Paul Merriman’s Ultimate Portfolio: 10 X 10 = Winner?

Paul Merriman’s Ultimate Portfolio can be built with 10 ETFs. It is a 100% stock portfolio and a high-risk portfolio. It is exposed to small-cap stocks and value stocks.

For the past 10 years, Paul Merriman’s Ultimate Portfolio has returned 9.20% with a standard deviation of 17.74%. Last year it returned 23.8%. 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%.

Returns for The Ultimate Portfolio

NameAsset class countYear to dateReturn in 201910 year returnCAGR since 1989 (%)Risk levelExpense ratio
Merrimans Ultimate Portfolio10-7.1423.89.20%9.1330.17%

How to build the Merriman’s Ultimate Portfolio with 10 ETFs

  • 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)

Who is Paul Merriman?

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 has massive diversification and has a good amount invested in small caps.

What is the Paul Merriman Ultimate Portfolio?

The Ultimate portfolios is also knows as the Ultimate Buy and Hold 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 two asset classes have historically outperformed other asset classes.

Paul Merriman’s financial literacy videos

What is the asset allocation for the Ultimate portfolio?

paul-merriman-ultimate-portfolio

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.

Advantages and disadvantages of The Ultimate Portfolio

Advantages

  • The Ultimate portfolio is thoroughly tested by Paul Merriman. Paul Merriman updates the portfolio each year in Marketwatch.
  • It is easy to understand the concept of the Ultimate portfolios. You have 10 asset classes that are split 10 ways = 10 x 10.
  • The portfolio gets you great diversification across many asset classes.
  • The Ultimate portfolio gives 40% in small caps – one of the best historical performing asset classes.
  • You might outperform the market if you use the Ultimate portfolio.
  • Paul Merriman’s portfolio leaves you excellent opportunities for rebalancing. The act of rebalancing can reduce risk and may increase returns because you sell high and buy low.

Disadvantages

  • The portfolio has a higher risk than the S&P 500 as measured by (standard deviation).
  • The Ultimate portfolio makes a large bet on small caps which may not be what you want.
  • Paul Merriman’s Ultimate portfolios may consist of too many asset classes for some people.

Resources

Go here for a rebalance excel worksheet.

Go here for the article on Paul Merriman’s website. Here is the condensed article on Marketwatch.

Here is his podcast for 2018 for the portfolio. He updates the portfolio every year.

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

Related questions

What is the best asset class?
Small-cap value is the best performing asset class in the past 60 years. In the past 15 years value has lagged the broader market.

What is the two-fund portfolio?
The two fund portfolio is a portfolio built with 2 ETFs. It uses a target-date fund and a small-cap value fund.

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