Is tilting index funds investments ever a good idea?

[Alchemisst]

Couldn't really word the title right, but is tilting such as small cap, small cap value (SCV), mid cap or mid cap value (MCV) etc ever a good idea? SVC and MCV have outperformed previously, though who knows if this will continue, the reasons SCV outperformed seem to make sense to me.

Edit:

I think tilting was the wrong word, what I meant was setting a fixed percentage to SCV for example and leaving that allocation, not changing it due to other factors. Although that is also an option.

[MustacheAndaHalf]

Starting after the dot-com crash, small cap value hasn't outperformed.  Using a more neutral starting point like 2005 and it trails the broader market.  Even if it will pull ahead, are you willing to wait 20 years for it to matter?

[ATtiny85]

Sure it’s “ever a good idea”. Unfortunately the actual timeframes are only known after the fact. So of course that makes it pretty hard to capitalize on them. I feel I get enough exposure through the use of a total stock index fund.

[bacchi]

Starting after the dot-com crash, small cap value hasn't outperformed.  Using a more neutral starting point like 2005 and it trails the broader market.  Even if it will pull ahead, are you willing to wait 20 years for it to matter?

Why is 2005 a "more neutral starting point?"

Small cap has outperformed large cap 11 times over the past 20 years, including in 2016 (9%) and 2020 (1.5%).

https://www.callan.com/research/2021-classic-periodic-table/#

Using portfoliovisualizer shows us that (US) SCV has slightly outperformed (US) LC since 2002.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation

From 2005 to 2018, SCV did marginally better than LC. Since 2018, LC has outperformed.

Is there any reason to suggest that SC/SCV won't have another outperformance like in 2016 or 2013 or 2010? Or is the expectation that LC will continue to have outsized gains vs SC like in 2021 (+14%)?

[BicycleB]

Perhaps it's better to rebalance toward a fixed percentage of each.

Though what % to rebalance toward leaves room for debate as well. :)

[cool7hand]

ever a good idea

If you're into market timing?

[MustacheAndaHalf]

Starting after the dot-com crash, small cap value hasn't outperformed.  Using a more neutral starting point like 2005 and it trails the broader market.  Even if it will pull ahead, are you willing to wait 20 years for it to matter?

Why is 2005 a "more neutral starting point?"

Small cap has outperformed large cap 11 times over the past 20 years, including in 2016 (9%) and 2020 (1.5%).

https://www.callan.com/research/2021-classic-periodic-table/#

Using portfoliovisualizer shows us that (US) SCV has slightly outperformed (US) LC since 2002.

https://www.portfoliovisualizer.com/backtest-asset-class-allocation

From 2005 to 2018, SCV did marginally better than LC. Since 2018, LC has outperformed.

Is there any reason to suggest that SC/SCV won't have another outperformance like in 2016 or 2013 or 2010? Or is the expectation that LC will continue to have outsized gains vs SC like in 2021 (+14%)?

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

I guess the market has moved towards value, because MTUM currently is closer to balanced than the S&P 500.  MTUM is 23/60/17 for value/blend/growth, while SPY (S&P 500) tracks 23/45/33.  The S&P 500 is +10% growth, while MTUM is -6% growth.
https://www.morningstar.com/etfs/bats/mtum/portfolio
https://www.morningstar.com/etfs/arcx/spy/portfolio

[bacchi]

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

Well, those events did happen. It seems odd to ignore the time periods where a favored asset class is out-of-favor.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

How do you invest only before the years when blend/growth will be better and exclude certain years? That's how.

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

You're criticizing a 20 21* year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?


The OP asked about a tilt, not a 100% allocation change. There's no question that LCB/LCG has outperformed lately but, in a withdrawal scenario, pulling from the best performing asset class to rebalance works better than pulling only from one asset class.

Recency bias is a thing.



* 11/19 This subtraction error really rankles another user so I've corrected it.

[Telecaster]

Couldn't really word the title right, but is tilting such as small cap, small cap value (SCV), mid cap or mid cap value (MCV) etc ever a good idea? SVC and MCV have outperformed previously, though who knows if this will continue, the reasons SCV outperformed seem to make sense to me.

I think the word you're looking for is "weighting."    VTSAX and such are weighted to large cap stocks.  I think you are asking if it is a good idea to weigh your portfolio more towards small and mid cap stocks.  Is that right?

The answer is "probably."  My portfolio looks more like equal weight, so I personally think there is some merit to this line of thinking.    But no one really knows what the future holds.  And if you do something different that the traditional cap weight index, almost assuredly there will be times when you lag the index.   So if you go that route you want a rock solid understanding of why you are doing it.

