Merriman, LLC

A couple of weeks ago, we introduced our online workshop with Section 1: Choosing the best asset classes.

Now Section 2, Fine Tuning Your Asset Allocation, is available at www.youtube.com/merrimaninc. Arguably the single most important decision every investor makes is how much of his portfolio to hold in stock funds and how much in bond funds. This is the main determining factor in both risk and returns. In this section, Paul Merriman uses a table of investment results going back to 1970 to help you choose the allocation that is most likely to be successful for you.

The six videos that make up Section 2 cover:

1. Fine Tuning Your Asset Allocation
2. Fine Tuning Table
3. S&P 500 vs Worldwide Equity
4. The impact of adding fixed income
5. Fine Tuning for retirees and moderate risk investors
6. Finding your personal best asset allocation

Successful investing is all about making smart choices, and I’ve taught thousands of investors how to do that since our company opened in 1983. Our teaching has taken many forms, including radio, television, newsletters, podcasts, books, articles, websites and DVDs. But my favorite format is the live workshop, a room filled with investors looking for the best solutions.

For most of my career, delivering a workshop required actually being in such a room, often with extensive travel involved. Now I am delighted to present a consistent workshop experience to thousands of investors online. (more…)

Podcast: Play in new window | Download

There was an interesting article in the Wall Street Journal from March 8, 2011 called “Why Small-Cap Funds are Lagging.” It cites a study by Credit Suisse showing that “small-cap funds have increasingly been investing in companies larger than their category name would indicate—and the average fund is underperforming its benchmark.”

The article goes on to say “The average market capitalization of a company in a small-cap fund was about $3.1 billion at the end of 2010, compared to the average market cap of the benchmark Russell 2000 index of about $1.3 billion. The $1.8 billion gap between the two is the largest since September 2008.” (more…)

Podcast: Play in new window | Download

Podcast: Play in new window | Download

Podcast: Play in new window | Download

Every year, we update an article called “Fine tuning your asset allocation.” To view the associated table, click on the thumbnail below. You can also read the full article here.

This table shows the year-by-year hypothetical returns for 11 combinations of investment assets from 1970 through 2010, as well as the returns for the S&P 500. It has a wealth of information on it. Some interesting points include the following:

• The 2010 gain in various stock markets has allowed more of the portfolios to regain their previous peak reached in October 2007. The hypothetical portfolios with 40%, 50% and 60% equity have now surpassed their previous highs.
• The portfolio which is divided evenly (50/50) between stocks and bonds had the same annualized return from 1970 through 2010 as the portfolio invested entirely in the S&P 500.
• This 50/50 portfolio, while achieving the same long-term return as the S&P 500, had substantially lower risk, as measured by its standard deviation and various draw-down measures.

While the period from October 2007 through March 2009 was a horrible time to be an investor, staying the course with a broadly-diversified portfolio has led to many investors recouping much, if not all, of the losses suffered during that tumultuous time.

Here’s what Mark Metcalf has to say about a recent article from the New York Times, “A Dying Banker’s Last Financial Instructions”, in which ex-Wall Street salesman Gordon Murray talks about a better way to invest:

Not only is this a powerful article about life, but it just happens to come with some top-notch investment advice.  While “The Investment Answer” differs slightly around the edges from Merriman’s investment approach, it is very much in line with our philosophy, and I would recommend it highly to anybody in search of a prudent way to invest.

Editors Note:
Burt Mayer, a senior at Lakeside High School in Seattle, WA interned at Merriman this summer with the intention of creating educational material for young investors.  This three part series featured on FundAdvice.com is perfect for those investors who are looking to get started but need to know the basics first.

Investors at all levels spend a tremendous amount of time and energy looking for hot stocks and attractive funds. They track fancy-looking graphs and complicated ratios because they’re fancy looking and complicated. Ultimately far more time is spent thinking about individual stocks and bonds than what percentage of their money is invested in stocks versus bonds.

Meanwhile, many academic studies by very smart people have concluded that the way we distribute investments across asset classes is far more relevant to a portfolio’s return than the specific securities or funds in that portfolio. A famous 1986 study by Brinson, Hood, and Beebower (he’s the smart one) called “Determinants of Portfolio Performance” concluded that a full 93.6% of the variation in a portfolio’s quarterly returns can be explained simply by what proportion of the portfolio is put in different asset classes. (more…)