In the second installment of Paul Merriman’s 9-part Bootcamp series, we delve into the Ultimate Buy and Hold Portfolio, a proven strategy designed to maximize returns while managing risk. Originally introduced in 1995, this portfolio has evolved over the years, but its core principle remains the same: diversification is key.


Whether you’re a seasoned investor or just starting your financial journey, Bootcamp 2 offers a step-by-step breakdown of how this strategy works, why it’s effective, and how it can fit into your portfolio in 2025.


What Is the Ultimate Buy and Hold Portfolio?

The Ultimate Buy and Hold Portfolio is built on the idea of diversifying across 10 equity asset classes to achieve higher returns without taking on additional risk. By spreading investments across U.S. and international markets, large-cap and small-cap stocks, and value and growth sectors, this strategy creates a balanced portfolio designed to weather market volatility.


Key Features of the Portfolio:

  • 10 Equity Asset Classes: Includes U.S. large-cap blend, small-cap blend, small-cap value, international large-cap blend, international small-cap value, and more.
  • Diversification: Reduces risk by including up to 12,000 companies.
  • Historical Performance: Outperforms the S&P 500 over the long term with similar or lower volatility.


What’s New in the 2025 Update?

Paul Merriman revisits the Ultimate Buy and Hold Portfolio with updated data and insights for 2025. Here’s what’s changed:

Adjusted Fixed Income Allocation:

In 1995, the portfolio included 40% fixed income. Today, it’s closer to 30-35% fixed income, reflecting modern market conditions.

Focus on All-Equity Portfolios:

For investors seeking higher returns, Paul highlights the benefits of an all-equity portfolio diversified across 10 asset classes.

Simplified Strategies:

While the original portfolio included 10 asset classes, Paul introduces streamlined alternatives like the 4-Fund Strategy, offering similar diversification with fewer components.

Rebalancing Insights:

Annual rebalancing remains optimal, as monthly rebalancing often leads to lower returns despite slightly reduced volatility.


Why Diversification Matters

Paul emphasizes that diversification isn’t just about owning multiple stocks—it’s about spreading investments across different types of asset classes. For example:

  • Small-Cap Value Stocks: Historically deliver the highest returns, though they come with higher risk.
  • Real Estate Investment Trusts (REITs): Provide stability and reduce portfolio volatility due to low correlation with other asset classes.
  • International Equities: Add global exposure, enhancing returns and reducing reliance on U.S. markets.

By combining these asset classes, the Ultimate Buy and Hold Portfolio aims to achieve higher returns while managing risk effectively.


Performance Highlights

  • S&P 500 vs. Ultimate Buy and Hold Portfolio:
    A $100,000 investment in the S&P 500 in 1970 grew to nearly $30 million by 2025. However, the same investment in the Ultimate Buy and Hold Portfolio grew to over         $53 million, showcasing the power of diversification.
  • Step-by-Step Growth:
    Adding just 10% of small-cap value stocks to the S&P 500 allocation increased returns by $2.2 million over 55 years—without adding significant risk.
  • Emerging Markets:
    Including emerging markets boosted returns to 12.1% annually, growing the portfolio to         $53.4 million with only a slight increase in volatility.


Simplified Alternatives: The 4-Fund Strategy

For investors seeking a simpler approach, Paul introduces the 4-Fund Strategy, which includes:

  • 25% U.S. Large-Cap Blend (S&P 500 or Total Market Index)
  • 25% U.S. Small-Cap Value
  • 25% International Large-Cap Value
  • 25% International Small-Cap Blend

This strategy offers nearly identical returns to the full 10-asset-class portfolio while being easier to manage.

Key Takeaways for 2025

  • Diversify Broadly: Spread your investments across U.S. and international markets, small-cap and large-cap stocks, and value and growth sectors.
  • Rebalance Annually: Maintain your target allocation to maximize returns and manage risk.
  • Consider Simplified Portfolios: The 4-Fund Strategy offers a streamlined approach to diversification.
  • Think Long-Term: Even small adjustments, like adding 10% in small-cap value stocks, can lead to millions in additional returns over decades.


What’s Next in the Bootcamp Series?

Stay tuned for Bootcamp 3, where Paul dives into fine-tuning your asset allocation, including the role of bonds in your portfolio.


Join the Conversation

Have questions or want to learn more about the Ultimate Buy and Hold Portfolio? Contact Paul Merriman at paul@paulmerriman.com or explore additional resources on his website. Don’t forget to share this series with friends and family who want to make smarter investment decisions!