Possibly, but again, that requires human hands making adjustments and thinking they’re timing it properly. Historically, that doesn’t work in our favor. If you can set it up to rebalance mechanically with a small, mid, large and international index funds it could work. But, the total stock index accomplishes almost the same thing. I think 500 companies (in the S&P) or 3000+ in the total stock market index is plenty of diversification. Really, how many more companies could you possibly need to own to feel diversified? Another thing is when people come involved multiple mutual funds both index and actively managed, they end up overlapping. So what they’re perceiving as security by diversifying amongst multiple funds, may be a false sense of security (although not necessarily adding more risk). Here’s an interesting article that uses the portfolio x ray tool at Morningstar.com to identify overlap. As you can see a lot of non s&p 500 fund allocations are pretty similar to s&p fund allocations.

http://genxfinance.com/avoid-fund-overlap-to-achieve-true-diversification-in-your-portfolio/

I’m not saying anyone is wrong here, the important thing is that money is being saved and invested. I can’t stand that the financial industry makes this seem so scary and over complicated and charge us huge fees to make us feel like we are safer, when it usually ends up the opposite. Just got to find what works for you and you’re comfortable with.