Ultimate Buy and Hold - Portfolio 7 by Paul Merriman

The Ultimate Buy and Hold Portfolio 7 is one of Paul Merriman's flagship model portfolios, developed by the investing educator and founder of the Paul Merriman Foundation. Merriman, who spent decades as a financial advisor, designed the Ultimate Buy and Hold series to demonstrate how factor diversification across multiple equity asset classes — rather than holding a single total market index — can improve expected long-run returns. The "7" variant holds seven distinct equity sleeves globally, weighted to maximise factor exposure while maintaining broad diversification.

Investment Philosophy

Merriman's Ultimate Buy and Hold series is based on the academic evidence for the size and value premiums identified in the Fama-French research. Rather than holding just a total market fund, the portfolio divides equity exposure across US large-cap blend, US large-cap value, US small-cap blend, US small-cap value, international large-cap value, international small-cap, and international small-cap value. The premise is that holding all of these distinct factor segments, rather than just the total market, provides better diversification of the sources of equity return and captures multiple documented risk premia simultaneously.

Who It's For

This portfolio is suited to investors with a long time horizon, high risk tolerance, and genuine conviction in factor investing. The high equity allocation and factor tilts mean it can experience significant tracking error relative to a simple index fund, particularly during periods when growth stocks dominate. It is best for investors who have educated themselves on the factor evidence and can maintain discipline through underperformance.

Pros

• Broad diversification across seven distinct global equity factor segments
• Small-cap and value tilts aim to capture documented return premiums beyond market beta
• Simple buy-and-hold approach with annual rebalancing — no tactical overlay required

Cons

• Managing seven distinct fund sleeves requires careful annual rebalancing
• Factor tilts can significantly underperform a total market index for extended periods
• Requires access to low-cost small-cap value funds across US and international markets

Technical Notes

A bond allocation can be added to the portfolio to reduce overall risk, with the equity-to-bond split set according to individual risk tolerance. See also Ultimate Buy and Hold Portfolio 8 for the broader eight-sleeve version.