Simplifying The Ultimate Buy And Hold Strategy With M1 Finance
Episode 130R
Episode Guide
Episode Timestamps
ChooseFI Podcast Episode Show Notes
Episode Summary
In this episode, hosts Jonathan Mendonsa and Brad Barrett discuss the pivotal role of community in the journey towards financial independence. They share insights from the premiere of the Playing With Fire documentary, review investment strategies, particularly Paul Merriman's ultimate buy-and-hold portfolio, and highlight the significance of diversification and simplified asset allocation. Listeners are encouraged to engage with local ChooseFI groups and partake in screenings of the documentary to promote financial literacy.
Key Topics Discussed:
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Introduction to Community and Documentary
The episode opens with a warm welcome and highlights the importance of joining the financial independence community at screenings, particularly focusing on the premiere of Playing With Fire. -
Playing With Fire Documentary Experience
Brad recounts the emotional and empowering experience at the documentary premiere, emphasizing the importance of attending with like-minded individuals. -
Investment Strategies: Paul Merriman's Approach
Discussion leads into an analysis of Paul Merriman's ultimate buy-and-hold portfolio. Jonathan and Brad compare his strategy with JL Collins' philosophy from The Simple Path to Wealth. -
Asset Allocation and Diversification
The hosts emphasize the advantages of diversification and how reducing fees can enhance long-term investment returns. They encourage listeners to simplify their investment strategies. -
M1 Platform Overview
A segment on using the M1 investment platform to maintain a simplified portfolio, allowing for automated investment management. -
Conclusion and Final Thoughts
The episode wraps with a call to action for listeners to participate in Junior Achievement and support financial literacy efforts in their communities.
Key Takeaways:
- Engage with local ChooseFI communities for screenings and events.
- Simplifying your investment strategy can lead to better performance by reducing complexity.
- Explore the M1 platform for automated investment management options.
Action Items:
- Attend a local community screening of Playing With Fire.
- Sign up for M1 to automate your investments.
Discussion Questions:
- How does community support enhance your journey towards financial independence?
- What are your thoughts on a buy-and-hold strategy versus active trading?
Key Quotes:
- "Invite a friend to the documentary; it's more than just about financial independence!"
- "As Warren Buffett suggests, focus heavily on the S&P 500 for long-term wealth."
- "Remember, everyone's journey to financial independence is unique."
- "Building a supportive community is essential for financial independence."
Related Resources:
SEO Keywords:
financial independence, ChooseFI, investment strategies, buy-and-hold portfolio, Paul Merriman, Playing With Fire documentary, community engagement, asset allocation, diversification, financial literacy, travel rewards, local groups
Unlocking Financial Independence Through Community Engagement and Smart Investing
Navigating the path to financial independence requires thoughtful strategies, smart investments, and often, the support of a community. The latest discussions from the ChooseFI podcast showcase vital insights from hosts Jonathan Mendonsa and Brad Barrett, emphasizing the critical role community engagement plays on this journey.
The Power of Community in Your Financial Journey
One significant aspect that the podcast highlights is the profound impact of community. Engaging with local groups can amplify your financial literacy and motivation. When you join forces with others on similar paths, you'll find accountability and encouragement.
- Join Local Groups: Look for local ChooseFI meetups or other financial independence gatherings in your area. They are invaluable resources for motivation and support.
- Connect Through Screenings: Participate in screenings of documentaries like Playing With Fire. These events can spark discussion and bring you closer to others on the same journey.
As highlighted in the podcast, “You become the average of those five closest to you.” Surrounding yourself with financially savvy peers can dramatically shift your perspective and decisions regarding money.
Recommended Investment Strategies for Long-Term Success
The podcast dives deep into investment strategies, emphasizing Paul Merriman’s ultimate buy-and-hold portfolio and its relation to a simplified asset allocation approach. Here's how to apply these insights to your portfolio:
Embrace Buy-and-Hold Philosophy
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Understand the Buy-and-Hold Strategy: This method involves purchasing stocks and holding them for the long term, regardless of market fluctuations. Warren Buffett’s advice rings true: A significant portion of holdings should be in broad market index funds, especially the S&P 500.
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Focus on Low Fees: When investing, choose funds with low expense ratios. Higher fees can erode long-term returns, making it vital to keep your costs down as much as possible.
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Diversification Matters: Investing in a variety of assets can minimize risk. Merriman's insights suggest adding exposure to small-cap value stocks, which historically provide better returns over time.
Simplifying Your Investment Strategy
For many, the complexity of investments can be overwhelming. Simplifying your strategy not only makes it easier to manage but often more effective. Here are actionable steps:
- Use Target Date Index Funds: As part of your portfolio, these funds automatically adjust your asset allocation as you approach retirement age, making it easier to maintain proper risk levels.
- Consider Two Funds for Life: This strategy involves investing in a target date fund combined with a small-cap value fund for added growth potential.
Actionable Steps to Optimize Your Financial Independence Journey
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Attend Community Events: Tom and attend local ChooseFI screenings or meetups. Engaging in these can provide not only support but also insights into your financial journey.
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Invest through Technology: Explore platforms like M1 for automating and managing your investments easily. These tools can help you stick to your allocated strategy without the constant need to evaluate and adjust manually.
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Educate Yourself Continuously: Leverage available resources and platforms to expand your financial knowledge. Websites like ChooseFI provide valuable tools and educational content.
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Stay Engaged with Your Community: Community involvement is crucial. Volunteer to organize local events or screenings to help foster a deeper sense of connection with your peers.
