![\"\"](\"https:\/\/affordanything.com\/wp-content\/uploads\/2025\/03\/Screenshot-2025-03-14-at-2.52.32\u202fAM-300x168.png\")
In the left corner, we have Paul Merriman, the seasoned finance veteran weighing in at 183 pounds. In the right corner, Dr. Karsten Jeske, the scrappy newcomer at 208 pounds. The bell rings, and the small cap value debate begins.<\/p>\n
This episode features a financial boxing match between two investment heavyweights with dramatically different perspectives. Paul Merriman champions diversification through the efficient frontier, which means adding small cap value to your portfolio. Dr. Karsten Jeska has \u201cthrown cold water\u201d on this approach, favoring simpler strategies like \u201cVTSAX and chill.\u201d<\/p>\n
The stakes are high \u2014 we\u2019re talking potentially millions of dollars in your retirement account over decades.<\/p>\n
Merriman argues that history shows clear evidence for small cap value\u2019s premium. From 2000 to 2009, small cap value outperformed the S&P 500 in all but one year, compounding at 10 percent while the S&P 500 returned negative 1 percent. He believes this pattern will continue, creating a powerful diversification effect when combined with broader market indexes.<\/p>\n
Jeske counters that small cap value\u2019s outperformance is mostly \u201cfront-loaded\u201d in history, happening before anyone knew about it. Since 2006, small cap value has underperformed. He argues that once an advantage becomes widely known, it disappears in an efficient market. Adding small cap value might even be \u201cdi-worsification\u201d \u2014 increasing complexity without improving returns.<\/p>\n
The debate expands beyond small cap value to touch on:<\/p>\n
- \n
- Active vs. passive investing strategies<\/li>\n
- Market timing vs. buy-and-hold approaches<\/li>\n
- Simplicity vs. complexity in portfolio construction<\/li>\n
- The role of faith vs. evidence in investment decisions<\/li>\n<\/ul>\n
While both experts disagree about small cap value\u2019s future, they agree on fundamentals: invest early, stay invested for the long term, and understand that no one can predict markets with certainty.<\/p>\n
What starts as a technical debate evolves into a philosophical discussion about evidence, probability, and the limits of our knowledge \u2014 all with millions of retirement dollars hanging in the balance.<\/p>\n
Timestamps:<\/u><\/strong><\/p>\n
Note: Timestamps will vary on individual listening devices based on dynamic advertising run times. The provided timestamps are approximate and may be several minutes off due to changing ad lengths.<\/em><\/p>\n
(0:00) Debate intro: small cap value vs index funds<\/p>\n
(4:01) Merriman: small cap value offers premium returns<\/p>\n
(9:40) Jeske: small cap value underperformed since 2006<\/p>\n
(18:20) Historical performance data significance<\/p>\n
(25:15) Stakes: difference of millions over time<\/p>\n
(33:08) Diversification vs added volatility debate<\/p>\n
(41:45) Risk-adjusted returns comparison<\/p>\n
(49:08) Questioning true diversification benefits<\/p>\n
(57:40) Value traps and actively managed funds<\/p>\n
(1:05:08) Technology stocks vs value investments<\/p>\n
(1:13:45) Data selection bias in studies<\/p>\n
(1:19:40) Faith vs science in investment decisions<\/p>\n
(1:29:20) Personal risk tolerance considerations<\/p>\n
(1:36:08) Closing arguments on investment strategies<\/p>\n
(1:42:08) Paula declares the debate a draw<\/p>\n
![\"listen](\"https:\/\/affordanything.com\/wp-content\/uploads\/listen-to-afford-anything-on-itunes.png\")
![\"subscribe](\"https:\/\/affordanything.com\/wp-content\/uploads\/subscribe-on-android-afford-anything.png\")
<\/a><\/p>\nThanks to our sponsors!<\/p>\n
NetSuite<\/strong><\/a>
NetSuite is the number one cloud financial system, bringing accounting, financial management, inventory, HR, into ONE platform, and ONE source of truth. Head to\u00a0NetSuite.com\/PAULA\u00a0<\/strong><\/a>\u00a0and download the CFO\u2019s Guide to AI and Machine Learning.<\/p>\nPolicygenius<\/strong><\/a>
Go to\u00a0policygenius.com<\/a>\u00a0<\/strong>for free quotes and comparisons. With Policygenius, you can find life insurance policies that start at just $292 per year for $1 million of coverage.<\/p>\nSkims<\/strong><\/a>
The SKIMS Fits Everybody collection is a line of ultra-soft, stretchy, and lightweight intimates and basics designed to adapt to all body shapes while providing a comfortable, second-skin fit. Go to\u00a0Skims.com\/paula<\/strong><\/a>\u00a0to check out the Fits Everybody Collection.<\/p>\nQuince<\/strong><\/a>
Quince offers a range of high-quality items at prices within reach. Go to\u00a0Quince.com\/paula<\/strong><\/a>\u00a0for free shipping on your order and 365-day returns.<\/p>\nIndeed<\/strong><\/a>
If you\u2019re looking for amazing talent to bolster your team, you need Indeed. Go to\u00a0indeed.com\/paula<\/strong><\/a>\u00a0for a $75 job credit to upgrade your listing and start hiring today.<\/p>\nShopify<\/strong><\/a>
Diversify your business by selling physical and digital products through Shopify\u2019s all-in-one platform. Go to\u00a0shopify.com\/paula<\/strong><\/a>\u00a0for $1\/month trial and get full access to Shopify\u2019s entire suite of features.<\/p>\n<\/div>\n