less cluttered statement.

A bunch of funds with a value tilt; I would hold tight, and add new funds to growth oriented funds.

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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by shriram »

I think it has more to do with number of funds that one needs to deal with rather than the SCV tilt as such. For me it has been a challenge to maintain a 3-fund portfolio mostly due to behavioral reasons. One needs to have the discipline to track various funds and rebalance periodically to get the best results.

Eventually I realized that I need a portfolio where I need to make very few decisions (ideally no decisions at all). I made following changes to make this happen,
- In the tax deferred accounts, using target date funds
- In the taxable accounts, shifting the (VTI + VXUS) combo to VT. This takes care of all the hassle of maintaining proper balance between US/international stocks.
Last edited by shriram on Mon Jul 04, 2022 4:48 pm, edited 1 time in total.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by nedsaid »

dbr wrote: Mon Jul 04, 2022 4:27 pm
nedsaid wrote: Mon Jul 04, 2022 4:18 pm
Investor regret is a powerful negative force. I suppose I could regret not having put all of my money in Microsoft stock after it went public, I would likely be long retired. Or regrets about not having thrown all my money into Tesla a few years ago. I am using extreme examples, but you get my point. Merriman's portfolio was well designed and well thought out, the market just didn't go his way. But both Value and International may well outperform in the future, you just never know. One puts down his money and takes his chances.
On the occasions I have read a bit from Merriman I worry that he seems more sure of himself than the "market not going his way" would justify. The bugaboo about small and value factor investing and other concentrations is that even if it is so that the expected return of such a portfolio is greater the unpredictable variability of investment returns makes it highly possible the results will not materialize. In addition it is also possible the expected return from the investors starting point forward is not greater than the total market portfolio or some other portfolio. In the latter case it could also happen that what materializes in any specific time frame actually would be better even if it "shouldn't" be.

Your last sentence is the real lesson here.
What is different from me and the original poster are two fold. First, my tilts are all in IRA accounts, so I could undo everything without regard to Capital Gains taxes. Second, I have been a Value oriented investor my whole career and also had a taste for Mid/Small Cap stocks. So what I learned from Merriman was a refinement on what I was already doing. For the original poster, he might have become intrigued with Merriman's writings and decided to make changes, something that seemed a good idea at the time. I give him credit for sticking with Merriman for 15 years.

This is why I believe that investors should have strong convictions, they should believe in their basic investment approach and believe in the investments they are making. Otherwise, an investor with low conviction will change both investment philosophy and investments often at the worst possible times. We love investments when they are hot and hate them when they are cold. Going through the "what could have been" thought process is not terribly productive for an investor.

What will do better going forward? Impossible to know. What I do know is that in the past, the Value vs. Growth and US vs. International trends go back and forth and often last about a decade.

Going from memory, the 1980's were a Value and International decade, the 1990's were a Growth and US decade, much of the 2000's were a Value and International decade, and then after the Financial Crisis then Growth and US predominated. Seeing that Value and International have both underperformed for an extended period of time, it isn't irrational to believe that these unpopular investments will have their day again. Again, it is the old problem of switching at the wrong time and that is what I am concerned about.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by dbr »

nedsaid wrote: Mon Jul 04, 2022 4:47 pm
dbr wrote: Mon Jul 04, 2022 4:27 pm
nedsaid wrote: Mon Jul 04, 2022 4:18 pm
Investor regret is a powerful negative force. I suppose I could regret not having put all of my money in Microsoft stock after it went public, I would likely be long retired. Or regrets about not having thrown all my money into Tesla a few years ago. I am using extreme examples, but you get my point. Merriman's portfolio was well designed and well thought out, the market just didn't go his way. But both Value and International may well outperform in the future, you just never know. One puts down his money and takes his chances.
On the occasions I have read a bit from Merriman I worry that he seems more sure of himself than the "market not going his way" would justify. The bugaboo about small and value factor investing and other concentrations is that even if it is so that the expected return of such a portfolio is greater the unpredictable variability of investment returns makes it highly possible the results will not materialize. In addition it is also possible the expected return from the investors starting point forward is not greater than the total market portfolio or some other portfolio. In the latter case it could also happen that what materializes in any specific time frame actually would be better even if it "shouldn't" be.

