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Hello BadPlumber,
It sounds like your following the same advice that I am. I found Bernstein’s book to be very insightful and I am trying to follow his long-term investing advice as well.

He also recommends Value vs Growth as another distinction of asset classes. He has computed and/or sites papers that state value stocks have a slightly better return then growth ones. He also states that during recessions value stocks aren’t hurt as badly as growth stocks. So you may want to add value index funds as well, small and large cap.

If would raise emerging markets to a must have, according to his list. Also if you can get them all, having separate EU and Pacific Rim index funds allows you to rebalance them yourself hopefully gaining more advantages from rebalancing imperfectly correlated assets.

As for Morningstar ratings, I remember reading that top rated funds this year are only slightly better than 50% likely to be top rated a few years down the road. Remember his analogy about being a judge at a coin-flipping contest. I think that applies here too, to a degree. If your going for index funds look for how well they track the stated index and the lowest expense ratios.

Hope that helps,

Sandy aka Mcbain (who’s just another coin flipper)
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