What We Tested and Why Portfolio Structure Matters
If you had put $100,000 into any of these portfolios back in January 2016, the gap between the best outcome and the worst is an eye-opening $300,000. That’s what portfolio structure can cost or earn you over time. With so many ETFs available today, most people never get a direct side-by-side comparison backed by real data. That’s what we are putting in front of you today.
We ran 10 model portfolios through 10 years of proprietary analysis (January 2016 to December 2025) on a $100,000 starting balance. These are the ETF portfolio structures investors debate most online, in books, and across investing communities, each built around different investment objectives, risk profiles, and underlying philosophies. Exchange-traded funds trade throughout the day on national stock exchanges at market prices, which makes them far more flexible than mutual funds for building and adjusting a diversified ETF portfolio.1 For a full comparison of how those structures differ, the ETFs vs. mutual funds article walks through the key differences.
Each ETF portfolio below is built from individual securities, uses a unique investment strategy, and can be copied on most platforms. The net asset value of an ETF reflects its underlying holdings, but they trade at their market price throughout the day. The allocation model changes across each setup, and the results are more varied than most expect. If you’re new to exchange-traded funds, check out our guide on How to Invest in ETFs: Step-by-Step for Beginners before building your own portfolio.
The 4 Stats That Actually Matter for Any Asset Allocation Decision
So what numbers should you actually care about? For this test: 10-year CAGR, end balance on $100,000, standard deviation, and maximum drawdown. The CAGR gives you the annualized return over the full period. The end balance makes percentages tangible. Standard deviation measures year-to-year volatility, how much the annual returns bounced around to produce that CAGR. Lower standard deviation means a smoother ride, while higher means bigger swings in both directions. Max drawdown is the worst peak-to-trough loss during the period, which is tied to risk tolerance, because it tells you whether you could have held through the tough times. These four cover return, scale, volatility, and risk in one run.
The Benchmark: Why VT Was Used as the Baseline
Instead of the S&P 500, VT (Vanguard Total World Stock ETF) serves as the benchmark for this test. It represents the broadest possible equity exposure in a single fund, covering U.S., developed international, and emerging markets all at once. That makes it the most honest baseline for comparing portfolios with different geographic tilts. Every portfolio below is measured against it.
Over the 10-year test period, VT posted an 11.77% CAGR, growing $100,000 to $304,201 with a -25.52% max drawdown and a standard deviation of 14.68%. Just so you know, the S&P 500 (via VOO) returned a 14.79% CAGR over the same period.2 The investment strategies that worked in this window all had a significant U.S. stock market focus, specifically on large-cap growth positions, and kept fixed income light despite climbing interest rates.
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ETF Portfolio Examples: All 10 Tested Side by Side
Here’s how all 10 ETF portfolio examples did from January 2016 through December 2025, starting from $100,000. All results are from proprietary analysis. Mutual funds and actively managed products were excluded. Every position here is a passive index ETF or low-cost fund. VT (Vanguard Total World Stock ETF) is the benchmark.
| 10 ETF Portfolios Backtested Over 10 Years | January 2016 – December 2025 | $100,000 Starting Balance | |||||
| Portfolio | # of ETFs | 10-Yr CAGR | End Balance ($100K Start) | Std Dev | Max Drawdown |
| VT — Benchmark | 1 | 11.77% | $304,201 | 14.68% | -25.52% |
| Warren Buffett (2-Fund) | 2 | 13.57% | $356,866 | 13.56% | -21.98% |
| DS Taxable Growth (2-Fund) | 2 | 16.62% | $465,175 | 16.17% | -27.75% |
| Bogleheads (3-Fund) | 3 | 10.79% | $278,688 | 12.42% | -23.12% |
| YouTubers (3-Fund) | 3 | 15.63% | $427,376 | 15.04% | -24.03% |
| Paul Merriman (4-Fund) | 4 | 11.87% | $306,877 | 16.68% | -27.42% |
| Ray Dalio All Weather (5-Fund) | 5 | 6.61% | $189,595 | 8.55% | -20.68% |
| David Swensen (6-Fund) | 6 | 7.95% | $214,930 | 10.88% | -22.31% |
| Coffeehouse (7-Fund) | 7 | 7.07% | $197,996 | 10.52% | -19.70% |
| DS Ultimate (9-Fund) | 9 | 17.36% | $495,844 | 15.65% | -26.60% |
| Notes: All results from proprietary Portfolio Visualizer analysis (Jan 2016–Dec 2025). VBR used as small-cap value proxy for Paul Merriman backtest; AVUV recommended going forward. FBTC excluded from DS Ultimate historical data due to BTC early momentum being an outlier. | |||||
1. Total World 1-Fund ETF Portfolio (VT): The Benchmark
One ETF and done. The world’s simplest portfolio strategy is the Vanguard Total World Stock ETF (VT).
