RobInCT wrote:You seemed pretty happy with 100% VT the other day.
boggler wrote:The equity side of my portfolio is currently 100% VT. I love the simplicity of this... no rebalancing, unbelievably tax-efficient, hands-off, etc.
Yet I still have some cash on hand to invest, and I keep hearing about the small-value tilt and am trying to decide whether it makes sense for me. Here are my thoughts:
+ S/V seems to have improved returns while reducing portfolio volatility over time.
+ I never liked the fact that the stock market is so skewed towards major large companies, as I think smaller/value companies might do better over time.
- S/V premium is based on historical data. "Past performance does not predict future returns."
- People often attribute the S/V premium to factors like a preference for growth stocks, which might no longer hold in the 21st century with more efficient, HFT markets.
- Portfolio will require manual rebalancing to stay in shape
- Many financial advisors believe that S/V is currently overvalued, and growth stocks will outperform in the near future.
- There's no easy way to invest in international small value without DFA access, and I'd like to have a symmetric portfolio between domestic and international.
Similarly, many people recommend tilting towards emerging markets. Many of the above points hold for that as well.
It's hard to know what to do. Any tips? Are there any other asset classes that have similar expected returns to stocks but low correlation with the overall market?
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