Paul Merriman Portfolios: Unbiased Outperformance

Paul Merriman has constructed a lot of portfolios. This page details his many fantastic portfolios. Many of them outperform the S&P 500.

Paul Merriman has constructed a lot of portfolios. This page details his many portfolios. An example is Paul Merriman’s enduring Ultimate Portfolio.

Paul Merriman’s Ultimate Portfolio can be built with 10 ETFs. It is exposed to 100% equities. It tilts towards value and small caps. It is a high-risk portfolio.

For the past 10 years, the Paul Merriman’s Ultimate Portfolio has returned 9.20% with a standard deviation of 17.74%. The dividend yield is 2.82%. The 30-year return is 9.13%. Year to date the Paul Merriman’s Ultimate Portfolio has returned -7.14%.

How do you build Paul Merriman’s Ultimate portfolio with ETFs?

Below you can see the suggested asset allocation for Paul Merriman’s Ultimate Portfolio.

  • 10.00%  US Large Cap Value (VTV)
  • 10.00%  US Large Cap (VV)
  • 10.00%  US Small Cap Value (VIOV)
  • 10.00%  US Small Cap (VIOO)
  • 10.00%  REITs (VNQ)
  • 10.00%  Emerging Markets (VWO)
  • 10.00%  International All-World ex-US (VEU)
  • 10.00%  International Large Cap Value (EFV)
  • 10.00%  International Small Cap Blend (VSS)
  • 10.00%  International Small Cap Value (DLS)

You can find asset allocation for the rest of Paul Merrimans portfolios below.

What is the return of Paul Merriman’s portfolios?

Below you can see the returns of Paul Merriman’s portfolios.

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Paul Merriman Best-in-Class ETFs Portfolio (Aggressive)12-6.3523.539.40%9.2830.18%
Paul Merriman Best-in-Class ETFs Portfolio (Moderate)15-1.6616.446.88%8.1820.13%
Paul Merriman Best-in-Class ETFs Portfolio (Conservative)150.6912.95.53%7.4110.10%
Paul Merriman Target Date Portfolio (25 year old)4-15.6522.1710.48%10.8330.26%
Paul Merriman Target Date Portfolio (35 year old)11-14.8222.4910.50%10.730.24%
Paul Merriman Target Date Portfolio (45 year old)14-12.0621.8310.04%10.2430.21%
Paul Merriman Target Date Portfolio (55 year old)14-7.3719.478.82%9.3420.15%
Paul Merriman Target Date Portfolio (65 year old)14-2.3515.046.81%8.1110.10%
Paul Merriman FundAdvice Ultimate Buy and Hold13-2.1316.616.77%8.1320.12%
Paul Merriman 2-Fund-Value-Portfolio2-13.5724.2912.22%10.6630.10%
Paul Merriman 4-Fund-Portfolio4-6.6626.8512.72%10.7130.08%
Paul Merriman 5-Fund-Value-Portfolio5-14.1921.759.99%9.9330.28%
Paul Merriman Ultimate Buy & Hold Strategy 201012-0.8318.077.47%8.4320.17%

Who is Paul Merriman?

Paul Merriman is an educator, entrepreneur, and an all-around good guy in investing. He has created a host of portfolios. They all express massive diversification and a slight to an extreme bias towards value and small-cap, especially small-cap value

Small cap value has historically been the best performing asset class.

Paul Merriman’s podcast is highly recommended, as are the many articles on his site. His personal finance book Get Smart or Get Screwed: How To Select The Best and Get The Most From Your Financial Advisor easily wins as the best-titled book on personal finance.

His book Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind is fantastic and stuffed with sage advice, statics, and evidence-based best-investing practices.

For a detailed rundown of Paul Merriman’s Ultimate portfolio, you should read the article Paul Merriman’s Ultimate Portfolio: 10 X 10 = Winner?

Paul Merriman’s work on the best ETFs inspired me to expand upon his work to create a best-in-class ETF and Mutuals fund overview for many more asset classes.

What is unique about Paul Merriman’s portfolios?

