No. of Recommendations: 1
Forget the three funds and just buy one Vanguard fund: VTSMX. Add to it monthly.

Bad idea. You give up diversification with a total market index fund like VTSMX because it's capitalization-weighted. So, it's like having 85% of your money in large caps. It's not that much different from putting all your money in an S&P 500 index fund, which is not diversified among asset classes at all.

What you want is a distribution that's much closer to equal between your counterperforming asset classes. That way, when large caps are going down (like the last couple of years) small caps or international stocks or both will go up with a comparable chunk of your portfolio and help even out the loss.

And remember, rebalance frequently. That way, when your small cap holdings outperform the large cap, you take money out of small cap to put into the underperforming large cap (if you're in a nontaxable account) or you put extra into large cap to get the ratio right (if you're in a taxable account, to avoid capital gains.) You'll end up wringing possibly an extra percent of return out of your investment by doing this every six months.

-- Mark
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