It holds close to 10,000 stocks across global markets that consist of the U.S., developed international, and emerging markets. It’s also the benchmark for this entire test, chosen because it gives you the broadest possible equity exposure out there, that you can get with one convenient purchase. If your portfolio can’t beat it, a single 0.06% ETF would have done the job.
The results after 10 years: VT returned 11.77% a year, ending up with a balance of $304,201, with a standard deviation of 14.68%, that’s volatile, and a max drawdown of -25.52%, a significant fall. And VT trailed the S&P 500 by around 3 percentage points a year, mostly because international stocks didn’t do nearly as well. The expense ratio is 0.06%, which is low for one ETF covering the entire global market. If you want broad market exposure and zero maintenance then you can’t get much simpler than this.
2. Warren Buffett 2-Fund Portfolio
Buffett recommends something here that actually makes a lot of sense; put 90% of your portfolio funds into a low-cost S&P 500 ETF and 10% into a short-term government bond ETF. You can take his word for a lot, he has credibility. His track record at Berkshire Hathaway spans decades and has made him one of the wealthiest people alive.
The results after 10 years: a 13.57% yearly return, with an ending balance of $356,866, standard deviation of 13.56% and max drawdown of -21.98%. The bond position in VGSH kept the volatility down but didn’t make a huge difference on the return side. The Warren Buffett 2-fund portfolio beat out the Bogleheads and a few other more complex setups too. And the total expense ratio works out to be 0.03%, very low for a portfolio that’s this effective.
3. DS Taxable Growth ETF Portfolio
This one is built with taxable brokerage accounts in mind, where dividend drag and tax consequences eat into returns every year. The setup is 50% SCHG (the Schwab U.S. Large Cap Growth ETF) and 50% VOO (the Vanguard S&P 500 ETF).
One of the reasons for choosing SCHG is its very low expense ratio of 0.04% and a low dividend yield, this keeps the tax drag down compared to higher-yield alternatives.3 For more on investments you might want to steer clear of in taxable accounts have a look at the article investments to avoid in taxable accounts.
The results after 10 years: 16.62% CAGR, finishing up with $465,175, a standard deviation of 16.17% and a max drawdown of -27.75%. The trade-off for growth is a higher drawdown, but this is the price you pay for concentrated growth stock exposure. VOO’s 0.03% expense ratio keeps the blended cost of this portfolio low.
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4. Bogleheads 3-Fund Portfolio
Millions of investors swear by this three-fund structure, and its popularity is hard to miss.
The classic Bogleheads setup brings together total U.S. market (VTI), international stocks (VXUS) and a total bond market ETF (BND) that covers the full investment-grade U.S. bond universe. The idea is a broadly diversified, globally balanced portfolio with simple, low-cost funds. Both VTI and BND have expense ratios under 0.05%.
The results after 10 years: 10.79% CAGR, ending up with $278,688. A standard deviation of 12.42% and a max drawdown of -23.12%. Diversification is good but it also dragged the return down below the S&P 500 in this time window. If you want the full case for this structure, then you might want to take a look at our simplest 3-fund portfolio article. The Bogleheads approach still has some strong long term logic, but what the past decade actually delivered is what we’re seeing in the data.
5. YouTubers 3-Fund Portfolio
This combination really started picking up traction in the 2023-24 investing world. QQQ (Nasdaq-100), VOO (S&P 500 core), and SCHD (dividend equity) put growth, broad U.S. equity exposure, and dividend stability right into the mix with this ETF portfolio. Equal thirds is the most common weighting.
The results after 10 years: 15.63% CAGR, ending up with a total of $427,376, a standard deviation of 15.04% and a max drawdown of -24.03%. That actually beats the VT benchmark by nearly 4 percentage points per year. QQQ’s expense ratio is a bit high at 0.18%, that’s worth keeping in mind, and so is its 64% technology sector concentration. For an ETF portfolio that actually reflects what people in the investing community are talking about, this has the data to back it up.
6. Paul Merriman 4-Fund Portfolio
The Merriman 4-Fund Combo breaks down 25% across four U.S. equity asset classes: S&P 500 (large-cap blend), large-cap value (VTV), small-cap blend (VB) and small-cap value (AVUV).4
The rationale uses historical data going all the way back to 1928, and is targeting small-cap and value risk premiums that academic research shows add up to long-run excess returns. By adding in other asset classes, value and small-cap, beyond just the S&P 500 – Merriman’s thinking is that diversification across equity factors does add up over decades. All four funds carry expense ratios of 0.10% or under.
