Large Cap Value -- worth the effort?

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Outer Marker
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Large Cap Value -- worth the effort?

Post by Outer Marker »

In a further effort to refine and streamline my portfolio, I'm considering eliminating a separate allocation to LCV. The 10 year returns of the 500 index fund and Vanguard Value index are within spitting distance of each other, and are closely correlated. Eyeballing the top holding of the Vanguard Value index and 500 index, there is a great deal of overlap. Holding LCV adds cost and complexity to my portfolio, and, while I try to resist the urge to tinker, I'm becoming increasingly convinced that LCV just isn't worth the effort. My IPS calls for 8% LCV, and is currently around 6%. So, rolling LCV up into TSM is not really a major shift.

I plan to maintain a tilt to Small Cap Value, International Small, and REITs. (Otherwise all Total Stock Market and Total International on the equities side).

Curious on what the consensus is on LCV, and how many maintain this as a separate category in their portfolios . . .?
stan1
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Re: Large Cap Value -- worth the effort?

Post by stan1 »

I have tilts to Small Cap Value, EM, International Small, and REITs.
LCV was too much trouble and as you noted its the same companies that dominate TSM so it doesn't do much for diversification. LCV funds are essentially financial services, energy, and health care sector funds.
Warning: I am about 80% satisficer (accepting of good enough) and 20% maximizer
yobria
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Re: Large Cap Value -- worth the effort?

Post by yobria »

stan1 wrote:LCV funds are essentially financial services, energy, and health care sector funds.
Right, these are sector plays. If financials do well, LCV and SCV will outperform. If tech does, LCG and SCG will.

Own the whole market and you won't have to worry about it.

Nick
dharrythomas
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Re: Large Cap Value -- worth the effort?

Post by dharrythomas »

I own Value Index, Mid-Cap Value Index, Small Cap Value Index, REIT Index and International RE in my Roth. DW has Wellington in her Roth. Our Traditional IRAs and TSPs have the target date funds. Is it worth the effort? It will probably depend on my time horizon and market returns during that timeframe, I'll only know in hindsight. :annoyed

Good luck

Harry
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Go Blue 99
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Re: Large Cap Value -- worth the effort?

Post by Go Blue 99 »

Any more thoughts on whether Large Cap Value is worth the effort?

I've held a LCV allocation in Windsor II since reading Four Pillars of Investing in 2002. I'm considering moving that allocation into TSM to simplify things (neither my wife's nor my 401k offers a LCV fund).
JRA
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Re: Large Cap Value -- worth the effort?

Post by JRA »

As chance would have it, Christine Benz currently has a video special report, "A Portfolio Checkup in 6 Steps," on the Morningstar website, which is worth watching, in my opinion. She makes the claim that domestic large value is currently the only undervalued domestic equity asset class. I am not going to make a judgment call about the legitimacy of that claim (although it sounds reasonable), but now might not be the best time to unload the Value Index Fund in favor of the growth dominated Total Stock Market Fund. If I owned the Value Index Fund right now, I would not sell it and buy a total stock market fund with the proceeds. I, however, would not buy the Value Index Fund and don't think it is worth the trouble. Although it carries a lot more risk, I personally agree with Bernstein and RobertT and prefer the Vanguard Mid-Cap Value Fund due to its size and value loadings.
Grt2bOutdoors
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Re: Large Cap Value -- worth the effort?

Post by Grt2bOutdoors »

Keep it! Jim Barrow has done a decent job of keeping pace with the Russell 1000 and the S and P 500.
I'd be more concerned with buying small and mid cap indexes right now.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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ruralavalon
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Re: Large Cap Value -- worth the effort?

Post by ruralavalon »

Outer Marker wrote: Holding LCV adds cost and complexity to my portfolio . . .
What is the LCV ER as compared to your TSM fund, in other words how much added cost?

Does using LCV inhibit your ability to keep the allocation you want in other funds, make rebalancing difficult?

I wouldn't spend too much effort on the market timing aspect of the issue.
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nisiprius
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Re: Large Cap Value -- worth the effort?

Post by nisiprius »

1) I don't tilt, myself.
2) If I did, I would probably consider the Coffeehouse Portfolio (Bill Schultheis) and it does include large-cap value:

10% each
US large cap stocks
US large value stocks
US small cap stocks
US small cap value stocks
US REITS
International stocks

40%
US intermediate bonds
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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