Your last sentence is the real lesson here.
What is different from me and the original poster are two fold. First, my tilts are all in IRA accounts, so I could undo everything without regard to Capital Gains taxes. Second, I have been a Value oriented investor my whole career and also had a taste for Mid/Small Cap stocks. So what I learned from Merriman was a refinement on what I was already doing. For the original poster, he might have become intrigued with Merriman's writings and decided to make changes, something that seemed a good idea at the time. I give him credit for sticking with Merriman for 15 years.

This is why I believe that investors should have strong convictions, they should believe in their basic investment approach and believe in the investments they are making. Otherwise, an investor with low conviction will change both investment philosophy and investments often at the worst possible times. We love investments when they are hot and hate them when they are cold. Going through the "what could have been" thought process is not terribly productive for an investor.

What will do better going forward? Impossible to know. What I do know is that in the past, the Value vs. Growth and US vs. International trends go back and forth and often last about a decade.

Going from memory, the 1980's were a Value and International decade, the 1990's were a Growth and US decade, much of the 2000's were a Value and International decade, and then after the Financial Crisis then Growth and US predominated. Seeing that Value and International have both underperformed for an extended period of time, it isn't irrational to believe that these unpopular investments will have their day again. Again, it is the old problem of switching at the wrong time and that is what I am concerned about.
I agree with that. But I also have problems that Merriman tends to sell something without also conveying this perspective.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by nedsaid »

dbr wrote: Mon Jul 04, 2022 4:49 pm
nedsaid wrote: Mon Jul 04, 2022 4:47 pm

What is different from me and the original poster are two fold. First, my tilts are all in IRA accounts, so I could undo everything without regard to Capital Gains taxes. Second, I have been a Value oriented investor my whole career and also had a taste for Mid/Small Cap stocks. So what I learned from Merriman was a refinement on what I was already doing. For the original poster, he might have become intrigued with Merriman's writings and decided to make changes, something that seemed a good idea at the time. I give him credit for sticking with Merriman for 15 years.

This is why I believe that investors should have strong convictions, they should believe in their basic investment approach and believe in the investments they are making. Otherwise, an investor with low conviction will change both investment philosophy and investments often at the worst possible times. We love investments when they are hot and hate them when they are cold. Going through the "what could have been" thought process is not terribly productive for an investor.

What will do better going forward? Impossible to know. What I do know is that in the past, the Value vs. Growth and US vs. International trends go back and forth and often last about a decade.

Going from memory, the 1980's were a Value and International decade, the 1990's were a Growth and US decade, much of the 2000's were a Value and International decade, and then after the Financial Crisis then Growth and US predominated. Seeing that Value and International have both underperformed for an extended period of time, it isn't irrational to believe that these unpopular investments will have their day again. Again, it is the old problem of switching at the wrong time and that is what I am concerned about.
I agree with that. But I also have problems that Merriman tends to sell something without also conveying this perspective.
Paul's perspective has changed in that he and his son both retired and the firm was sold. So in the past, he certainly had a financial interest in pushing his ideas as he hoped that people would be impressed enough that they would invest with his firm. Now he is freer from what some might perceive as a conflict of interest. I have gone back to the website of his old firm, and they seemed a bit more vague on what they were doing, I suspect they made changes from when Paul and his son were there though the essential philosophy is much the same. I further suspect that they have dabbled in Alternatives just as Buckingham has done. Never have heard Paul give opinions on the Alts as has Larry Swedroe.

In fairness, when I went to the seminars it was clear they wanted our business but they showed us how to execute the strategies if you were a Vanguard, Fidelity, T Rowe Price, or a Schwab customer. They showed a do-it-yourself investor how to do it themselves but of course such an investor wouldn't be able to access DFA funds. I also got my free hour with a Financial Advisor from Paul's firm and didn't feel any sales pressure. Paul was one of the good guys in the business.

They made it clear that if we had a Value oriented market that a Merriman run portfolio would do better than a similar portfolio done through Vanguard. They also said that in a Growth market that a do-it-yourself factor tilted portfolio done with Vanguard would do better than a Merriman portfolio heavy with DFA Funds. And that is exactly what happened. So I give them points for intellectual honesty. The reason this happened was that DFA Funds loaded better on Size and Value than similar funds with Vanguard, no surprises here.

