Sound Investing The Final Chapter: S&P 500 vs. 60/40 vs. Four-Fund Strategy
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Oct 1, 2025 In this insightful discussion, Paul Merriman compares three investment strategies: the high-reward S&P 500, the balanced 60/40 mix, and the diversified four-fund approach. He reveals that the four-fund strategy could lead to significantly higher wealth over time, with only minimal additional risk. Highlighting 55 years of data, he explores how different portfolios perform during both accumulation and retirement phases. Listeners will discover crucial insights about balancing risks, the impact of withdrawals, and the value of diversification in long-term investing.
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Diversification Raised Returns Historically
- Diversifying beyond the S&P 500 historically raised long-term returns with only slightly more risk over 55 years.
- Past outperformance by four-fund mixes suggests potential future gains but no guarantee of replication.
Scale Tables To Your Contributions
- Use the accumulation tables to scale results to your savings rate by multiplying outcomes by your contribution factor.
- Compare portfolio endings to decide whether extra expected return justifies added risk for you.
Four-Fund Produced Much Bigger Balances
- Over 40 years the four-fund all-equity approach produced substantially larger ending balances than the S&P 500 alone.
- A 60/40 with four-fund equities also outperformed a 60/40 with S&P 500 equity exposure in that period.