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Unloved companies (in aggregate) should have better long-term returns.

if it matters, when i define 'unloved' I'm talking low return on equity business models with modest growth prospects and questionable capital allocation. besides, the 10 year returns on many emerging market indexes has been horrific, and over the same period developed market returns have been horrible vs. domestic returns. That's why i was considering them, but you can't help but wonder if they aren't as good not because the mean is skewed but because international markets are inferior to domestic ones. Besides, there is that pesky thought of 'how much?'

I'm not trying to convince you not to invest in index funds - there's a whole bunch to recommend them. But if you can accept that the market is efficient then you can also accept that unloved companies are often unloved for very good reasons - maybe these good business models aren't as good? Do I really want to own foreign banks, for example? Maybe the reason VEA is not concentrated could be that, on the whole, those business models aren't nearly as good as many US based ones. That seems to be unquestionably true. I don't think the diversification is a good thing, but I'm 100% sure I could be absolutely wrong too.

I sold my index funds today - I do think I can pick stocks, so I will concentrate on that (thanks for the discussion - it helped me crystallize my goals here) - esp. since I own many foreign stocks and can continue doing that (plus, as we know many US based companies have significant international exposure). But I'll be the first to admit that asset allocation is 5x more important than stock picking.
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