Paul Merriman’s portfolios are characterized by one of two features:

  • Excellent diversification through slicing and dicing.
  • They display a heavy concentration of a few high performing asset classes like small caps and small-cap value.

Paul Merriman’s portfolios have evolved over the years. They used to have a good amount of bonds in them. The Ultimate portfolio used to have a bond component. The ultimate portfolio no longer sports bonds.

Paul Merriman is a big fan of small caps and value on which he has done extensive research.

Paul Merriman is an evidence-based investor and favors statistics over feelings.

His ultimate portfolio is a beautiful example of how diversification can bring higher returns without higher risk.

Paul Merriman is retired (he used to run his own investment consulting shop). The work he is doing now is strictly non-profit. All of his podcasts, articles, and many other greats resources are without any profit motive.

This makes him highly unbiased and trustworthy as he is not pushing any hidden agenda other than trying to help everyday investors. I am a big fan of Paul Merriman and the great work he is doing.

Paul Merriman is an evidence-based investor and favors statistics over feelings.

Building the portfolio(s)

Below you can see the asset allocations for the portfolio(s). You can also see if the portfolio(s) has a socially responsible investing (ESG) variant portfolio. You can read more about socially responsible investing (ESG) investment portfolios in this post.
To build the portfolio(s) yourself, go to our best in class ETF page to see which ETF you should choose for a particular asset class. There you can also see which socially responsible investing ESG ETFs you should select.

Asset Allocation of Paul Merriman’s Portfolios

Paul Merriman’s Best-in-Class ETFs Portfolio (Aggressive)

  • 11.30%  US Large Cap Value (VTV)
  • 11.20%  US Large Cap (VV)
  • 11.30%  US Small Cap Value (VIOV)
  • 11.20%  US Small Cap (VIOO)
  • 5.00%    REITs (VNQ)
  • 9.00%    International Developed Blend (VEA)
  • 4.50%    Emerging Markets (VWO)
  • 9.00%    International Large Cap Value (EFV)
  • 9.00%    International Small Cap Blend (VSS)
  • 9.00%    International Small Cap Value (DLS)
  • 4.50%    Emerging Markets Small Cap (EWX)
  • 5.00%    International REITs (VNQI)

This and the two portfolios below are part of his “best-in-class” portfolios. You can find them here.

Paul Merriman’s Best-in-Class ETFs Portfolio (Conservative)

  • 4.50%    US Large Cap Value (VTV)
  • 4.50%    US Large Cap (VV)
  • 4.50%    US Small Cap Value (VIOV)
  • 4.50%    US Small Cap (VIOO)
  • 2.00%    REITs (VNQ)
  • 3.60%    International Developed Blend (VEA)
  • 1.80%    Emerging Markets (VWO)
  • 3.60%    International Large Cap Value (EFV)
  • 3.60%    International Small Cap Blend (VSS)
  • 30.00%  Intermediate-Term Treasuries (VGIT)
  • 18.00%  Short Term Treasuries (VGSH)
  • 12.00%  TIPS (VTIP)
  • 3.60%    International Small Cap Value (DLS)
  • 1.80%    Emerging Markets Small Cap (EWX)
  • 2.00%    International REITs (VNQI)

Paul Merriman’s Best-in-Class ETFs Portfolio (Moderate)

  • 6.80%    US Large Cap Value (VTV)
  • 6.70%    US Large Cap (VV)
  • 6.80%    US Small Cap Value (VIOV)
  • 6.70%    US Small Cap (VIOO)
  • 3.00%    REITs (VNQ)
  • 5.40%    International Developed Blend (VEA)
  • 2.70%    Emerging Markets (VWO)
  • 5.40%    International Large Cap Value (EFV)
  • 5.40%    International Small Cap Blend (VSS)
  • 20.00%  Intermediate-Term Treasuries (VGIT)
  • 12.00%  Short-Term Treasuries (VGSH)
  • 8.00%    TIPS (VTIP)
  • 5.40%    International Small Cap Value (DLS)
  • 2.70%    Emerging Markets Small Cap (EWX)
  • 3.00%    International REITs (VNQI)

