“Hello. I love your website.Thanks for the kind words. Without knowing more about your financial life, I can’t advise you directly, but I can tell you how I view my own portfolio.
I've read dozens of books on investing: Paul Merriman, Malkiel, Ferri, Ellis, Bogle, Swedroe, etc. All of these guys disagree on how to index! It is confusing. Some of them wholeheartedly believe in value and small stocks. I've seen their research, it seems very solid.
On the other hand, how can anyone predict the future?
In Bogle's book, He says that ‘if someone wants to tilt, it would be reasonable to do 85% total stock market fund, 10% value stocks, 5% small stocks.’
So that is what I've done with my US and International holdings. Can I get your thoughts on this? Thanks.”
The truth is that we just don’t have enough historical stock information to make confident judgements about fine differences in stock allocations. I’ve chosen an allocation for my stocks, but I make no claim that it is optimal. As you say, “how can anyone predict the future?”
The main thing I do is stick with my allocation. I doubt it would have made much difference if I had used slightly different percentages. But what can make a big difference is tinkering. When investors make changes to their allocations, they are often shifting from an asset class that has recently performed poorly to an asset class that has recently performed well. Their reasons may sound smart, but they are really just selling low and buying high.
As long as investors are adequately diversified and have an appropriate allocation to fixed income, I doubt that fine differences among small cap tilt and value tilt percentages will make much difference. Much more important are costs and potential losses due to tinkering.
Good luck, A.J.