Closing Thoughts
Financial independence isn't just a personal journey; it's a communal one. Engage with your local financial independence community, leverage smart investment strategies, and remain open to learning. By doing so, you’ll not only enhance your own journey but also contribute to a larger movement towards financial literacy and empowerment.
As the hosts of ChooseFI note, the clearer the vision of financial independence is within a supportive community, the more achievable it feels. Let's work together towards this common goal, celebrating our victories and learning from each experience along the way.
Jonathan and Brad discuss Playing with FIRE updates and the ultimate buy and hold portfolio.
[elementor-template id="143609"]Playing With FIRE update
Brad and Jonathan just returned from the world premiere of Playing with FIRE in San Diego. Around 250 people showed up to the event and it was an eye-opening experience.
You should not watch this at home on your couch in the living room. Right now, you have the opportunity and need to join the Financial Independence community. You need to watch this. Go to the movie theatre, watch this movie, join your local community of like-minded individuals.
If you have not already joined a local group, then take this opportunity to find people with a similar mission. Join a local group today.
Tickets
The minimum number of tickets needed for a screening of Playing with FIRE is 70. Many cities are close to their threshold but are a few tickets short. If you live in one of these areas, please grab a ticket and go meet your tribe.
These are the deadlines to reach the minimum ticket threshold for select cities.
- Grand Rapids- June 20th
- Albany -June 20th
- Pittsburgh- June 27th
- Nashville- June 19th
- Portland- June 24th
- Vancouver -June 24th
- Las Vegas- June 24
- Long Beach, CA - June 24
- Pittsburgh- June 27th
- Phoenix-June 27th
- Honolulu- July 3rd
If you are in the area, please attend. Bring along family or friends that might be interested. It is a great way to introduce them to this concept and show that it has a large following.
Bring a friend to the documentary. This is more than just Financial Independence, the whole point is to spread this message as far as we can.
If you want to learn more about the documentary we chatted with the creator in Episode 37.
The Ultimate Buy And Hold Strategy
Brad and Jonathan asked William on the show to discuss the pros and cons of this strategy. Plus, they found a way to simplify the maintenance of this portfolio.
Merriman is the ultimate diversified investor. Instead of investing in just the S&P 500 or a total stock market index that holds around 3,000 companies, he has around 12,000 companies in the ultimate buy and hold strategy.
Similarly to most of our thinking, Merriman recognizes the value of low fees.
The lower the expenses, the better the likely returns over the long-term.
In the ultimate buy and hold portfolio, there are eight to ten asset classes to keep track of which can be difficult. However, Merriman realized this was too complicated for the average investor to keep up with after a conversation with John Bogle. So, he found a way to maximize the benefits while keeping it simple with the two funds for life strategy.
With the two funds for life strategy, the two funds are target date index funds and small-cap value funds. Overall, Merriman believes that this combination will outperform the S&P 500 and the entire stock market.
Merriman's newest strategy, and what he is advising, is the 'two funds for life'. And now to me, this makes more sense. So, ultimate buy and hold, you look at, there are eight to ten different funds in there... it's a little bit too much for my own brain, frankly. But with this 'two funds for life' [strategy] it really simply is the target date index fund, and then the small-cap value fund.
However, this asset allocation performs better based on increased risk.
Any extra performance is generally because you are taking on more work or more risk. But just because you take on more risk doesn't mean you are going to get a good return.
Additional Companies In Your Portfolio
Since a total stock market index is thousands of companies, you may be wondering how Merriman is able to add even more to his portfolio. The answer is that his portfolio goes international. It includes developed stocks and emerging market stocks from around the world.
JL Collins countered this point in episode 36. Most large companies within the US have operations and exposure overseas, so he is getting that exposure through the larger companies. In his line of thinking, international stocks can be associated with higher fees and less transparency.
William countered that the higher fees for international stock are largely a thing of the past.
You don't know where the winners are going to be and that justifies international exposure as well.
If you are interested in following the two funds for life strategy, then you have options for the small-cap value portion. You can choose individual stocks, actively managed funds, or index funds.
The biggest thing that will mess you up is if you switch course. You know, it's fine to bring in new information and make a change. But if you get emotionally tied to returns and you don't stay the course for five, seven, or ten years from now, you're never going to see the outcome projected by the academics 40 years from now.
You can find Merriman's official advice on the ultimate buy and hold strategy and the two funds for life strategy on his website.
Simplify With M1 Finance
If you are interested in these strategies but uncomfortable about the amount of rebalancing you need to do yourself, then consider M1 Finance. You can replicate the strategy and get most of the benefits by using this platform. M1 Finance is a brokerage platform that allows you to set up your asset allocation in terms of a pie chart.
You can set up the percentages of your portfolio and M1 Finance will do the rest.
Simply set up your own strategy based on the risks you are comfortable with and M1 Finance will take care of the rest. You will stay in your predetermined asset classes without breaking a sweat. The platform will allow you to rebalance with new deposits and any dividends to avoid the tax implications of selling within your taxable accounts.
Calling Our Community
Our community places high importance on financial literacy and works to spread it. We have the opportunity to spread it further through a partnership with Junior Achievements. They have provided the opportunity to teach kids about finance in your local area through finance parks.
So far, Seattle, San Diego, and St. Louis are ready to go.
We are still looking for volunteers to lead this program in Denver, Phoenix, Atlanta, Detroit, Charlotte, Milwaukee, D.C., Minneapolis, and Richmond.
If you are interested in helping out, then send an email to feedback@ choosefi.com
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