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One caveat: Many of these Emerging Market and Small Cap index funds have higher expense ratios than Vanguard's S&P500 index fund, so you'll have to see better performance just to stay whole.

intercst




Not necessarily true, intercst. If you are a rebalancer (in a non-taxable a/c) you can actually achieve smoother and higher total returns if you combine assets with different covariance...even if the L/T returns in some categories are expected to be lower than, say, the S&P 500. People can use Emerging Market and precious metal funds (among others) for this...with a smallish portion of their assets. Bill Bernstein's site :

http://www.efficientfrontier.com

has got lots of stuff on this (...I know you know this...sorry...)

For LTBH my comments do not apply. Do not LTBH gold funds or EMG equities hoping for a steady ride into retirement. I pretty much believe that you can only capture their benefits via rigorous rebalancing.

Euro
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