Actually it does matter quite a bit. I'm not saying to start buying individual stocks,
So what are you saying then?
Here is an example of a low cost index portfolio that is more diversified than the S&P 500 or even VTI.
42.5% modeled after the S&P but sector specific to allow tax loss harvesting:
7.5% - VGT - S&P Technology
6.5% - VFH - S&P Financials
6.0% - VHT - S&P Healthcare
4.5% - VCR - S&P Consumer Discretionary
4.0% - VIS - S&P Industials
6.5% - VDC - S&P Consumer Staples
3.0% - VDE - S&P Energy
1.5% - VAW - S&P Materials
1.5% - VPU - S&P Utilities
1.5% - VOX - S&P Communication
Mid Caps specific - 20%:
3.5% - VO - Mid Cap index
4.0% - VOT - Mid Cap Growth
12.5% - VXF - Mid Caps not in the S&P (some small caps in this one)
Small Cap specific - 20%:
20% - VB - Small Cap index
International - 17.5%:
8.5% - VEU - Ex US International
9.0% - VSS - Ex US International (small cap)
From a portfolio like this you get:
-Tax loss harvesting
-Much more market cap diversity (40% Large Cap, 34% Mid Cap, 26% Small Cap)
-International Diversity (18% international, 82% U.S.)
-Sector weighting very similar to VTI (+1% on Consumer Def, Real Estate, and -1% on Energy and Health C.)
-Holding Type very similar to VTI (ie. Aggressive Growth, value, etc.)
-Long Term EPS Growth at 11.2% with a P/E of 18.5 vs 10% for VTI (PE 18.3) or 9.6% (PE 18) for the S&P 500
-Expense ratio of 0.12% and free transactions with Vanguard
This portfolio is very similar to a VTI + VXUS portfolio with some small cap ETFs added. To eliminate the majority of the problems with indexing, you don't have to be a stock picker. You just have to be an intelligent indexer.