But yes, Paul was a salesman and Paul wanted people to invest through his firm rather than doing-it-yourself or going to another Advisory firm. He really does believe in the Academic Research and I am pretty certain that he eats his own cooking. I don't believe he is invested in a Taylor Larimore 3 fund portfolio while telling others to factor tilt.

We find that nothing is perfect and everything has its flaws. Merriman and his old firm are no exception.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by nedsaid »

Another thing that the Merriman folks said was that a Merriman portfolio with factor tilts and DFA Funds would outperform a more traditional Vanguard Portfolio without tilts by 1% a year after their fees. Pretty much this meant they thought DFA could produce a factor premium of 2% beyond the broad indexes. So half of the premium would have gone to Merriman for the fee and the other half would have gone to the investor. Of course, what happened was that after 2007, the tilts produced a negative premium.

Also the Merriman portfolios had stock allocations 50% US and 50% International. We know that US outperformed International by a lot after 2007 and this is another reason the Original Poster is feeling pain.

A third difference between me and the Original Poster is that my International exposure fluctuated from 24% to 28% stocks and not the 50% that Merriman recommended. So I didn't experience as much investor regret as he did.

This is a good lesson to investor. It is really easy to get excited about a model portfolio and about particular investments. Markets do what markets do and they don't care about your portfolio design or how excited you are. As in ABC's Wide World of Sports, you will feel both the Thrill of Victory and the Agony of Defeat. In other words, things don't always work out the way you expect.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Grt2bOutdoors »

Motostash wrote: Mon Jul 04, 2022 9:22 am If you're contemplating Vanguard's PAS, just dump it all in target date funds and be done. Or pay them to make pretty graphs for you.
I disagree. Unbeknownst to many who followed that advice in the past, last year they were hit with significant capital gains as a result of institutional investors selling out and moving into a lower expense share class that individual investors were unable to move into. Had the OP done what you suggested, he’d be incurring significant and unnecessary capital gains.

A PAS advisor would at least be mindful of taxes, whereas Target Retirement funds are more appropriate within a tax deferred retirement account.
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Grt2bOutdoors »

nedsaid wrote: Mon Jul 04, 2022 5:25 pm Another thing that the Merriman folks said was that a Merriman portfolio with factor tilts and DFA Funds would outperform a more traditional Vanguard Portfolio without tilts by 1% a year after their fees. Pretty much this meant they thought DFA could produce a factor premium of 2% beyond the broad indexes. So half of the premium would have gone to Merriman for the fee and the other half would have gone to the investor. Of course, what happened was that after 2007, the tilts produced a negative premium.

Also the Merriman portfolios had stock allocations 50% US and 50% International. We know that US outperformed International by a lot after 2007 and this is another reason the Original Poster is feeling pain.

A third difference between me and the Original Poster is that my International exposure fluctuated from 24% to 28% stocks and not the 50% that Merriman recommended. So I didn't experience as much investor regret as he did.

This is a good lesson to investor. It is really easy to get excited about a model portfolio and about particular investments. Markets do what markets do and they don't care about your portfolio design or how excited you are. As in ABC's Wide World of Sports, you will feel both the Thrill of Victory and the Agony of Defeat. In other words, things don't always work out the way you expect.
Are you saying that in your best Jim McKay voice?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Prokofiev
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Prokofiev »

nedsaid wrote: Mon Jul 04, 2022 5:25 pm Another thing that the Merriman folks said was that a Merriman portfolio with factor tilts and DFA Funds would outperform a more traditional Vanguard Portfolio without tilts by 1% a year after their fees. Pretty much this meant they thought DFA could produce a factor premium of 2% beyond the broad indexes.
While I never attended one of his seminars, I did talk to his firm over the phone and exchanged Emails after listening to some of Paul's podcasts/radio shows. Back then DFA was all the rage and getting access to their funds was a big selling point for them. I questioned whether they could be worth both the higher ER as well as the 1% AUM fee. They stressed that I could expect to out-perform their published Vanguard model over time despite the costs
due to the improved factor tilts. Of course, that never happened. But luckily, I decided not to have them manage my portfolio.

