Originally Posted by FBinNY

The nature of the problem is very different between too tight and too loose. (the below refers to the classic angular contact cup/cone bearings).

Overly tight overloads the bearing and the rolling balls stress the surface of the races in a way similar to driving a tank might damage the ice on a frozen lake that's thick enough for a car. It also overpowers the lubricant's film strength causing dry metal to metal. In short order, the contact area develops surface cracks and a flaking process sets in. Overly tight, is the fastest way to kill a bearing.

Loose is completely different. Bcause the contact is on an angle, the smaller part of the cone is not in contact with all balls all the time. The axle then tries to drop into the gap between the lower balls driving them apart. That causes two problems. The first is that each ball must lift the axle slightly as it passes the bottom, setting up a vibration, and a small impact load at that point on the non-moving cone. Also, the wedging action pushes the balls apart so they now are forced to the top, where they are all rubbing against each other rather than spacing themselves freely. The ball to ball rub is why too loose can increase bearing drag.

A slight looseness won't create major issues, and if I had to be more than a slight bit off perfect, I'd prefer loose since it's more forgiving.

Lastly a loose wheel creates issues having nothing to do with the bearing. The play needs to be accommodated in the brake adjustment, plus there can be handling problems such as high speed shimmy, or brake shudder if there's any play in the system.

So, focus on being close, but there is a margin of error, so there's no need to obsess.