[Alchemisst]

Perhaps it's better to rebalance toward a fixed percentage of each.

Though what % to rebalance toward leaves room for debate as well. :)

I think tilting was the wrong word, as that as basically what I meant, setting a fixed percentage to SCV for example and leaving that allocation, not changing it due to other factors. Although that is also an option

[Alchemisst]

Couldn't really word the title right, but is tilting such as small cap, small cap value (SCV), mid cap or mid cap value (MCV) etc ever a good idea? SVC and MCV have outperformed previously, though who knows if this will continue, the reasons SCV outperformed seem to make sense to me.

I think the word you're looking for is "weighting."    VTSAX and such are weighted to large cap stocks.  I think you are asking if it is a good idea to weigh your portfolio more towards small and mid cap stocks.  Is that right?

The answer is "probably."  My portfolio looks more like equal weight, so I personally think there is some merit to this line of thinking.    But no one really knows what the future holds.  And if you do something different that the traditional cap weight index, almost assuredly there will be times when you lag the index.   So if you go that route you want a rock solid understanding of why you are doing it.

Yes, like a Small cap value or mid cap value allocation for portfolio

[GilesMM]

Couldn't really word the title right, but is tilting such as small cap, small cap value (SCV), mid cap or mid cap value (MCV) etc ever a good idea? SVC and MCV have outperformed previously, though who knows if this will continue, the reasons SCV outperformed seem to make sense to me.

I think the word you're looking for is "weighting."    VTSAX and such are weighted to large cap stocks.  I think you are asking if it is a good idea to weigh your portfolio more towards small and mid cap stocks.  Is that right?

The answer is "probably."  My portfolio looks more like equal weight, so I personally think there is some merit to this line of thinking.    But no one really knows what the future holds.  And if you do something different that the traditional cap weight index, almost assuredly there will be times when you lag the index.   So if you go that route you want a rock solid understanding of why you are doing it.

Yes, like a Small cap value or mid cap value allocation for portfolio

VTSAX is about 10% small cap.  Is that enough for you?  Too much?

[achvfi]

Paul Merriman and his associates think its a great idea and the idea is backed up by historical returns and respected academics. Check out his website, they have great depth of information on this topic.

https://paulmerriman.com/portfolios/

By having a equity portfolio combination of LCB, LCV, SCB, SCV indexes reduces/maintains risk level and increases returns significantly over long periods of time compared to just holding total stock market fund.

[MustacheAndaHalf]

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

Well, those events did happen. It seems odd to ignore the time periods where a favored asset class is out-of-favor.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

How do you invest only before the years when blend/growth will be better and exclude certain years? That's how.

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

You're criticizing a 20 year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?


The OP asked about a tilt, not a 100% allocation change. There's no question that LCB/LCG has outperformed lately but, in a withdrawal scenario, pulling from the best performing asset class to rebalance works better than pulling only from one asset class.

Recency bias is a thing.

You're putting words in my mouth when you claim I criticized the length of time.  You clearly read my suggestion of 2005-2022, so you're claiming things you know are contradictory, which is a bad faith way to argue.  Also, 2002-2022 is 21 years, not 20 years as you claim.

When I look at 20 years of data (2003-2022), the S&P 500 and small/value are nearly tied.  In 2002, the S&P 500 fell 21% and small/value fell 14%.  It's interesting how you changed 20 years to 21 years just to favor your point of view.

Highlighting specific years where small/value did well is cherry picking.  I'm surprised you didn't understand that when I pointed it out.

The ETF I cited, MTUM, was created in 2013.  Plug MTUM and SPY into portfolio visualizer and you'll see it starts tracking performance from 2014.  Academic studies go back much further.

[MustacheAndaHalf]

Edit:

I think tilting was the wrong word, what I meant was setting a fixed percentage to SCV for example and leaving that allocation, not changing it due to other factors. Although that is also an option.

That sounds right - I've heard this called "tilting" in numerous books on investing.  You might have a core portfolio in the total stock market or S&P 500, and then a fration allocated to small/value or momentum.  Your goal is to diversify or perform better with the tilt, but the core portfolio remains the stock market.

[PDXTabs]

I have a slight small cap value tilt in my portfolio. Very slight because I keep my 401k market cap weighted. I don't think that there is anything wrong with it, but you need to be prepared to stick with it for the years where it under-performs.

[FLBiker]

I also have a small SCV allocation (5%).  I don't do any other "active" investing -- everything else is market / global cap weighted.  The underlying logic makes sense to me, which is a prerequisite for me of investing in something.  Who knows if it will ultimately be good or bad?