Paul Merriman’s FundAdvice Ultimate Buy and Hold

  • 6.00%    US Large Cap Value (VTV)
  • 6.00%    US Large Cap (VV)
  • 6.00%    US Small Cap Value (VIOV)
  • 6.00%    US Small Cap (VIOO)
  • 6.00%    REITs (VNQ)
  • 6.00%    Emerging Markets (VWO)
  • 6.00%    International All-World ex-US (VEU)
  • 6.00%    International Large Cap Value (EFV)
  • 6.00%    International Small Cap Blend (VSS)
  • 20.00%  Intermediate-Term Treasuries (VGIT)
  • 12.00%  Short-Term Treasuries (VGSH)
  • 8.00%    TIPS (VTIP)
  • 6.00%    International Small Cap Value (DLS)

Paul Merriman’s Target Date Portfolio (25-year-old)

This portfolio is part of Portfolio Einstein Gold, Premium Portfolios. 

Paul Merriman’s Target Date Portfolio (35-year-old)

This portfolio is part of Portfolio Einstein Gold, Premium Portfolios. 

Paul Merriman’s Target Date Portfolio (45-year-old)

This portfolio is part of Portfolio Einstein Gold, Premium Portfolios. 

Paul Merriman’s Target Date Portfolio (55-year-old)

  • 9.13%    US Large Cap Value (VTV)
  • 21.74%  US Small Cap Value (VIOV)
  • 18.27%  US Small Cap (VIOO)
  • 4.06%    REITs (VNQ)
  • 2.47%    Emerging Markets (VWO)
  • 3.13%    International All-World ex-US (VEU)
  • 3.13%    International Large Cap Value (EFV)
  • 3.13%    International Small Cap Blend (VSS)
  • 12.00%  Intermediate-Term Treasuries (VGIT)
  • 7.20%    Short Term Treasuries (VGSH)
  • 4.80%    TIPS (VTIP)
  • 6.73%    International Small Cap Value (DLS)
  • 2.47%    Emerging Markets Small Cap (EWX)
  • 1.74%    International REITs (VNQI)

Paul Merriman’s Target Date Portfolio (65-year-old)

  • 7.87%    US Large Cap Value (VTV)
  • 7.88%    US Small Cap Value (VIOV)
  • 15.75%  US Small Cap (VIOO)
  • 3.50%    REITs (VNQ)
  • 1.35%    Emerging Markets (VWO)
  • 2.70%    International All-World ex-US (VEU)
  • 2.70%    International Large Cap Value (EFV)
  • 2.70%    International Small Cap Blend (VSS)
  • 25.00%  Intermediate-Term Treasuries (VGIT)
  • 15.00%  Short Term Treasuries (VGSH)
  • 10.00%  TIPS (VTIP)
  • 2.70%    International Small Cap Value (DLS)
  • 1.35%    Emerging Markets Small Cap (EWX)
  • 1.50%    International REITs (VNQI)

Paul Merriman’s Ultimate Portfolio

  • 10.00%  US Large Cap Value (VTV)
  • 10.00%  US Large Cap (VV)
  • 10.00%  US Small Cap Value (VIOV)
  • 10.00%  US Small Cap (VIOO)
  • 10.00%  REITs (VNQ)
  • 10.00%  Emerging Markets (VWO)
  • 10.00%  International All-World ex-US (VEU)
  • 10.00%  International Large Cap Value (EFV)
  • 10.00%  International Small Cap Blend (VSS)
  • 10.00%  International Small Cap Value (DLS)

This is the portfolio that Paul Merriman features on MarketWatch. It shows the power of diversification that brings home excellent returns while keeping risk in check.

Paul Merriman 2-Fund-Value-Portfolio

This portfolio is part of Portfolio Einstein Gold, Premium Portfolios. 

Paul Merriman 4-Fund-Portfolio

Paul Merriman 5-Fund-Value-Portfolio

This portfolio is part of Portfolio Einstein Gold, Premium Portfolios. 