I also asked them about using TIPS for the fixed income portion of the portfolio which seemed like a good idea at the time. The salesman told me that Paul doesn't believe in TIPS and that he favored short-term floating rate funds such as money market or 1 year T-bills which would provide inflation protection. I pointed out that many TIPS were yielding 2-3.5% real while historically ST returned 0-1% real. But they stuck to their guns, only to reverse course about a year later and embrace TIPS. I also received Paul's Market Timing signals for several years via email.

I never considered them "bad guys", but they were clearly salesmen pushing their service. They, like many, used the DFA funds as a selling point
to get the customer in the door.
Everything should be made as simple as possible, but not simpler - Einstein
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dogagility
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by dogagility »

Prokofiev wrote: Mon Jul 04, 2022 6:31 pm I questioned whether they could be worth both the higher ER as well as the 1% AUM fee. They stressed that I could expect to out-perform their published Vanguard model over time despite the costs due to the improved factor tilts. Of course, that never happened.
Bingo. One of the few knowns is the expense. It's a known drag on returns. Realization of that expense requires no prediction to be right.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
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nedsaid
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by nedsaid »

Prokofiev wrote: Mon Jul 04, 2022 6:31 pm
nedsaid wrote: Mon Jul 04, 2022 5:25 pm Another thing that the Merriman folks said was that a Merriman portfolio with factor tilts and DFA Funds would outperform a more traditional Vanguard Portfolio without tilts by 1% a year after their fees. Pretty much this meant they thought DFA could produce a factor premium of 2% beyond the broad indexes.
While I never attended one of his seminars, I did talk to his firm over the phone and exchanged Emails after listening to some of Paul's podcasts/radio shows. Back then DFA was all the rage and getting access to their funds was a big selling point for them. I questioned whether they could be worth both the higher ER as well as the 1% AUM fee. They stressed that I could expect to out-perform their published Vanguard model over time despite the costs
due to the improved factor tilts. Of course, that never happened. But luckily, I decided not to have them manage my portfolio.

I also asked them about using TIPS for the fixed income portion of the portfolio which seemed like a good idea at the time. The salesman told me that Paul doesn't believe in TIPS and that he favored short-term floating rate funds such as money market or 1 year T-bills which would provide inflation protection. I pointed out that many TIPS were yielding 2-3.5% real while historically ST returned 0-1% real. But they stuck to their guns, only to reverse course about a year later and embrace TIPS. I also received Paul's Market Timing signals for several years via email.

I never considered them "bad guys", but they were clearly salesmen pushing their service. They, like many, used the DFA funds as a selling point
to get the customer in the door.
The 1.00 percent AUM fee plus the 0.34 percent to manage my portfolio seemed too much for me, so although the presentation seemed impressive, I chose not to invest. I chose to do the tilts myself using ETFs they recommended.
A fool and his money are good for business.
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Cuzfuzz
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by Cuzfuzz »

Appreciate the replies. I truly held to the lazy portfolio doctrine. I’ve let it sit for 15 years, rebalancing from time to time, putting money in at random times. Downturns never made me panic, nor did comparably poor performance. I guess I’m perfect for a lazy portfolio because I’m one hell of a lazy investor. I suppose there’s no harm in speaking with the vanguard rep and seeing their plan for capital gains, because yes they will probably be substantial as will the taxes.
Deep down I want to stick to my guns on value and international, bc that’s where I started. I don’t necessarily believe in them but I’m somewhat stuck. I like the idea of putting everything on here and letting folks help. It will take time that I don’t have much of anytime soon but I will do it. Cost basis you say? Just post the funds, holdings and cost basis amounts as well as whether they’re Roths vs taxable? Remember to treat me like the ignorant investor I am.
Merriman is a nice guy. He actually called me once for no reason to discuss things. He probably felt bad, haha.
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retiredjg
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by retiredjg »

If you decide to post your information, see the format at the bottom of this message for how to do that. The closer you follow the format, the easier it is to help you and the better help you will get. It is some work, but you will learn a lot about your financial picture by doing it.

This would be a good exercise to get you ready to make a decision about what you want to do.
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whodidntante
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Re: Started a Merriman “lazy portfolio” 15 years ago

Post by whodidntante »

It would be far lazier (and cheaper) to leave your messy portfolio in place. You might even outperform a lot in the future by doing that.

Realizing 15 years of capital gains in a single year will certainly hurt come tax time.
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