2 funds for life?

What do you think of a target date index fund and 10-20% of a small cap value fund?
Do you personally invest this way?
Supposedly returns are higher with this strategy.

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Hi Ala,

A target date index fund contains small cap value stocks, so it would be redundant. It’s like buying a combo meal with an extra order of fries!

Regarding that last comment, we cannot predict if small cap value stocks will outperform the market moving forward so we prefer to diversify and not pick and choose! But if you want to “speculate” with a small percentage of your portfolio, that’s fine too!

This is the “two fund portfolio” suggested by Paul Merriman. @vivitron is exactly right that the small cap value stocks are already in the target date fund. BUT, over long periods of history there is evidence that small cap value stocks outperform the wider market. IS THAT LIKELY TO CONTINUE? Who knows. But I think the portfolio you described is reasonable, and if you want to put a “small cap tilt” on your portfolio, you have my blessing. In fact that’s exactly what I do in my PFC 401k! 90% Vanguard 2050, 10% small cap value! Why not!