Here's a question that sends most personal finance content into a tailspin: How complicated should my portfolio actually be?
Some people will tell you that one fund is all you need. Others will send you a 47-slide deck about factor loadings, international small cap premiums, and the Fama-French five-factor model. Both camps have merit. Neither camp is wrong, exactly — but the answer almost certainly lives somewhere in between, and it depends on you.
That's why VTI & Chill organizes its portfolio guidance into three tiers: Good, Better, and Best. Not because some investors are smarter than others, but because different strategies fit different personalities, time commitments, and appetites for complexity. Let's break down each tier, who it's built for, and what you can realistically expect from it.
Three legitimate tiers. The right one is the one you'll actually hold through the next bear market.
Tier 1: Good — The VTI-Only Portfolio
What it is: 100% VTI (or close to it, perhaps with a bond allocation as you near retirement).
Who it's for: Anyone who wants to invest, stay sane, and get on with their life.
The Good portfolio is not a consolation prize. As we covered in the previous post, VTI's 0.03% expense ratio and full US market exposure make it one of the most powerful wealth-building tools ever created. The CRSP US Total Market Index that VTI tracks has delivered roughly 10-11% annualized returns historically. You capture nearly all of that for three dollars per $10,000 invested per year.
The Good portfolio works because it removes every possible reason to make a bad decision. There's nothing to rebalance. No asset class to fret about. No factor that's underperforming and making you question your strategy. You own America. You keep buying. You wait.
The main limitations of the Good portfolio are:
- US-only exposure — no international diversification
- No factor tilts — you won't capture potential premiums from small cap value
- Cap-weighting bias — you're heavily concentrated in mega-cap tech companies
Are these real limitations? Yes. Are they deal-breakers? Absolutely not. The vast majority of investors would build more wealth over their lifetimes with the Good portfolio plus consistent contributions than with any complicated alternative they'd tinker with constantly.
If the thought of tracking multiple funds, understanding factor investing, or explaining your "tilt toward international small cap value" to your spouse makes you want to set your laptop on fire — the Good portfolio is your answer.
Tier 2: Better — VTI Plus Factor Tilts
What it is: A core VTI position (50-70%) supplemented with factor-tilted ETFs, primarily small cap value.
Who it's for: Investors who've done some reading, believe in the academic research behind factor premiums, and can handle watching part of their portfolio underperform for years without bailing.
The academic case for this tier comes from Nobel Prize-winning research by Eugene Fama and Kenneth French. Their three-factor model showed that two factors beyond market exposure — small size (small minus big, or SMB) and value (high minus low, or HML) — have historically driven excess returns over long periods. In plain English: small cap value stocks have beaten the broad market over very long horizons.
A Better portfolio might look something like this:
| Allocation | Ticker | Expense Ratio | Role |
|---|---|---|---|
| 60% | VTI | 0.03% | Total US market core |
| 20% | AVUV | 0.25% | U.S. small-cap value tilt |
| 10% | AVLV | 0.15% | U.S. large-cap value tilt |
| 10% | BND or AVIG | ~0.03-0.15% | Bonds (optional, age-based) |
AVUV is a particularly smart addition. It doesn't just passively hold all small cap value stocks — it uses a refined, academically grounded methodology to emphasize companies with both small size and high profitability, which the Fama-French five-factor model identified as especially potent. AVUV holds approximately 776 stocks and has a weighted average book-to-market ratio that meaningfully differentiates it from the broad market.
Paul Merriman's research demonstrates compellingly that adding just 10% small cap value exposure to an S&P 500 portfolio increased returns by approximately $2.2 million over 55 years on a $100,000 investment — without adding significant volatility. That's the premium you're hunting.
The catch with Better
You have to believe in the premium, and you have to hold when it's not working. Factor premiums are not guaranteed or consistent. Small cap value underperformed large growth significantly from roughly 2010 to 2020. Investors who added this tilt during that period watched their "enhancement" drag their portfolio relative to simple VTI. Many bailed. Those who stayed have been rewarded as the cycle turns.
If you can look at an underperforming allocation for 5 years and shrug because you're playing a 30-year game, Better is worth pursuing.
Tier 3: Best — The Globally Diversified, Merriman-Inspired Portfolio
What it is: A globally diversified portfolio across US and international factor-tilted ETFs, inspired by Paul Merriman's Ultimate Buy and Hold research.
Who it's for: Investors who are genuinely interested in portfolio construction, have read Merriman and Fama-French, can rebalance annually without emotion, and want maximum long-term diversification.
The Best portfolio takes everything from Better and adds international exposure, specifically targeting factor premiums globally. Using Avantis ETFs, it might look something like:
| Allocation | Ticker | Expense Ratio | Role |
|---|---|---|---|
| 40% | AVUS | 0.15% | U.S. core (broad market, subtle tilt) |
| 15% | AVUV | 0.25% | U.S. small-cap value |
| 10% | AVLV | 0.15% | U.S. large-cap value |
| 10% | AVDV | 0.36% | International small-cap value |
| 10% | AVDS | 0.30% | International small-cap equity |
| 10% | AVES | 0.36% | Emerging markets value |
| 5% | AVEE | 0.42% | Emerging markets small cap |
This lineup is heavily influenced by Merriman's finding that a $100,000 investment in the Ultimate Buy and Hold Portfolio grew to over $53 million by 2025 — versus roughly $30 million for the S&P 500 alone over the same period. Diversifying across multiple factor-tilted asset classes, both domestic and international, has historically delivered materially better returns.
The Best portfolio isn't for everyone, and that's okay. It requires:
- Genuine conviction in factor investing
- Willingness to hold international positions that may lag US for extended periods
- Annual rebalancing discipline
- A stomach for tracking error vs. the S&P 500
If you check all those boxes, the Best portfolio is a serious, academically grounded strategy that gives you the widest diversification across the factors that have historically driven returns.
Which Tier Should You Choose?
Here's the most honest answer we can give you: all three tiers work. The question isn't which one is optimal in theory — it's which one you'll actually stick with.
A perfectly constructed Best portfolio that you abandon during a bear market is infinitely worse than a "suboptimal" VTI portfolio you hold for 40 years. Behavioral consistency beats theoretical return optimization every single time.
Start with the tier that feels right for your knowledge level and temperament. If the Good portfolio gives you peace of mind, that peace of mind has real financial value — it keeps you in the market when everything is screaming at you to sell. If you're drawn to factor investing and the academic research excites you rather than confuses you, explore the Better or Best tiers with eyes open about the required patience.
The best portfolio is the one you can hold, maintain, and not panic-sell during the next crash.
The Bottom Line
Good is VTI — simple, powerful, and enough for most people to build serious wealth over a lifetime. Better adds U.S. factor tilts via AVUV and AVLV to potentially capture the small cap value premium, at the cost of more complexity. Best goes globally diversified across Avantis ETFs in a Merriman-inspired structure that gives you maximum factor exposure worldwide.
Pick your tier. Commit to it. Buy consistently. The rest is just noise.
Disclaimer: VTI & Chill provides financial EDUCATION, not personalized financial ADVICE. We are not licensed financial advisors. All content is for informational and educational purposes only. Past performance does not guarantee future results. Always do your own research and consider consulting a qualified financial professional before making investment decisions. All investing involves risk, including the possible loss of principal.