Why not own a growth index fund instead of the S&P 500?

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Manage episode 244079023 series 30352
By Paul Merriman. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.

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The podcast addresses five different topics from our readers and listeners. It starts with a discussion of the likely future returns of growth vs. value. I read a short blog from Seth Godin, titled “Getting to the truth”:

Your anecdote isn’t true.

I know it happened. I know that your experience, your feelings, your outcomes are real. And they’re yours.

Statistics suffer when compared to anecdotes. Because your mileage may vary. Your interaction with the randomness of the world will never match up to what the statisticians tell us to expect. Because averages and correlations are never what we actually experience. We experience a tiny slice of it.

But, at the same time that the larger truth can’t be experienced, your anecdote can never represent the larger truth, because it’s yours. What happened to you will never happen to anyone else, not in quite the same way.

By relying on well-told stories, we ignore the real truth, the universal truth of how the world actually is.

Yes, our mileage varies. But please let me know what the reality of the world is.

This blog inspired me to address the question of the reality I want investors to consider, but with the ‘reality' that 'my reality' may turn out wrong. On the other hand, there is absolutely no evidence that anything has changed in the long term relationship between these two great asset classes. My comments include a full discussion of the returns of the Russell 1000 Large-Cap Growth, Large-Cap Value and Large-Cap Blend for the last 10 and 20 years.

Topic 2: Chitra asks me to explain the process of withdrawing income from the Vanguard Monthly Income Fund Portfolio

Topic 3: Jaaron asks whether it makes sense to use the Vanguard Large Growth Index instead of the S&P 500. In my answer, I compare the small, large, value and growth Russell indexes as well as the same asset classes as designed by DFA. Listeners may be surprised by the fact that how these indexes are built can produce life-changing differences.

Topic 4: Chris and Kayli ask where they can find our recommendations to build the Ultimate Buy and Hold Portfolio.

Topic 5: Fred asks me to discuss the difference between investing in a target date fund and working with a professional advisor to give personal advice.

326 episodes