Merriman 4 Fund Combo: backtest, returns and drawdowns
All stocks, in four equal parts: S&P 500, large-cap value, small caps and small-cap value.
Data updated October 2026
Created by: Paul Merriman
Allocation
| Asset class | ETF used in the backtest | Weight |
|---|---|---|
| S&P 500 | IVV | 25% |
| US large-cap value | IVE | 25% |
| US small caps | IJR | 25% |
| US small-cap value | IJS | 25% |
- Stocks 100%
From October 2011 to October 2026 the Merriman 4 Fund Combo returned 12.6% a year on average, with annual volatility of 18.0%. Its deepest fall was 39.3%, from January 2020 to March 2020, recovered in about 10 months.
Its best year was 2013 (+35.7%) and its worst 2022 (−12.8%).
Over the same period 100% US stocks returned 14.3% a year with a maximum fall of 35.0%.
Key figures
- Annual return (CAGR)
- +12.6%
- Annual volatility
- 18.0%
- Maximum drawdown
- −39.3%
- Recovery time
- 10 months
- Sharpe
- 0.67
- Sortino
- 0.95
- Worst year
- 2022: −12.8%
- Positive years
- 11/14
Growth of $10,000
Drawdowns
Returns by calendar year
| Year | Merriman 4 Fund Combo | 60/40 Portfolio | 100% Stocks |
|---|---|---|---|
| 2026(partial) | +13.4% | +6.9% | +12.7% |
| 2025 | +10.8% | +13.0% | +17.0% |
| 2024 | +13.2% | +14.8% | +23.8% |
| 2023 | +19.8% | +17.9% | +26.1% |
| 2022 | −12.8% | −16.9% | −19.5% |
| 2021 | +27.7% | +14.6% | +25.7% |
| 2020 | +8.2% | +15.4% | +20.7% |
| 2019 | +27.2% | +21.9% | +30.7% |
| 2018 | −8.9% | −3.1% | −5.3% |
| 2017 | +15.2% | +14.2% | +21.4% |
| 2016 | +21.4% | +8.3% | +12.1% |
| 2015 | −3.1% | +0.2% | −0.1% |
| 2014 | +9.4% | +9.7% | +12.2% |
| 2013 | +35.7% | +18.2% | +31.8% |
| 2012 | +16.5% | +10.4% | +14.7% |
| 2011(partial) | +6.3% | +3.1% | +4.1% |
History
- Created by
- Paul Merriman
- Who
- Founder of the Merriman Financial Education Foundation
- Year
- 2010s
- Source
- Paul Merriman’s articles and books (paulmerriman.com)
- Funds in the backtest
- 4
Paul Merriman’s 4 Fund Combo is an all-stock mix built to capture the extra long-run return that academic studies have found in value and small-company stocks: a quarter each in the S&P 500, US large-cap value, US small caps and US small-cap value.
Merriman presents it as an alternative to a plain S&P 500 fund for long-term savers, to be combined with bonds as retirement approaches.
Strengths and weaknesses
Strengths
- Four funds, equal weights
- Strong tilt to value and small caps
- Simple to rebalance
Weaknesses
- 100% stocks: falls as deep as the market or deeper
- Small and value stocks can lag for a decade or more
- Only US stocks
How it works
Keep 100% in stocks but tilt towards value and small companies, where academic studies found higher long-run returns.
Backtest with total-return ETF prices (dividends reinvested), rebalanced to target weights on the first trading day of each year. Where a Vanguard fund has a short price history in our data, an iShares fund on the same market is used (for example ITOT for VTI, IVV for VOO). No fees, taxes or currency effects; first and last years are partial. Past results do not predict future returns.
Questions
Who created the Merriman 4 Fund Combo?
Paul Merriman (founder of the Merriman Financial Education Foundation), 2010s. Source: Paul Merriman’s articles and books (paulmerriman.com).
What is the Merriman 4 Fund Combo?
All stocks, in four equal parts: S&P 500, large-cap value, small caps and small-cap value. Allocation: 25% s&p 500, 25% us large-cap value, 25% us small caps, 25% us small-cap value. Created by: Paul Merriman.
What is the Merriman 4 Fund Combo return?
In the backtest from October 2011 to October 2026 it returned 12.6% a year on average, with a maximum drawdown of 39.3%. US dollars, before fees and taxes.
How often should it be rebalanced?
The backtest rebalances once a year back to the target weights. Rebalancing more often changes little and adds costs; some investors rebalance only when a weight drifts beyond a threshold.
What was the worst drawdown of the Merriman 4 Fund Combo?
39.3%, from January 2020 to March 2020; it took about 10 months to get back to the previous high.
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Source: MarketStack end-of-day prices. Historical and educational content: not a forecast and not investment advice. MEDGE Capital does not recommend buying or selling any instrument. Risk disclaimer.