No. of Recommendations: 1
In addition to diversity you have to look at the goals and risk tolerance for the money. For example if your goal is to invest enough to retire at early at 55 then you may be able to take more risks(and hopefully higher reward) than VTSMX because the downside of underperformance would be that you had to work a few more years but could still retire at a decent age. Similarly if your are investing some ”widow and orphan” money but didn't want to put it all in bonds, then a more conservative index fund would be appropriate.

The real great selling point of the index funds isn't the specific type of investments; it is that their low costs allow them to outperform the majority of other similar risk adjusted funds(and stock pickers). A mixture of several of the Vanguard index funds is a fine way to go.

(Note: I do not personally like the Vanguard target retirement funds. I think they are too conservative and put too much in bonds too early.)

Greg
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