10 Year Results: 11.87% CAGR, ending up with $306,877. A standard deviation of 16.68% and a max drawdown of -27.42%, which was a bit steep. VBR was used in the backtest as the small-cap value proxy, but AVUV is the one recommended for moving forward.
If you want to see the full YouTube video for all 10 of these ETF portfolios, check out this video below:
7. Ray Dalio’s All Weather 5-Fund Portfolio
The concept behind this ETF portfolio is to be able to survive any economic season. Dalio’s allocation is 30% stocks (VTI), 40% long-term U.S. bonds (VGLT), 15% intermediate bonds (BIV), 7.5% gold (GLD), and 7.5% commodity ETFs (DBC). Fixed income securities dominate at 55% combined, making it the most defensive setup in testing by a wide margin.
The results after 10 years: 6.61% CAGR, finishing up at $189,595, with a standard deviation of 8.55% and a max drawdown of -20.68%. This beats the Coffeehouse on every single one of those metrics. It came in with the lowest standard deviation and second-lowest max drawdown in the test.
International Bonds and Fixed Income in the All Weather Model
The bond portfolios didn’t deliver on the protection we had anticipated, at least in this particular time frame. These aren’t your run-of-the-mill junk bonds, by the way. VGLT and BIV are high-quality government and investment-grade bonds. When interest rates go up, bond prices take a hit and the extended period of rising rates from 2022 through 2024 really hurt long-duration holdings (VGLT). All bonds, government or corporate, long or short, suffered when interest rates shot up. These were not all safe investments, the returns were way below their historical average over this period.
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8. David Swensen 6-Fund Portfolio
Swensen managed Yale University’s endowment for 35 years, growing it from $1.3 billion to an astonishing $42.3 billion. His own personal investor portfolio was based on the same principles as the institutional models, distilled into six asset classes: U.S. stocks (VTI), real estate (VNQ), international stocks (VXUS), the inflation-protected bonds (SCHP), U.S. government bonds (VGIT) and a developing economy ETF (VWO). Not rocket science, just good, solid investing.
Results over ten years: 7.95% average annual return, an end balance of $214,930, 10.88% standard deviation, a -22.31% max drawdown. The multi-asset mix is supposed to offer real diversification benefits, but in this time frame, the international and fixed income positions dragged down performance. And to be honest, the real estate and inflation-protected assets (REITs and TIPS) added some unnecessary complexity, without delivering any real benefit over simpler alternatives.
International Stocks: Why They Helped Some Portfolios and Hurt Others
It turns out that foreign equities didn’t exactly have a great run over that 10 year stretch. Any portfolio that had a lot of exposure to VXUS or VWO paid a real price in returns. There have been times when international stocks have outperformed their U.S. counterparts, U.S. stocks have generally been the stronger investment over time, and the tax drag on foreign holdings makes that gap even wider in taxable accounts. But from 2016 to 2025, developed and emerging markets just didn’t keep pace with U.S. stocks, that explains why portfolios #4, #8 and #9 all trailed the benchmark.
9. Coffeehouse 7-Fund Portfolio
Forty percent of the portfolio in bonds was a steep price to pay for stability. The Coffeehouse Portfolio holds BND (total bond), VOO (S&P 500), VOOV (S&P 500 Value), a small-cap blend (VB), a small-cap value (VBR), VNQ (REITs) and VXUS (international equities). So, corporate bonds contribute to the income layer, but they also add a bit of drag, given how bonds performed during this period.
Results over ten years: 7.07% average annual return, an end balance of $197,996, 10.52% standard deviation, a respectable -19.70% max drawdown, the lowest of any portfolio in this test. But on the flip side, barely doubling a $100,000 investment over a decade isn’t exactly the kind of growth investors are usually looking for.
10. DS Ultimate 9-Fund Portfolio
This portfolio is the most aggressive one in this test, and the results show it. The DS Ultimate stacks targeted exposure across nine different positions, starting with VOO (30%), SCHG (30%), then a bunch of smaller allocations: SPMO, XMMO, AVUV, VGT, SMH each at 6%, VEA (5%) and GLD (5%) to round out the international and defensive balance. The semiconductor ETF SMH was a standout performer, given how well the sector did over this decade.
This kind of aggressive portfolio is designed for experienced investors with a high tolerance for risk, and those who are looking to push past the returns of the S&P 500 without getting into individual stocks. XMMO adds mid cap momentum exposure, and the combination of VGT and SMH provides some concentrated sector tilts towards technology and semiconductors, which paid off handsomely in this time frame. And the good news is that SCHG and VOO together keep the expense ratio of the portfolio down, even at this 60% level.