[bacchi]

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

Well, those events did happen. It seems odd to ignore the time periods where a favored asset class is out-of-favor.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

How do you invest only before the years when blend/growth will be better and exclude certain years? That's how.

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

You're criticizing a 20 year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?


The OP asked about a tilt, not a 100% allocation change. There's no question that LCB/LCG has outperformed lately but, in a withdrawal scenario, pulling from the best performing asset class to rebalance works better than pulling only from one asset class.

Recency bias is a thing.

You're putting words in my mouth when you claim I criticized the length of time.  You clearly read my suggestion of 2005-2022, so you're claiming things you know are contradictory, which is a bad faith way to argue.  Also, 2002-2022 is 21 years, not 20 years as you claim.

When I look at 20 years of data (2003-2022), the S&P 500 and small/value are nearly tied.  In 2002, the S&P 500 fell 21% and small/value fell 14%.  It's interesting how you changed 20 years to 21 years just to favor your point of view.

Highlighting specific years where small/value did well is cherry picking.  I'm surprised you didn't understand that when I pointed it out.

The ETF I cited, MTUM, was created in 2013.  Plug MTUM and SPY into portfolio visualizer and you'll see it starts tracking performance from 2014.  Academic studies go back much further.

What? You did criticize 2002-2022. How is that putting words in your mouth? Are you angry because it was a 21 year graph? My bad. Or are you criticizing that I find your starting date of 2005 odd and used a different time period?

The dot-com crash -- the actual crash -- happened in 2000/2001. That's when the market declined most and that's when the layoffs and bankruptcies happened. (Heck, in early 2002, I was still employed and thought I had escaped the crash.) "Starting after the dot-com crash" could then mean 2002, which I used, or even 2003, when the market started to rise from its 2002 low. 2005 is an odd choice. It might even be considered cherry-picking the start year.

I'm surprised that it's not obvious how most of us invest. Most of us don't lump sum $500k at once and let it grow to our FI number. In the lump sum case, start year and going all-in for one asset choice matter. However, we invest biweekly/yearly. It turns out that investing in different asset classes, as mentioned above, increases returns and reduces risk.

[harvestbook]

Paul Merriman and his associates think its a great idea and the idea is backed up by historical returns and respected academics. Check out his website, they have great depth of information on this topic.

https://paulmerriman.com/portfolios/

By having a equity portfolio combination of LCB, LCV, SCB, SCV indexes reduces/maintains risk level and increases returns significantly over long periods of time compared to just holding total stock market fund.

I've used a slightly modified Merriman portfolio for about a decade (aside from bonds, which I don't really like but have maybe 5 percent of just because, and I am light on large value funds.)

Is it a good idea? Maybe. I doubt it makes much difference in the long run. Merriman's ideas just happened to appear to me just as I was seriously starting to shape my investment ideas. At the time I was persuaded by the apparent outperformance over longer time periods (15+ years).

If I started today I'd probably just go Total World Market and be done with it because I'd rather be lazy and not think about investments. It's not much work, though, I just rebalance once a year.

Lots of ideas are just fine if you stick with them. The danger is changing ideas every three months.

[MustacheAndaHalf]

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

Well, those events did happen. It seems odd to ignore the time periods where a favored asset class is out-of-favor.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

How do you invest only before the years when blend/growth will be better and exclude certain years? That's how.

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

You're criticizing a 20 year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?


The OP asked about a tilt, not a 100% allocation change. There's no question that LCB/LCG has outperformed lately but, in a withdrawal scenario, pulling from the best performing asset class to rebalance works better than pulling only from one asset class.

Recency bias is a thing.

You're putting words in my mouth when you claim I criticized the length of time.  You clearly read my suggestion of 2005-2022, so you're claiming things you know are contradictory, which is a bad faith way to argue.  Also, 2002-2022 is 21 years, not 20 years as you claim.

When I look at 20 years of data (2003-2022), the S&P 500 and small/value are nearly tied.  In 2002, the S&P 500 fell 21% and small/value fell 14%.  It's interesting how you changed 20 years to 21 years just to favor your point of view.

Highlighting specific years where small/value did well is cherry picking.  I'm surprised you didn't understand that when I pointed it out.

The ETF I cited, MTUM, was created in 2013.  Plug MTUM and SPY into portfolio visualizer and you'll see it starts tracking performance from 2014.  Academic studies go back much further.

