Important questions to ask yourself:
- Do you have the discipline to manage a complex portfolio well in the long term even during times of extreme market conditions, strong temptations to time the market or very stressful personal situations? (I suspect the answer is no for the majority of people.)
- If you have a partner, can the same be said about them, or do you invest separately, or can you agree that they don't interfere with investing?
And if your answers to both are yes:
- Do you want to add a REIT fund?
- Do you want to increase the weight of small caps compared to a total market index?
- Do you want to increase the weight of international small caps?
- Do you want to increase the weight of emerging markets relative to a total international index?
- Do you want to increase the weight of emerging markets small caps?
- Do you want to tilt large cap, small cap, international, anything else towards value?
- Do you want to barbell with bonds?
- Do you want to add a TIPS fund?
And so on...
These would be reasons for your asset allocation to slightly differ from that of some total index. While there's a broad consensus that the best strategy is a very well diversified portfolio, opinions differ somewhat on whether and to what degree you should change the weights of various components and what it means precisely to have good diversification for a given personal situation and time horizon. I don't claim to have the final word on that, I just suggest you research patiently and tread carefully. Simulations like the one you linked to may be useful tools for learning but keep in mind that they cannot predict the future and there's a risk you might try to overfit your allocation.
In my opinion there's nothing wrong with slice and dice as long as you don't pay excessive fees and don't make mistakes in your complicated system. What's important is that you have a balanced portfolio and get your asset allocation right (whatever that means for you). Whether you achieve it using 3 funds or 30 funds makes absolutely no difference in terms of returns. Some asset allocation targets can be reached using very few funds, others cannot.
(I don't think there's anything very wrong with either of the two portfolios you presented. I'd probably calculate with a 4% withdrawal rate at most, have less bonds if my time horizon is as long as 45 years, add some REITs, have a little more emerging markets, less U.S. equities, just off the top of my head. None of this is necessarily the best advice, though, and I'm sure many people here will recommend something else.)
