In previous articles, I've discussed how to use index funds to create simple but effective portfolios. Here are some additional insights and reminders:

I disagree with folks who advocate using the S&P 500 index ETF as a "core holding." I have never cared for the S&P 500 index when investing in index funds, so I would not use that ETF. The reason I dislike it as an index investment is because it is capitalization weighted, which simply means that stocks in the index must be held in proportion to their market value in the index. Back in the late 1990s, during the technology stock bubble, the S&P 500 index was overloaded with bloated technology stocks selling at grossly inflated valuations, so S&P 500 index funds were forced to overweigh pricey technology holdings. (And, just prior to the late 2000s bear market, the same phenomenon happened with financial companies in the index.) I prefer broader market indexes such as Vanguard Total Stock Market ETF or even better — value-oriented ETFs discussed next.

I lean toward value-oriented indexes and ETFs for the generally smoother ride and historically slightly higher total return. In the small-cap arena, I like the iShares Russell 2000 Value Index, to which I would add consideration of Vanguard's Small Cap Value ETF.

In the foreign-stock arena, Vanguard FTSE All-World ex-US is a solid core holding. To tap into the growth opportunities in developing countries, Vanguard's Emerging Markets ETF is an interesting although volatile (risky) holding. I also recommend Wisdom Tree's Emerging Markets Equity Income ETF, which has a far more generous yield and is less volatile.