Ultimate Buy and Hold Portfolio: backtest, returns and drawdowns
Sixty percent split equally across ten equity asset classes, forty percent in government bonds.
Data updated October 2026
Created by: Paul Merriman
Allocation
| Asset class | ETF used in the backtest | Weight |
|---|---|---|
| S&P 500 | IVV | 6% |
| US large-cap value | IVE | 6% |
| US small caps | IJR | 6% |
| US small-cap value | IJS | 6% |
| US real estate (REITs) | IYR | 6% |
| International large caps | EFA | 6% |
| International large-cap value | EFV | 6% |
| International small caps | SCZ | 6% |
| International small caps, dividend-weighted | DLS | 6% |
| Emerging-market stocks | EEM | 6% |
| Intermediate US Treasuries | IEF | 20% |
| Short-term US Treasuries | SHY | 12% |
| Inflation-protected Treasuries (TIPS) | TIP | 8% |
- Stocks 60.0%
- Bonds 40%
From October 2011 to October 2026 the Ultimate Buy and Hold Portfolio returned 6.7% a year on average, with annual volatility of 9.5%. Its deepest fall was 21.0%, from January 2020 to March 2020, recovered in about 10 months.
Its best year was 2019 (+17.1%) and its worst 2022 (−13.8%).
Over the same period 100% US stocks returned 14.3% a year with a maximum fall of 35.0%.
Key figures
- Annual return (CAGR)
- +6.7%
- Annual volatility
- 9.5%
- Maximum drawdown
- −21.0%
- Recovery time
- 10 months
- Sharpe
- 0.57
- Sortino
- 0.79
- Worst year
- 2022: −13.8%
- Positive years
- 11/14
Growth of $10,000
Drawdowns
Returns by calendar year
| Year | Ultimate Buy and Hold Portfolio | 60/40 Portfolio | 100% Stocks |
|---|---|---|---|
| 2026(partial) | +5.9% | +6.9% | +12.7% |
| 2025 | +16.0% | +13.0% | +17.0% |
| 2024 | +5.1% | +14.8% | +23.8% |
| 2023 | +11.5% | +17.9% | +26.1% |
| 2022 | −13.8% | −16.9% | −19.5% |
| 2021 | +11.1% | +14.6% | +25.7% |
| 2020 | +6.8% | +15.4% | +20.7% |
| 2019 | +17.1% | +21.9% | +30.7% |
| 2018 | −7.0% | −3.1% | −5.3% |
| 2017 | +13.9% | +14.2% | +21.4% |
| 2016 | +7.8% | +8.3% | +12.1% |
| 2015 | −0.8% | +0.2% | −0.1% |
| 2014 | +4.1% | +9.7% | +12.2% |
| 2013 | +12.4% | +18.2% | +31.8% |
| 2012 | +12.4% | +10.4% | +14.7% |
| 2011(partial) | +2.4% | +3.1% | +4.1% |
History
- Created by
- Paul Merriman
- Who
- Founder of the Merriman Financial Education Foundation
- Year
- 2000s
- Source
- Paul Merriman’s articles and books (paulmerriman.com)
- Funds in the backtest
- 13
Paul Merriman, a former investment adviser who now runs a non-profit foundation for financial education, designed the Ultimate Buy and Hold to show how much a portfolio could change by adding asset classes to the S&P 500. The equity part is split equally across ten classes: US and international large, large value, small and small value, plus US real estate and emerging markets.
The classic version holds 60% in these equity funds and 40% in government bonds: intermediate Treasuries, short-term Treasuries and inflation-protected Treasuries. Merriman’s articles compare it with the S&P 500 year by year over several decades.
Strengths and weaknesses
Strengths
- Ten equity asset classes: very wide diversification
- Deliberate tilt to value and small companies
- Bond side in government bonds only
Weaknesses
- Thirteen funds
- The tilts lagged the S&P 500 for long stretches, as in the 2010s
- Complex to replicate outside the US
International small-cap value is represented by an international small-cap dividend ETF (DLS), the closest US-listed fund with a long history.
How it works
Add value, small-cap, international and real-estate stocks to the S&P 500 in equal parts, and hold only government bonds on the safe side.
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 Ultimate Buy and Hold Portfolio?
Paul Merriman (founder of the Merriman Financial Education Foundation), 2000s. Source: Paul Merriman’s articles and books (paulmerriman.com).
What is the Ultimate Buy and Hold Portfolio?
Sixty percent split equally across ten equity asset classes, forty percent in government bonds. Allocation: 6% s&p 500, 6% us large-cap value, 6% us small caps, 6% us small-cap value, 6% us real estate (reits), 6% international large caps, 6% international large-cap value, 6% international small caps, 6% international small caps, dividend-weighted, 6% emerging-market stocks, 20% intermediate us treasuries, 12% short-term us treasuries, 8% inflation-protected treasuries (tips). Created by: Paul Merriman.
What is the Ultimate Buy and Hold Portfolio return?
In the backtest from October 2011 to October 2026 it returned 6.7% a year on average, with a maximum drawdown of 21.0%. 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 Ultimate Buy and Hold Portfolio?
21.0%, 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.