Our most important investment lessons from 2020

This podcast addresses the most important investment lessons of 2020 from The Merriman Financial Education Foundation’s research team, Chris Pedersen and Daryl Bahls. In each case there is a table/chart/graph that helps illustrate the lesson. (See more below. Also, WATCH as a VIDEO).

In this a year-end Zoom call, Chris discusses his recent studies on using “2 Funds for Life after 60” as well as the case for international diversification and how he has created additional past returns for international asset classes that are difficult to find.

Paul discusses why he thinks the new book, We’re Talking Millions, has been well received.

Each finished the discussion with what’s coming in 2021. For Daryl it is new studies on distributions and inflation. For Chris it is a new book on 2 Funds for Life, along with Best In Class ETF Portfolio updates. For Paul it is more presentations to high school and college students, a series of 5-minute videos, promoting the upcoming We’re Talking Millions audio book, and a major overhaul of his website.

About The Charts

Click here to access a pdf of the charts

The first two Quilt Charts show the one year returns (1928-2019) for S&P 500, Large Cap Value, Small Cap Blend, Small Cap Value and 4 Fund Portfolio. Only 1 in 5 years produced expected premiums.

The next two quilt charts show that the 10 and 20 year results become more dependable in achieving results. In 75% of the 20 year periods the ranking of results was as expected.

The next 5 graphs show the relative strength of the S&P 500 vs. the 4 Fund, All Value and Small Cap Value Portfolios.

All of the graphs show investors how very patient they must be to capture the better returns of the different portfolios. The worst case in each graph ran from 15 to 20 years of under-performance.

The next five tables track the risk and returns of 11 super simple portfolios of 1 to 4 funds. The good news is all but one of the portfolios had very fine returns. It was also noted that the best performers also had the biggest number of best and worst years.

The Ultimate Buy and Hold Equity Portfolio didn’t produce many new lessons but the one it produced was interesting. After 50 years of performance the All Value Portfolio produced its first total return that was lower than the portfolio of all 10 asset classes.

What Paul failed to note (but Daryl and Chris left in the table) was the 50-year result of the 4 Fund All U.S. Portfolio of 12.3%, just .3% less than the much more complex 10-fund Ultimate Buy and Hold Portfolio.