Bichon Frise wrote:
yes. and my point above is, so what if value has edged out growth based on history? I think Vin is trying to say Value funds have a place in one's portfolio. And he probably is correct if one is to venture out and grab a growth specific fund. But, what is his suggestion? A value tilt? how much of a tilt? That is what isn't understood.
And of course, if one doesn't rebalance, it certainly brings more volatility to the table.
You are correct in that I was trying to say that value funds have a place in one's portfolio. In fact, I was leading up to advising that the OP exchange his S&P500, Large Cap Growth and Small Cap Growth funds for the Total Stock Market Index Fund. Not only would he have gotten greater diversification, but with $21K in the hopper, he'd qualify for Admiral Shares, which would lower his expenses.
As for my own portfolio, it's primarily comprised of Total Market (both domestic and international) funds, with a tilt toward small cap and value via index funds in those areas. How much of a tilt is really something that can only be determined by an individual's risk tolerance. It's hard (if not impossible) to get past that risk/reward relationship. I'm fortunate enough to have the resources to be able to afford more risk than most, so my portfolio is what it is. I would expect that each person here would have a portfolio that reflects their own risk tolerance, not mine.
As for determining the tilt based on your risk tolerance, a good place to start is the http://en.wikipedia.org/wiki/Fama%E2%80%93French_three-factor_model
. I believe that DH would have a particular interest in this, as it a mathematical model and DH has an affinity for mathematics. It is the basis for some of what Bill Bernstein writes about.