The suggested process from iShares begins with "start broad" which means using ITOT for domestic equity exposure, IXUS for foreign equity exposure and AGG for fixed income exposure.

From there investors can "tilt" the portfolio to express opinions about slightly narrower market segments with the other seven core ETFs.

Finally investors can draw upon the many narrow-based funds available from iShares which includes various country, sector and industry funds to round out the portfolio.

The idea of a few core funds combined with other holdings that are more specialized of course makes sense but there are some specifics to what iShares suggests that don't make much sense.

As an example according to the correlation between ITOT (and its predecessor symbol ISI) and IVV has been between 0.96 and a perfect 1.00 the vast majority of the time.

Since ITOT's inception, back when it traded as ISI, in 2004, it is up 29.78%. In that same time IVV is up 26.27% and the path these funds have taken to these results has been identical.

The reason is that both funds have the same top ten holdings. For IVV the top ten add up to 20.62% of the fund and for ITOT the top ten add up to 18.28%. There would seem to be very little utility in owning both IVV and ITOT and there are similar arguments to be made within the foreign equity and fixed income portions of the portfolio.

The domestic core would be accomplished with either ITOT or some combination of IVV, IJH and IJR. An investor not interested in making market cap decisions could simply use ITOT and save the time and expense of owning all four funds.

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