What? You did criticize 2002-2022. How is that putting words in your mouth? Are you angry because it was a 21 year graph? My bad. Or are you criticizing that I find your starting date of 2005 odd and used a different time period?

The dot-com crash -- the actual crash -- happened in 2000/2001. That's when the market declined most and that's when the layoffs and bankruptcies happened. (Heck, in early 2002, I was still employed and thought I had escaped the crash.) "Starting after the dot-com crash" could then mean 2002, which I used, or even 2003, when the market started to rise from its 2002 low. 2005 is an odd choice. It might even be considered cherry-picking the start year.

I criticized 2002 as a starting year, which you are falsely claiming was not part of the crash.  Anyone looking at the stock market drops from 2000-2002 can see you are making this up, and not referring to factual information.

2000 :  -10.57%
2001 :  -10.97%
2002 :  -20.96%
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

I criticized you for being unable to count to 20 because you claimed 2002-2022 as your "20 year" time period.  It is not: 2003-2022 is a 20 year time period, but that spoils your narrative with factual information like 2002 being a -21% year, or the most significant year in the dot-com crash.

[bacchi]

If you start in 2002, during the dot-com crash, that will naturally favor value over the growth stocks that were still falling.  If you start too close to the 2008 crash, again growth stocks get hit harder.  So between the two crashes is 2005.

Well, those events did happen. It seems odd to ignore the time periods where a favored asset class is out-of-favor.

You pointed to specific years where small/value outperformed.  That doesn't sound like a buy and hold approach to investing.  How do you plan to invest in small/value only before the years where it will outperform?

How do you invest only before the years when blend/growth will be better and exclude certain years? That's how.

My personal favorite is momentum, which academic studies claim outperforms in 4 out of 5 years.  It is a strong, consistent factor.  If you look at Portfolio Visualizer comparing MTUM to SPY, you'll see the performance from 2014-2022.
SPY 10.7% CAGR
MTUM 12.0% CAGR

You're criticizing a 20 year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?


The OP asked about a tilt, not a 100% allocation change. There's no question that LCB/LCG has outperformed lately but, in a withdrawal scenario, pulling from the best performing asset class to rebalance works better than pulling only from one asset class.

Recency bias is a thing.

You're putting words in my mouth when you claim I criticized the length of time.  You clearly read my suggestion of 2005-2022, so you're claiming things you know are contradictory, which is a bad faith way to argue.  Also, 2002-2022 is 21 years, not 20 years as you claim.

When I look at 20 years of data (2003-2022), the S&P 500 and small/value are nearly tied.  In 2002, the S&P 500 fell 21% and small/value fell 14%.  It's interesting how you changed 20 years to 21 years just to favor your point of view.

Highlighting specific years where small/value did well is cherry picking.  I'm surprised you didn't understand that when I pointed it out.

The ETF I cited, MTUM, was created in 2013.  Plug MTUM and SPY into portfolio visualizer and you'll see it starts tracking performance from 2014.  Academic studies go back much further.

What? You did criticize 2002-2022. How is that putting words in your mouth? Are you angry because it was a 21 year graph? My bad. Or are you criticizing that I find your starting date of 2005 odd and used a different time period?

The dot-com crash -- the actual crash -- happened in 2000/2001. That's when the market declined most and that's when the layoffs and bankruptcies happened. (Heck, in early 2002, I was still employed and thought I had escaped the crash.) "Starting after the dot-com crash" could then mean 2002, which I used, or even 2003, when the market started to rise from its 2002 low. 2005 is an odd choice. It might even be considered cherry-picking the start year.

.
I criticized 2002 as a starting year, which you are falsely claiming was not part of the crash.  Anyone looking at the stock market drops from 2000-2002 can see you are making this up, and not referring to factual information.

2000 :  -10.57%
2001 :  -10.97%
2002 :  -20.96%
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

I criticized you for being unable to count to 20 because you claimed 2002-2022 as your "20 year" time period.  It is not: 2003-2022 is a 20 year time period, but that spoils your narrative with factual information like 2002 being a -21% year, or the most significant year in the dot-com crash.

Really? The 21 year thing is still itching you? If you wish, I can edit "20 year graph" to "21 year graph" and it wouldn't change a thing.* The mistake is irrelevant and was mentioned at least one post after I referenced 2002-2022.

Using portfoliovisualizer shows us that (US) SCV has slightly outperformed (US) LC since 2002.

Since you're stuck on 20 years, we can also use 2003-2022, as you mentioned, which still slightly favors SCV.

Or maybe 2004-2022, which slightly favors LCB.