Results over ten years: 17.36% average annual return, an end balance of $495,844, 15.65% standard deviation, and a -26.60% max drawdown. The highest return of any portfolio tested, but you’d have to have a lot of conviction to stick with it through the rough patches to actually capture those gains.
What the Asset Allocation Data Shows
The data from these portfolios really doesn’t show a lot of evidence of great bond protection, at least over the last 10 years. What do the top four performing portfolios actually have in common? As we took a closer look at the results, three things jumped out at us.
- In order for a portfolio to beat the VT benchmark, it had to be heavily weighted towards U.S. growth stocks and asset classes.
- On the other hand, portfolios that were heavily invested in bonds consistently trailed, three of the bottom four portfolios carried 30% or more in fixed income.
- Meanwhile, complexity, or at least trying to implement complex strategies, simply didn’t seem to pay off.
The 9-fund DS Ultimate portfolio saw less than one full percentage point of annual CAGR more than the simpler 2-fund DS Taxable Growth. Now, it turns out that trying to manage risk through diversification and bond-heavy asset allocation didn’t quite pay off in this particular market environment. But, past performance is useful to look at when considering different stock market cycles, even though it doesn’t tell us what’s going to happen next in the future.
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Market Volatility: Which Portfolio Came Out on Top Under Pressure?
The Coffeehouse Portfolio put up the smallest max drawdown at -19.70%, followed closely by Dalio’s All Weather at -20.68%, then the Warren Buffett 2-Fund at -21.98%. And looking at standard deviation, All Weather at 8.55% had the smoothest ride of all, followed by Coffeehouse at 10.52% and Swensen at 10.88%. Those are meaningful differences during volatile times for investors who are risk-averse.
The trade-off seems clear: every portfolio that beat the VT benchmark had to be willing to take on more volatility and harder drawdowns. And of course, there’s liquidity risk and behavioral risk to consider, these tend to be of higher importance for long-term investors who are in this for the long haul.
Why a Diversified Portfolio Isn’t Always the Winner
Let’s face it, a diversified portfolio isn’t inherently the better one. When foreign equities underperform domestic growth funds for a decade or more, broad diversification starts to feel like a drag rather than an advantage.
Take the Bogleheads 3-fund diversified ETF portfolio, this is probably the most respected structure in retail investing and it still managed to finish behind the Warren Buffett 2-fund model. Using diversified ETFs and broader asset classes just doesn’t reliably improve returns in every market environment. This decade made that case very clear.
Large Cap Stocks Dominated Performance
Three out of four top-performing portfolios happened to have 50% or more in U.S. large cap allocations and the fourth, the YouTubers portfolio, wasn’t far off. The growth-tilted stock ETFs, primarily SCHG, QQQ and VGT, were driving the bulk of returns from 2016 to 2025. The broad U.S. stock ETFs in the mix were helpful, but it was the growth-tilted ones that were really delivering. U.S. large cap stocks were more than just a contributing factor to performance, they were the defining factor.
International diversification, commodity ETFs, real assets, emerging markets exposure and bond market exposure all came at a measurable performance cost in this window.
Expense Ratio Costs and How Low Cost ETFs Had an Edge
Even a small difference in expense ratio fees compounds significantly over 10 years.5 Every top-performing portfolio in this test used low cost ETFs with expense ratios at or under 0.20%. Before buying any fund, it’s worth checking the summary prospectus to see what the expense ratio is. Management fees work against you in compounding, and the gap between a 0.03% index fund and a 1%+ active fund can add up to tens of thousands of dollars at scale.
Choosing the Right ETF Portfolio
The right ETF portfolio is the one that you’ll stick with for the long haul, 10 years or more. Of the ten model portfolios we looked at, the biggest difference was which asset classes were dominant. A 17% CAGR means nothing if you bail when your portfolio drops 26% in a bad year.
Building a diversified ETF portfolio that works means aligning your asset allocation mix with both your investment objectives and how you actually behave under pressure. Your stock allocation to bond exposure all need to fit your timeline and temperament.
When you’re working through those investment decisions it’s worth getting investment advice from a qualified financial advisor or investment advisor about your situation, especially if you’re an experienced investor building a complex multi-factor portfolio. The data here is just a starting point, not a personalized investment strategy. What you end up building with, whether it’s multiple ETFs or just two, needs to be right for you.
If you’re thinking about ETFs for retirement, our index funds for retirement article lays out a step-by-step guide to your investments at every stage of your life. Don’t forget to keep your tax advisor in the loop, tax implications and the specific advice they can give on taxable vs tax advantaged structures can make a big difference in where you end up.
Your individual circumstances, other investments, your time horizon and what it is you’re looking for from your investments (are you keen on mid cap or growth investments?) All of those circumstances come together to create a portfolio that actually makes sense for where you are right now.
