The Ultimate Buy and Hold Portfolio by Paul Merriman seeks to diversify investments as broadly as possible across countries, company size, and valuation.
Asset Allocation
Change the home country to translate the portfolio to local assets, currency, and inflation. This affects every section of the page.
Asset Notes
- Merriman specifically calls for 8% short term TIPS and 12% short term bonds. I don’t have good data for TIPS, but in an effort to maintain his design intent I added it to the short term bond allocation. Be sure to read Merriman’s explanation for why he chooses the funds he does.
Other Versions
Merriman describes several different versions of the portfolio that vary by the percentage of bonds. The one shown here is the “Moderate” version with 40% bonds.
Author
Paul Merriman
Paul Merriman is a retired investing adviser who continues to dedicate his time to investing education. You can read about the Ultimate Buy and Hold portfolio at The Merriman Financial Education Foundation.
Overview
The Ultimate Buy and Hold portfolio (also sometimes referred to as the Merriman Ultimate portfolio) is a very broadly diversified portfolio that takes international, size, and value diversification to their logical extremes.
Domestic
- Large Cap
- Blend
- Value
- Small Cap
- Blend
- Value
- REITs
International
- Large Cap
- Blend
- Value
- Small Cap
- Blend
- Value
- Emerging Markets
Merriman often describes the choice of these ten assets by adding them one at a time and noting the progressive improvement of portfolio returns with every step. The resulting allocation represents his vision of the pinnacle of thoughtful diversification, which is the origin of the “Ultimate” name.
To determine the final percentages, Merriman advocates for equal weighting of each stock asset while adjusting the overall percentage to accommodate as many bonds that are necessary to dial the volatility back to whatever is comfortable for the investor. It thus combines an advanced factor investing mindset for stocks with an old-school view of bonds into a portfolio that a lot of investors can appreciate.
Performance
Since 1970, an investor in the United States holding the Ultimate Buy & Hold earned an average 5.9% real return, with a baseline CAGR of 4.4% over 15 years. It supported a 5.1% safe withdrawal rate for 30 years and 4.0% indefinitely. Its worst peak-to-trough loss was 32%, and the longest a new investment spent below water was under 10 years.
Ultimate Buy & Hold Portfolio Performance
| # | Metric | What it measures |
|---|---|---|
| 5.9% | Average return | Mean annual return after inflation |
| 4.4% | Baseline real return (15 years) | What 15-year stretches returned in the weaker outcomes |
| 5.1% | Safe withdrawal rate (30 years) | Highest spending rate that lasted 30 years in the worst case |
| 4.0% | Long-term withdrawal rate | The SWR floor over very long retirements |
| 32% | Deepest drawdown | Worst peak-to-trough loss after inflation |
| 10 years | Longest drawdown | Longest a new investment stayed below what you put in |
| 10.6% | Volatility (standard deviation) | Year-to-year variation in returns |
Charts
Different ways to visualize the Ultimate Buy and Hold Portfolio
Comparisons
How the Ultimate Buy and Hold Portfolio compares to other options
Alternatives
Portfolios with a similar structure or design intent
Sandwich Portfolio — Similar structure but with less factor diversity
Ideal Index Portfolio — The same basic idea with a single international fund
Larry Portfolio — A shared factor philosophy with a different allocation approach
Articles
Insights that mention the Ultimate Buy and Hold Portfolio
Discussion
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