For higher returns, put money in fewer or more ETFs? w/rebalancing in the equation

Question

I'm evaluating my long-term investing strategy. I am somewhat aggressive and want to stick with ETFs.

Scenario A
60% Vanguard S&P 500 Index ETF (VOO)
40% Vanguard FTSE All-World Ex-U.S. ETF (VEU)

Scenario B
10% Vanguard S&P 500 Index ETF (VOO)
10% Vanguard Value ETF (VTV)
10% Vanguard Small-Cap ETF (VB)
10% Vanguard Small-Cap Value ETF (VBR)
10% Vanguard REIT ETF (VNQ)
10% Vanguard FTSE All-World Ex-U.S. ETF (VEU)
10% SPDR S&P International Dividend (DWX)
10% Vanguard FTSE AW ex-US Sm-Cap ETF (VSS)
10% WisdomTree International SmallCap Div (DLS)
10% Vanguard Emerging Mkts ETF (VWO)

Strategy
I will rebalance annually. I will not take money out for 20+ years.

Question
For simplicity, assume that all the ETFs listed above will produce similar long term returns but fluctuate differently.

Scenario B has more varied assets and will likely have more ups and downs. When I rebalance annually, it seems that Scenario B has an advantage as their will be more low buying and high selling. Does having a variety of ETFs yield higher return if you rebalance periodically?

There will be more transaction fees in Scenario B, but lets assume I'm investing a large sum, $100k, so the transaction fees don't have a large impact.

Thanks and let me know if anything needs clarification.

Answer 1

Yes, the larger number of ETFs will have a greater chance of enhancing the effect you observe. It's beyond a simple discussion, but the bottom line is that by carving out the different market segments your rebalancing will have greater impact.