Paul Merriman Ultimate Buy & Hold Strategy 2010

  • 6.00%    US Large Cap Value (VTV)
  • 6.00%    US Large Cap (VV)
  • 6.00%    US Small Cap Value (VIOV)
  • 6.00%    US Micro-Cap (IWC)
  • 6.00%    REITs (Real Estate) (VNQ)
  • 6.00%    International Developed Blend (VEA)
  • 6.00%    Emerging Markets (VWO)
  • 6.00%    International Large Cap Value (EFV)
  • 6.00%    International Small Cap Blend  (VSS)
  • 20.00%  Intermediate-Term Treasury (VGIT)
  • 20.00%  Corporate Bonds (LQD)
  • 6.00%    International Small Cap Value (DLS)

This is a slightly different variant of the Ultimate portfolio. This one is from 2010. The bond portion of the portfolio is somewhat different.

Together with Chris Pedersen, Paul Merriman has constructed what he calls the ultimate target-date fund

How we select the right ETFs

There are a lot of ETFs out there. Most of them can be discarded because:

  • They are too expensive
  • They hold too few assets and are therefore too illiquid
  • They do not meet the criteria for representing the asset class they are supposed to mirror.

We have carefully selected an ETF for each asset class that the portfolios on portfolioeinstein.com use. If you want to read more about our selection process and see what we consider the best ETFs please visit our article What Is The Best ETF?

If you are a European investor you need to buy European ETFs. We list 47 best ETFs in our article What Are The Best ETFs For European Investors? (Here Is 47).

As of 2020 we also track socially responsible investing ESG portfolios. Socially responsible investing (ESG) portfolios prioritize investing that puts an emphasis on environmental, social and corporate governance issues.

You can find the socially responsible investing ESG ETFs in the same article.

Alternatives to Paul Merriman’s portfolios

There are a few alternatives to Paul Merriman’s portfolios. Remember that his portfolios are very diversified into many asset classes, or they are very concentrated into a few of the best historically performing asset classes. Therefore, if you want similar diversification, then have a look at the IFA portfolios or some of David Booth’s portfolios. For concentrated portfolios, the best alternatives are from the FPL Capital Management Portfolios.

If you are looking for target-date funds, be sure to check out our growing Target Date Fund Portfolio overview.

Resources

Paul Merriman’s website with tons of information on his many portfolios.

Paul Merriman’s YouTube channel.

Paul Merriman’s podcast “Sound Investing”.

Suggestions for your next steps

Finding the correct portfolio is hard. Maintaining your portfolio is also daunting. If you are still in doubt about which portfolio to choose, we suggest you read our article How To Invest Money: 5 Simple Steps That Work For Anyone

If you have already committed to a portfolio – good for you! If you need help maintaining the portfolio you will find our rebalance worksheet useful. Rebalancing your portfolio lowers your risk and may even provide higher returns in the long run.

You can find the rebalance worksheet in our article Here Is The Most Easy To Use Portfolio Rebalance Tool

Conclusion

Which portfolio do you use? Why do you think the balanced portfolio too simple for you?

After having read up on Paul Merriman’s portfolios, I encourage you to find other great portfolios right here on portfolioeinstein.com.

If you have suggestions for new portfolios, be sure to add them in comments or reach out to me.

2 thoughts on “Paul Merriman Portfolios: Unbiased Outperformance”

  1. What do you think about adding 10% of a small cap value fund to a target date fund and leave it without a rebalance?I’m talking about Paul Merriman’s 2 fund for life portfolio.

    1. Hi Mario, I love the work that Paul Merriman and Chris Pedersen are doing in simplifying an outperforming target-date fund.
      I haven’t done the research myself on their work but their research looks promising.
      Value and small-cap have in recent years lagged the broader market to the extent that commentators (again) question the validity and permanence of the value and small asset class premia.
      The risk here is that investors may jump ship because they lose faith in the strategy.
      That said, the best performing portfolios that are tracker by portfolioeinstein.com all have a good amount of small and value stocks in them. Historically that has been the way to go if you want outperformance.

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