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Merriman Buy and Hold Portfolio Strategies

According to Paul Merriman, founder and director of Merriman Capital Management, the use of a no-load asset-class index funds managed by Dimensional Fund Advisors (DFA) represents the best way of establishing a productive buy-and-hold portfolio. These funds help investors identify the most profitable types of assets in which to invest.

It has been proven by financial researchers that the appropriate blend of large-cap and small-cap stocks, value stocks and growth stocks, U.S. stocks and international stocks combined with moderate risk-taking will result in substantial returns in the long-term. A good way of obtaining the right balance of funds and of identifying the best investment assets is through Dimensional Fund Advisors (DFA). Aside from their many advantages, they have many drawbacks, which are presented in the following lines.

Dimensional Fund Advisors Disadvantages

  • Compulsoriness of investment advisors
  • Annual management fees (from 0.25% to 2% annually)
  • Account size of minimum $50 000 required

On the other hand, if you think you cannot overcome the stated above drawbacks, Mr. Merriman suggests you to choose from the portfolios that are available at Fidelity, Schwab and Vanguard.

In order to make the most appropriate for you choice stick to the following simple steps:

  1. Select the funds whose investment targets coincide with yours to the greatest degree possible! This means that if you prefer investing in mid-cap stocks, do not buy shares of funds that purchase small-cap stocks along with mid-cap ones.
  2. Select the fund with the lowest expenses possible! Every penny that falls into the expenses paragraph will never reach your wallet.

Top 3 Chart

According to Merriman, if we can make a chart for the three do-it-yourself portfolios Vanguard will surely win the first place for its low-cost index funds. The second place is reserved for Schwab thanks to its wide variety of fund families that it offers from which you can choose to invest your hard-earned money in. The final third place is left for the buy-and-hold portfolios at Fidelity, since Mr. Merriman considers them least efficient. Despite this, he recommends their Fidelity do-it-yourself portfolios to patient investors that need to stay there.

According to Mr. Merriman, the most favorable allocation of equity is 50% in international stock funds and the other 50% in domestic funds. Additionally, the 50% in the international are divided between large stocks, small stocks, value stocks, growth stocks and emerging markets. The other 50% that are invested domestically are evenly divided between the same stocks as in the international part with the exception of the investment in emerging markets.

Mr. Merriman considers that the balance between stability and return can be best accomplished by the investment in one-year and five-year bonds when speaking about fixed-income allocation. This is true especially when this technique is implemented with the intention of alleviating the volatility of an equity portfolio.

Paul Merriman has been on the financial market since 1983 and is recognized by many for his expertise in the field. The four suggested buy-and-hold portfolios above may represent an attractive investment opportunity. But before embarking on whatever investment endeavors, remember to carefully analyze your current situation and consider where you want to be concerning your financial development.

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