Purchasing IJS Small Cap Value

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Topic Author
Mr Rosco
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Joined: Thu Nov 28, 2013 7:24 am

Purchasing IJS Small Cap Value

Post by Mr Rosco »

I have decided to tilt my Roth IRA portfolio 10% to small cap value. To do so I will buy about $3500 worth or iShares S&P Small Cap Value (IJS) ETF. Even though I am 36 and will not retire for another 20+ years it is hard not to look at the short term picture of the ETF. Being it is doing so well and is volatile I wonder if I should be waiting for the next drop before buying in.

Would you buy all $3500 of IJS right now because you are only thinking long term?
Would you spread the $3500 worth over the next few months or year?
Would you wait for the next sharp drop in value and then buy?

I know, way over thinking this. My guess is that the right answer is to just by it all now and stop thinking short term but I need a little moral support :wink:

Mr Rosco
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nedsaid
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Re: Purchasing IJS Small Cap Value

Post by nedsaid »

If you have a 20 year plus time horizon, I would just buy in. I have owned an S&P Small Cap 600 ETF and the Vanguard Small Cap Value ETF for a few years and am pleased with the results.

I will caution you that after you buy, you will read something that you just made a big mistake. Posters on this forum will say that IJS isn't small-ee and value-ee enough. They will say you need to go to Bridgeway or Dimensional Funds to get the small cap value secret sauce. So go ahead and buy and then forget it.
A fool and his money are good for business.
steve_14
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Re: Purchasing IJS Small Cap Value

Post by steve_14 »

A $3,500, or 10% allocation to any segment of the stock market vs the whole market is going to make very little difference to your final outcome. Buy now, buy later, don't buy; doesn't matter.
livesoft
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Re: Purchasing IJS Small Cap Value

Post by livesoft »

I would have no qualms about exchanging $3500 of Total Stock Market to IJS right now.

I would have qualms about exchanging 10% of my portfolio from bonds to IJS right now.
At the next sharp drop, I would buy more IJS (exchanging from bonds) and especially if that happened to be an RBD.
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vencat
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Re: Purchasing IJS Small Cap Value

Post by vencat »

you should check the thread started by Robert T on PXSV ( Powershares Small cap value) to confuse you further......

Venkat
RNJ
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Re: Purchasing IJS Small Cap Value

Post by RNJ »

vencat wrote:you should check the thread started by Robert T on PXSV ( Powershares Small cap value) to confuse you further......

Venkat
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JoMoney
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Re: Purchasing IJS Small Cap Value

Post by JoMoney »

I'm not a fan of small-cap stocks. But if the "S&P Small-Cap Value" is something you're interested in as a long-term holding, you may want to consider VIOV (Vanguard S&P Small-Cap 600 Value ETF): VIOV ER= .24 , IJS ER= .30
Vanguard has a history, culture, and better motivations to lower fund expenses. Also, on any income from securities lending in the Vanguard funds is put back into the fund for the benefit of the owners.
http://prospectus-express.newriver.com/ ... octype=sai
BlackRock Institutional Trust Company, N.A. (“BTC”) acts as securities lending agent for the Funds, subject to the overall supervision of BFA. BTC receives a portion of the revenues generated by securities lending activities as compensation for its services.
https://advisors.vanguard.com/VGApp/iip ... iesLending
Vanguard fund shareholders receive 100% of the revenue from securities lending after broker rebates, program costs, and agent fees, while other fund providers may keep a large portion of revenue to cover costs and retain a profit.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
RNJ
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Re: Purchasing IJS Small Cap Value

Post by RNJ »

JoMoney wrote:I'm not a fan of small-cap stocks. But if the "S&P Small-Cap Value" is something you're interested in as a long-term holding, you may want to consider VIOV (Vanguard S&P Small-Cap 600 Value ETF): VIOV ER= .24 , IJS ER= .30
Vanguard has a history, culture, and better motivations to lower fund expenses. Also, on any income from securities lending in the Vanguard funds is put back into the fund for the benefit of the owners.
http://prospectus-express.newriver.com/ ... octype=sai
BlackRock Institutional Trust Company, N.A. (“BTC”) acts as securities lending agent for the Funds, subject to the overall supervision of BFA. BTC receives a portion of the revenues generated by securities lending activities as compensation for its services.
https://advisors.vanguard.com/VGApp/iip ... iesLending
Vanguard fund shareholders receive 100% of the revenue from securities lending after broker rebates, program costs, and agent fees, while other fund providers may keep a large portion of revenue to cover costs and retain a profit.
Ditto. I own VIOV - Vanguard's version of IJS.
Topic Author
Mr Rosco
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Re: Purchasing IJS Small Cap Value

Post by Mr Rosco »

Great feedback. I am definitely taking that 10% out of my Total Stock Market. Everything else being equal I decided to take Rick Ferri's adivce on small cap value but to lower my allocation slightly lower than his recommendation. I chose (IJS) iShares Small Cap Value because of Rick and because my Roth is in a Fidelity account and it is available as a free trade ETF.

