Three. A lean toward cheaper, smaller, more profitable companies
What this lean is, what it was worth against a cheap index fund, and the long stretch of looking wrong that is the price of holding it.
What it holds
| Ticker | Fund | Weight | Fee | Cost after lending income |
|---|---|---|---|---|
| VTI | Vanguard Morningstar Total Stock Market ETF | 49% | 0.03% | 0.012% |
| VXUS | Vanguard Total International Stock ETF | 16% | 0.05% | 0.014% |
| VTV | Vanguard Value ETF | 15% | 0.03% | 0.027% |
| AVDV | Avantis International Small Cap Value ETF | 10% | 0.36% | 0.300% |
| IDMO | Invesco S&P International Developed Momentum ETF | 5% | 0.25% | 0.226% |
| AVES | Avantis Emerging Markets Value ETF | 5% | 0.36% | 0.292% |
Weighted, that is about 0.09% a year in fees and about 0.07% after lending income. On $10,000, as an illustration, roughly $9 and $7. Fund facts were read from filings on 17 August 2026.
These are the weights the test actually used, so the figures below need no rescaling. Change them and the numbers have to be recomputed.
Why each piece is there
VTI is the bulk of the portfolio and holds the whole US market at market weight. It is what the lean is measured against.
VXUS holds developed and emerging markets outside the US in a single line.
VTV holds the cheaper half of large US companies for 0.03% a year, the least expensive way we found to shift the US holdings at all.
AVDV holds small, cheap companies in developed markets outside the US, and is the only fund we found that reaches that corner of the market.
IDMO is the odd one out, and deliberate: it holds developed-market shares outside the US that have been going up, which is a different idea from cheapness, and different ideas are what help. Five ideas inside one region buy you about five independent bets; one idea spread across three regions buys about one and a half.
IDMO is also the weakest holding here, and the first one to drop if you want a simpler portfolio. Momentum has the widest gap on this site between what an idea pays on paper and what anyone has actually collected: 9.48% a year on paper against 1.86% delivered by real funds, before their fees. Its advantage over the market falls from 2.43 points before tax to 0.60 after tax at today’s rates. And it turns over 105% of itself a year, against 4% for the international value fund beside it.
AVES holds cheap shares in emerging markets, the region where cheapness has paid most in our data.
What it is compared against, and what the comparison showed
The comparison is a cheap global index fund holding roughly 65% US and 35% international, borrowing nothing. Against it, this lean came to 0.79% a year, plausibly 0.30% to 1.32%, over 427 months to May 2026, and was positive in all five sub-periods declared before the test ran.
Three things go with that number. About 86% of it rests on data beginning in November 1990, and nobody has run the idea on years it had not already seen. Charging each fund the shortfall measured for it moves the result to 0.60% or 0.30%, depending on the method. And a study would need about thirty years of data to tell the gap from zero. An earlier version of this site printed thirteen years, computed on a looser method than the range beside it.
The counterweight belongs on this page rather than in a footnote. Patton and Weller measured what US mutual funds delivered per unit of exposure against what the strategy earned on paper. Value on paper paid 7.76% a year; funds delivered 2.84% before their own fees. Momentum on paper paid 9.48%; funds delivered 1.86%. Plain market exposure came through at 6.93% against 6.72% on paper. The thing that costs nothing to hold is the thing that survives.
For perspective: putting in 3.08% more of your starting balance each year than you do now gets you, over 36 years, roughly where this entire lean would if it worked exactly as measured. Over 30 years the equivalent contribution is 2.57%.
How sure we are
Probably. It clears the smallest gap the test could detect, but only just, only at thirty years, and only on the stricter method. Nothing here has been checked on data the idea had not already seen.
What it feels like when it is losing
Cheap US stocks have spent 17.7 years running 54.3% behind the US market since September 2008, and had not caught up when we measured them. That is the record, not a simulated worst case. Someone who started in 2008 has watched most of their adult investing life go by while the simple thing beat the clever thing, every year, with no signal at any point that the wait would end.
The international side has been worse: international stocks have run 69.0% behind US stocks over 18.2 years and had not recovered either. Hold this portfolio and you hold both positions at once. They have been losing together.
Day to day it is undramatic, which is what makes it hard. This portfolio drifts about one percentage point a year from a cheap index fund, or about $100 a year on $10,000 as an illustration. Small enough to be invisible in any single year, and large enough to add up to a decade of regret.
Do not hold this because you think you could sit through that. Hold it only if you have already sat through something like it and know how you behaved.
What would make us drop it
Sub-periods turning negative, which none has yet. The funds delivering less exposure than they claim, checked against filings rather than marketing. Costs rising. And a proper test on years the idea had not already seen coming back flat. That last check is the one nobody has run, and the reason the verdict is probably rather than settled.
The decision that matters more than this page
How much of your money is in stocks at all outweighs everything above. Moving a portfolio from 60% stocks to 90% was worth 1.27 points a year, against 4.85 points of variation from one year to the next. That is more than every lean on this site combined. Choosing 60/40 is itself a forecast: it says stocks will do better than bonds by only about 1.2 points a year. One country, 1963 to 2025, with a modelled ten-year government bond, and about 24 years of your own results before you could be 90% confident about the step.