Paul Merriman is a long time established expert and educator on personal finance and investing. His Sound Investing podcast has been a massive inspiration to me and thousands of others. He is a contributor to Marketwatch. Paul Merriman has a very interesting and diverse investing philosophy. He favors diversification and a strong portion of stocks when you have plenty of time until retirement. He also favors going into the small-cap asset classes. His Ultimate Portfolio is his portfolio that has massive diversification and has a good amount invested in small caps.
Paul Merriman’s Ultimate Portfolio, 10 X 10 = Winner?
- 1 Paul Merriman’s Ultimate Portfolio, 10 X 10 = Winner?
- 2 What is the Paul Merriman Ultimate Portfolio?
- 3 Asset Allocation
- 4 Returns and risk for The Ultimate Portfolio
- 5 Building the portfolio
- 6 Advantages and disadvantages of The Ultimate Portfolio
- 7 Resources
- 8 Summary and your next steps
What is the Paul Merriman Ultimate Portfolio?
The portfolio is made up of 10 asset classes, each contributing 10% to the portfolio. The portfolio has a tilt towards value and small-caps. This means that the portfolio allocates a portion of its asset to small cap and value stocks. These have historically outperformed other asset classes.
Returns and risk for The Ultimate Portfolio
|Portfolio Name||Number of asset classes||1 year return 2018||10 year return||CAGR since 1989||Risk Level||Market Correlation||Dollar Value|
|S&P 500 (Benchmark)||1||-4.52%||12.97%||9.84%||5 - very high risk||0.99||$167,045.76|
|Merrimans Ultimate Portfolio||10||-12.38%||10.33%||8.75%||5 - very high risk||0.83||$123,701.16|
Building the portfolio
Below you can see which mutual funds or ETFs you can use to build the portfolio. They are the best-in-class funds and ETFs for this purpose. They are low-cost index funds that best capture the asset class. Read here how we selected the best funds.
Asset allocation for The 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)
Advantages and disadvantages of The Ultimate Portfolio
- Thoroughly tested by Paul Merriman
- 10 x 10 is easy to understand and even to implement.
- You get great diversification across many asset classes.
- You have 40% in small caps – one of the best historical performing asset classes.
- You might outperform the market.
- Good opportunities for rebalancing, thereby reducing risk and increasing returns.
- Has had a higher risk than the S&P 500 in the past 10 years as measured by (standard deviation).
- Makes a large bet on small caps which may not be desirable.
- May consist of too many asset classes for some.
Go here for a rebalance excel worksheet.
Here is his podcast for 2018 for the portfolio. He updates the portfolio every year.
Summary and your next steps
Paul Merriman’s Ultimate Portfolio divides your portfolio into 10 asset classes equally. While it has more risk than the S&P 500 it has also outperformed the S&P for the past 10 years. This is partly due to 40% allocation to small caps and a healthy portion to emerging markets, 10%. I consider Paul Merriman one of the “good guys” in investing. He has a lot of (investing)knowledge he passes on entirely for free and without compensation through his Merriman Foundation.
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