Sounds like it probably does not matter much if I buy today, three months from now, or even a year from now being I will buy and hold for 20 plus years?
berntson
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Re: Purchasing IJS Small Cap Value

Post by berntson »

IJS and VBR both switched indexes awhile back. The result has been less value tilt for IJS and more for VBR. You should double-check and see if Rick's recommendation was made before or after the switch. Me, I would go with VBR for both the lower ER (.1 vs .3) and the additional value tilt (which I consider to be more valuable than the small tilt). I also prefer holding my investments at Vanguard. But this is also really splitting hairs. Do what you feel comfortable with!
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JoMoney
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Re: Purchasing IJS Small Cap Value

Post by JoMoney »

Mr Rosco wrote:...
Sounds like it probably does not matter much if I buy today, three months from now, or even a year from now being I will buy and hold for 20 plus years?
Sounds like you're asking about timing the market. The price you pay will certainly have an impact, but I don't think you'll find people on here predicting the price three months or 20 years from now.
Personally, I don't think small-caps (even those fitting the value style box) are a "value" right now... but like I said above, I don't like small-caps, so it would probably take some huge premium in the price/earnings and dividends before I would be at all interested enough to question my pre-conceived distaste for them.

What is it you believe this will do for your portfolio? (i.e. will you be rebalancing between this and some other asset believing the correlations will benefit, or that small-value will always outperform and buying in at any price is more likely to beat the total-market over the next 20 years ?)
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
stan1
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Re: Purchasing IJS Small Cap Value

Post by stan1 »

I use both IJS (60%) and VBR (40%). I didn't necessarily plan it that way, but that's what I ended up with when I finished tax loss harvesting in 2009 so that's what I'll be stuck with for a long time unless the market drops below 2008 levels again. In retrospect I do think holding both adds more diversification especially if you have a sizeable slant (my domestic asset allocation is 2/3 TSM and 1/3 SCV). IJS and VBR have no overlap in Top 10 holdings, and should have very minimal overlap in their Top 100 (possibly caused by buffer zones in both indexes). VIOV did not exist at the time so it was not a consideration. PXSV has a 0.31% waiver on its expense ratio (actual ER is 0.70%). Until that gets favorably straightened out I might buy it in a tax advantaged account but no way in a taxable account.

IJS has the highest expense ratio in my portfolio, but it could be worse: I reluctantly tax loss harvested from VWO to EEM in 2008 but was able to round trip back to VWO 31 days later with a short term gain that was under $100. I would be very upset if I was being fleeced every year by EEM's 0.67% expense ratio (aka Blackrock executive bonus and yacht fund).
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
Topic Author
Mr Rosco
Posts: 40
Joined: Thu Nov 28, 2013 7:24 am

Re: Purchasing IJS Small Cap Value

Post by Mr Rosco »

berntson wrote:IJS and VBR both switched indexes awhile back. The result has been less value tilt for IJS and more for VBR. You should double-check and see if Rick's recommendation was made before or after the switch. Me, I would go with VBR for both the lower ER (.1 vs .3) and the additional value tilt (which I consider to be more valuable than the small tilt). I also prefer holding my investments at Vanguard. But this is also really splitting hairs. Do what you feel comfortable with!
Thanks! Do you know when that switch occurred? Rick Ferri references IJS in his portfolio as recent as September: http://www.rickferri.com/blog/investmen ... dex-funds/
JoMoney wrote: What is it you believe this will do for your portfolio? (i.e. will you be rebalancing between this and some other asset believing the correlations will benefit, or that small-value will always outperform and buying in at any price is more likely to beat the total-market over the next 20 years ?)
My hope is that small-value will outperform the total market over a 20 year span.

My Roth IRA portfolio at Fidelity is currently like this:

51% Spartan Total Market (FSTMX)
26% Spartan Global ex US (FSGUX)
8% Spartan Real Estate (FRXIX)
15% Spartan US Bond (FBIDX)

I would change it to this:

41% Spartan Total Market (FSTMX)
10% iShare S&P Small Cap Value ETF (IJS)
26% Spartan Global ex US (FSGUX)
8% Spartan Real Estate (FRXIX)
15% Spartan US Bond (FBIDX)
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