A thread on counters:
https://www.bogleheads.org/forum/viewtopic.php?t=136498I feel efficient market theory is theory for a reason, but I also think the availability of information has improved exceptionally even when compared with ten years ago, never mind the much longer history of the market. You can practically buy indexes in all sorts of things now, for very low cost. OTOH, low
interest rates are a very good explanation for the most recent run of high correlation as well.
I do believe there are systematic reasons why small cap has larger drawdowns, as volume affects these more. DFTSX went ~11% lower. It was only less exposed in the tech bubble because there were distribution problems with capital at the time. Drawdown can't be ignored in retirement.
The solution is generally to do some light overweighting and capture some returns via rebalancing, but I think this mostly complicates portfolios. If there is a 1-2% capture to be had and your weight at 20%, you'll reduce the benefit to .2-.4%. If you're paying that in fees for some reason, you're definitely wasting your time. If you save the fees and do it yourself, you increase decision making. Over time, I believe that behavior has an impact and the only thing I trust is that I can't measure it.
I actually don't hold a strong opinion that beating the index is impossible, but doing it via other very similar index funds seems unlikely when the idea is not unusual and can be attacked by quants.