10 simple investment decisions guaranteed to change your ... · 6/2/2020  · 10 simple investment...

10 Simple Investment Decisions Guaranteed to Change Your Financial Future

June 2, 2020

Paul Merriman

10 Simple MILLION DOLLAR Investment Decisions Guaranteed to Change Your

Financial Future

Spoiler Alert!• There is no risk in the past• I know exactly what you should have done• The future is totally unknown

Warren Buffett"You only have to do a very few things right in your life so long as you don't do too many

things wrong.”

Three Keys to Success

• How much you invest• How much the investments grow• Extra .5% is worth over $1,000,000

Save vs. Spend!• Who wants you to save?• Who wants you to spend?• “Do not save what is left after spending,

but spend what is left after saving”.• Saving is spending… later!

Save Sooner vs.

Save Later

• $1 a day from birth to 65 at 10% $1,786,203

• $1 a day from 10 to 65 at 10% 686,420

• $1 a day from 21 to 65 at 10% 238,213

Stocks vs. Bonds• $100 invested 1928 to 2019• Bonds (loan) $10,000• Stocks (own) $600,000

One Stock vs.

All Stocks

• Risk of total loss • More stocks likely to earn more than fewer

Mutual Funds (1924)

• Professional management

• Broad diversification of companies

• Low minimum investment

• High liquidity

• Broad family of funds for every investor need

Index Funds (1976)

• Professional management of asset class

• Low to no minimum and fees

• More tax efficient

• Higher expected returns

High Expenses vs.

Low Expenses

• Lower expenses easiestroute to higher returns

• Range of expenses from .00% to 1%

Actively vs.

Passively Managed Index

Funds

• Index funds have more diversification• Index funds have lower expenses

(operational and turnover)• Index funds are more tax efficient • Only 1 in 10 to 1 in 20 actively managed funds

likely to do better

Add Small Cap to Equity Portfolio

• Most investments in large cap • S&P 500 9.9% vs. SCB 12% (1928-2019)

Add Value to Equity Portfolio

• Most equity investments in growth• S&P 500 9.9% vs. LCV 12.0% (1928-2019)• S&P 500 9.9% vs. SCV 13.2% (1928-2019)

Dollar Cost Averaging

vs.Waiting for a

Better Opportunity

• DCA guarantees more shares purchasedwhen market is down

• DCA guarantees few shares are purchasedwhen market is up

• DCA can fail with individual stocks• DCA can fail short term

Market Timingvs.

Buy & Hold

• Most market timing unproductive• Most popular timing system emotionally driven

(ICSIA)• Equity returns following severe bear markets

TARGET DATE FUNDS AMERICA’S #1

RETIREMENT INVESTMENT

The Greatest Investment

Products

• Mutual Funds• Index Funds• Target Date Funds

Target Date Funds (1994)

• One decision for life: Select retirement year • 2015 to 2065 in 5-year increments• Low minimum investment• TDFs are default investments in many 401k plans• Professional stock diversification• Professional asset allocation management

Vanguard Target Retirement 2060

Blackrock Target Retirement 2060

Thank you.

If you have any questions,please email Paul@paulmerriman.com

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