Favor Value over Growth
Generally, value stocks have historically outperformed growth stocks. This holds true with both Large Cap stocks as well as Small Cap stocks.
Just looking at the last 12 years (from 1/1/2001 to 3/21/2013 utilizing indexed ETFs) the following indices have these total return numbers:
S&P 500 Value: +60%
S&P 500 Growth: +17%
S&P 500: +35%
S&P SmallCap 600 Value: +216%
S&P SmallCap 600 Growth: +140%
S&P SmallCap 600: 209%
So, where possible, in a buy-and-hold portfolio, it makes sense to "tilt" the portfolio towards value stocks.
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Favor Small over Large
Generally, small- and mid-size company stocks have historically outperformed large company stocks.
Over the last 12 years (from 1/1/2001 to 3/21/2013 utilizing indexed ETFs) the following indices have these total return numbers:
S&P 500: +35%
S&P 400 MidCap: +189%
S&P 600 SmallCap: +209%
As you can see, the last 12 years has been much kinder to small- and mid-size stocks, but they also experienced a 60% decline in 2008-09!
So, where possible, in a buy-and-hold portfolio, it makes sense to "tilt" the portfolio towards small- and mid-size stocks.
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Favor Emerging Markets
Generally, emerging market stocks have historically outperformed both US and International "Developed" company stocks.
Over the last 10 years (from 3/1/2003 to 3/21/2013 utilizing indexed ETFs) the following indices have these total return numbers:
S&P 500: +125%
MSCI EAFE Index: +142%
MSCI Emerging Markets: +338%
Emerging Market stocks come with their own set of risks to be sure, including a 60%+ drawdown in 2008-09!
So, where possible, when investing outside the US in a buy-and-hold portfolio, it makes sense to "tilt" the portfolio towards emerging market stocks.
All three of these points are generalizations that have historically been true over multiple-year periods. It is certainly possible for any of these to underperform at any point in time! However, taken as a whole, these ideas can certainly increase the expected total return of your portfolio without a great deal of additional risk to your capital.
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