Steve,
The Couch Potato Building Block portfolios (http://assetbuilder.com/Investing/inv_potato.aspx) start at a 50/50 equity/fixed income mix and build out to a more aggressive 80/20 equity fixed income mix.
The first five building blocks are broad asset classes: TIPS for domestic fixed income, Internationnal bonds, U.S. Total Market, International Total Market and REITs. What Vanguard is proposing is essentially a portfolio with three asset classes--- domestic and international stocks plus domestic fixed income. The suggested Diversified Equity Fund is mostly domestic equities but also includes some intenational equities.
If you built a 5 Building Block portfolio you would have a 60/40 equities/fixed income mix because two of the five blocks would be fixed income. Take a step further to a 6 Building Block portfolio and you'll add energy stocks which are a limited but useful proxy for commodities. This portfolio would be 67 percent equities and 33 percent fixed income.
Both of these porfolios will give you substantial diversification. Both have also done well since they were first discussed in "The Coming Generational Storm" (MIT Press, 2004) and I expect them to continue doing well because they offer a substantial hedge against a declining dollar and inflation.
The next four Building Blocks add one new asset class, emerging markets, and three value "tilts" to the portfolio--- domestic large cap value, domestic small cap value, and international value. Research shows that over long periods of time value stock trump growth stocks and small stocks do better than large stocks.
The portfolios we have built at AssetBuilder are similar in regards to diversification and value tilt but they are constructed to offer a broader range of risk, particularly at the low end.
Scott