But no. You used your "neutral starting point" 2005 as the starting year, which has a decent outperformance for LCB. That specific year nicely fits your narrative.





* Eta I've corrected "20" to "21" in the original post. I hope this allays your irritation.

[MustacheAndaHalf]

You mention 2002 in every post...

Using portfoliovisualizer shows us that (US) SCV has slightly outperformed (US) LC since 2002.

You're criticizing a 20 year graph from 2002-2022 and then claim 8 years? Or is that successful run mostly from the academic studies?

What? You did criticize 2002-2022. How is that putting words in your mouth? Are you angry because it was a 21 year graph? My bad. Or are you criticizing that I find your starting date of 2005 odd and used a different time period?

The dot-com crash -- the actual crash -- happened in 2000/2001. That's when the market declined most and that's when the layoffs and bankruptcies happened. (Heck, in early 2002, I was still employed and thought I had escaped the crash.) "Starting after the dot-com crash" could then mean 2002, which I used, or even 2003, when the market started to rise from its 2002 low. 2005 is an odd choice. It might even be considered cherry-picking the start year.

Until I bring up the -21% loss in 2002, and suddenly you go silent about it.

I criticized 2002 as a starting year, which you are falsely claiming was not part of the crash.  Anyone looking at the stock market drops from 2000-2002 can see you are making this up, and not referring to factual information.

2000 :  -10.57%
2001 :  -10.97%
2002 :  -20.96%
https://www.portfoliovisualizer.com/backtest-asset-class-allocation

Although I proved you were wrong to claim the -21% drop in 2002 wasn't part of a crash, you aren't willing to admit you were wrong.  You aren't willing to say your biased start date of 2002 had a -21% drop in it.

For everyone else, know that small cap value is tied with investing in the total stock market over the past 20 years: it can go a long time without it helping performance.

years ............ US Stock Market ... US Small Cap Value
2003-2022         +10.02%               +9.99%

[bacchi]

Although I proved you were wrong to claim the -21% drop in 2002 wasn't part of a crash, you aren't willing to admit you were wrong.  You aren't willing to say your biased start date of 2002 had a -21% drop in it.

I did suggest using 2003-2022 because of your obsession with the subtraction error but you ignored it and then below use it. Are you ok? What happened with your biased start date of 2005?

For everyone else, know that small cap value is tied with investing in the total stock market over the past 20 years: it can go a long time without it helping performance.

years ............ US Stock Market ... US Small Cap Value
2003-2022         +10.02%               +9.99%

Great, we're agreed!

[achvfi]

For everyone else, know that small cap value is tied with investing in the total stock market over the past 20 years: it can go a long time without it helping performance.

years ............ US Stock Market ... US Small Cap Value
2003-2022         +10.02%               +9.99%

That is only a part of story. For extended period performance of SCV can keep up with LCB while over performing in short bursts.

[Gremlin]

I invest in ethical indexed funds.  Ethical is a tilt.  I accept that I'll perhaps outperform or underperform the broader market.  I lose exactly zero sleep over it.  In fact, I sleep better knowing that my investments are not supporting the destruction of the planet, vice industries or modern slavery.

So as far as I'm concerned, tilting can be a very good idea.

[index]

Who the hell every said the "right" index was the S&P 500? Using VTI is tilting if the "right" index has been pre-ordained. There are many pros and cons of the S&P 500, market cap weighting in general, small cap value, ethical funds, on and on. Will SCV outperform overtime? Outperform what?

The argument between @bacchi and @MustacheAndaHalf doesn't really matter because both investments have done just fine over time. What is your investment time horizon? If you are investing for 10 years does a 20 or 21 year comparison even matter? Are you feeling lucky?

The only free lunch in investing is diversification. Is a S&P 500 index fund like VOO diversified? Is a SCV fund like AVUV diversified? If you hold VTI and AVUV 50/50, are you diversified? The trick is looking for uncorrelated assets that smooth the ride and provide the same final return as whatever you determine to be your benchmark.

I have heavy sector tilts (actually my entire portfolio is sector tilted) toward utilities, healthcare, and consumer staples. You know what the difference in returns has been for a portfolio of 1/3rd each of VDC, VPU, VHT compared to VOO over the last 10 years? +0.1%. I sleep better at night with the lower standard deviation. At the end of the day it doesn't really matter.   

[Telecaster]

Who the hell every said the "right" index was the S&P 500? Using VTI is tilting if the "right" index has been pre-ordained. There are many pros and cons of the S&P 500, market cap weighting in general, small cap value, ethical funds, on and on. Will SCV outperform overtime? Outperform what?

Love this.