Uploaded July 2024 | Updated September 2026, 2 weeks ago
We're finally here! Join Paul, Chris, and Daryl for one of our most important conversations yet: understanding past investment performance. Whether you're a seasoned investor or just starting out, this discussion will help you navigate the rich history of market data and make informed decisions.
Is Past Performance Really a Guide?
Chris kicks us off, explaining why past performance, especially long-term historical data (ideally back to 1928), is the only guide we have for the future, even if short-term returns are random. Daryl emphasizes that while you can't predict the future, studying past volatility helps build confidence in various investment types. They touch on "Black Swans" and the idea that while market crashes like the Great Depression are rare, similar volatility can arise from unexpected events. Paul believes the future will look like the past, just with a different sequence of returns.
Visualizing Market History:
Paul introduces Quilt Charts, an incredible tool Daryl put together. These charts vividly display the year-by-year performance of different equity asset classes: S&P 500, Large Cap Value, Small Cap Blend, Small Cap Value, and our US Four-Fund Strategy. You'll see how unpredictable individual asset class performance can be, with leaders and laggards constantly shifting. The Four-Fund Strategy often stays reliably "in the middle," offering consistent returns through diversification. This visual tool helps us understand why "staying the course" is crucial, even when some assets underperform for long periods.
Daryl then dives into Telltale Charts, or relative growth charts, which show how different asset classes perform relative to a baseline like the S&P 500. This helps illustrate periods of outperformance or underperformance, emphasizing that a downward slope on a Telltale chart doesn't mean losses, but simply underperformance relative to the baseline. He also highlights how dollar-cost averaging can significantly reduce early downside risk compared to lump-sum investing.
Chris's Go-To Chart for Investors:
Chris shares his top pick: the Two Funds for Life fine-tuning table. He loves it because it uniquely combines equity and fixed income, providing insights for both accumulators and retirees. This comprehensive chart covers compound annual growth rates, worst drawdowns, and crucial safe withdrawal rates. It lets you visualize various combinations of Target Date Funds with different percentages of Small Cap Value, helping you tailor a diversified portfolio for your objectives, even suggesting a "barbell" strategy for high returns with low volatility. Chris also mentions an upcoming presentation that will deeply explore how to use this table to create a customized "glide path" for your investments.
Tables referenced-
Equity Index Returns: 1-yr Periods (1928-2023) Equity Returns- irp.cdn-website.com/6b78c197/files/uploaded/Equity_Returns-_J1b.pdf
4 US Asset Class Indexes & 4 Fund Combo Relative Return Ranking (1928-2023) - irp.cdn-website.com/6b78c197/dms3rep/multi/%28K%29+Quilt+Charts+%281928-2023%29_Page_02.jpg
Asset Classes & 4 Fund Combo (1928-2023) - Return Rank Frequency- irp.cdn-website.com/6b78c197/dms3rep/multi/%28K%29+Quilt+Charts+%281928-2023%29_Page_04.jpg
S&P 500 & US SCV Relative Return Rank Comparison (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/Tablek1b.jpg
Sound Investing Port. Returns: 10 Yr Periods (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/K8a.jpg
Sound Investing Portfolios, S&P 500 & US SCV Relative Return Ranking (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/k6a.jpg
Sound Investing Portfolios, S&P 500 & US SCV (1928-2023) - Return Rank Frequency irp.cdn-website.com/6b78c197/dms3rep/multi/k7a.jpg
If you found this information helpful and want to support more free, financial education for everyone, please consider making a donation to the Merriman Financial Education Foundation. Your generosity helps Paul and his team continue providing invaluable tools and resources to investors worldwide. Every contribution makes a difference! Donate today at donate.paulmerriman.com.
We're finally here! Join Paul, Chris, and Daryl for one of our most important conversations yet: understanding past investment performance. Whether you're a seasoned investor or just starting out, this discussion will help you navigate the rich history of market data and make informed decisions.
Is Past Performance Really a Guide?
Chris kicks us off, explaining why past performance, especially long-term historical data (ideally back to 1928), is the only guide we have for the future, even if short-term returns are random. Daryl emphasizes that while you can't predict the future, studying past volatility helps build confidence in various investment types. They touch on "Black Swans" and the idea that while market crashes like the Great Depression are rare, similar volatility can arise from unexpected events. Paul believes the future will look like the past, just with a different sequence of returns.
Visualizing Market History:
Paul introduces Quilt Charts, an incredible tool Daryl put together. These charts vividly display the year-by-year performance of different equity asset classes: S&P 500, Large Cap Value, Small Cap Blend, Small Cap Value, and our US Four-Fund Strategy. You'll see how unpredictable individual asset class performance can be, with leaders and laggards constantly shifting. The Four-Fund Strategy often stays reliably "in the middle," offering consistent returns through diversification. This visual tool helps us understand why "staying the course" is crucial, even when some assets underperform for long periods.
Daryl then dives into Telltale Charts, or relative growth charts, which show how different asset classes perform relative to a baseline like the S&P 500. This helps illustrate periods of outperformance or underperformance, emphasizing that a downward slope on a Telltale chart doesn't mean losses, but simply underperformance relative to the baseline. He also highlights how dollar-cost averaging can significantly reduce early downside risk compared to lump-sum investing.
Chris's Go-To Chart for Investors:
Chris shares his top pick: the Two Funds for Life fine-tuning table. He loves it because it uniquely combines equity and fixed income, providing insights for both accumulators and retirees. This comprehensive chart covers compound annual growth rates, worst drawdowns, and crucial safe withdrawal rates. It lets you visualize various combinations of Target Date Funds with different percentages of Small Cap Value, helping you tailor a diversified portfolio for your objectives, even suggesting a "barbell" strategy for high returns with low volatility. Chris also mentions an upcoming presentation that will deeply explore how to use this table to create a customized "glide path" for your investments.
Tables referenced-
Equity Index Returns: 1-yr Periods (1928-2023) Equity Returns- irp.cdn-website.com/6b78c197/files/uploaded/Equity_Returns-_J1b.pdf
4 US Asset Class Indexes & 4 Fund Combo Relative Return Ranking (1928-2023) - irp.cdn-website.com/6b78c197/dms3rep/multi/%28K%29+Quilt+Charts+%281928-2023%29_Page_02.jpg
Asset Classes & 4 Fund Combo (1928-2023) - Return Rank Frequency- irp.cdn-website.com/6b78c197/dms3rep/multi/%28K%29+Quilt+Charts+%281928-2023%29_Page_04.jpg
S&P 500 & US SCV Relative Return Rank Comparison (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/Tablek1b.jpg
Sound Investing Port. Returns: 10 Yr Periods (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/K8a.jpg
Sound Investing Portfolios, S&P 500 & US SCV Relative Return Ranking (1928-2023)- irp.cdn-website.com/6b78c197/dms3rep/multi/k6a.jpg
Sound Investing Portfolios, S&P 500 & US SCV (1928-2023) - Return Rank Frequency irp.cdn-website.com/6b78c197/dms3rep/multi/k7a.jpg
If you found this information helpful and want to support more free, financial education for everyone, please consider making a donation to the Merriman Financial Education Foundation. Your generosity helps Paul and his team continue providing invaluable tools and resources to investors worldwide. Every contribution makes a difference! Donate today at donate.paulmerriman.com.
