Small Cap Value equals small cap financials

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Small Cap Value equals small cap financials

Postby zotty » Tue Jan 08, 2013 8:33 pm

i don't have a total market fund in my 401K so I have been balancing large cap equity accruals (in my 401K) with Vanguard Small Cap Value in my SEP. I poked into the portfolio holdings and was surprised at the lack of sector diversification.

https://personal.vanguard.com/us/FundsH ... IntExt=INT

Small Cap Value is 39% financials.

I presume if we look at any small cap value index, we'll find similar allocations to financials.

Small Cap Value, the sector gamble. ?
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Re: Small Cap Value equals small cap financials

Postby Occupier » Tue Jan 08, 2013 8:51 pm

Your reading too much into what you see. Some time ago I looked at the actual holdings. It seemed that Vanguard defines REITS as financials. Since most REITS are small value stocks that is why they show a high percentage of financials. You do get a significant number of small banks and finance companies in the small value category, but they don't amount to 30 some percent. Dave
PS I did not go over to morningstar, but I bet the have different figures based on their definition of financials.
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Re: Small Cap Value equals small cap financials

Postby zotty » Tue Jan 08, 2013 8:54 pm

You are right!

22% + 15% in real estate. Thank you!


http://portfolios.morningstar.com/fund/ ... ture=en-us
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Re: Small Cap Value equals small cap financials

Postby Rodc » Tue Jan 08, 2013 8:58 pm

zotty wrote:You are right!

22% + 15% in real estate. Thank you!


http://portfolios.morningstar.com/fund/ ... ture=en-us


Also, some people who have this fund and a REIT fund take this into account in setting their allocation.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Small Cap Value equals small cap financials

Postby larryswedroe » Tue Jan 08, 2013 10:38 pm

The sector holdings rotate depending on what industry is down at the time.
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Re: Small Cap Value equals small cap financials

Postby linenfort » Mon Mar 25, 2013 4:53 pm

I did the exact same thing this morning, zotty. Just thinking casually and glibly about financials (e.g. big banks tend to buy up the small ones, etc.) I thought they would tend to be mid- or large-cap, so I peeked. I was very wrong. There are plenty in small-cap, something like 23% in the most recent visible composition of VB (Vanguard's smallcap etf, easier to remember and type in than the ticker for the fund) and the 39-40% you mentioned for VBR (Vg SmallCap Value), more than any other sector. (15.8% in VOO, Vg's S&P etf, less than in IT).

I like SCV and dislike financials. I guess I'll have to get over that. ;-)
I also didn't think financials were doing well, so I'm not sure why these funds comprise so many financials + so little else (too little else).
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Re: Small Cap Value equals small cap financials

Postby apex84 » Mon Mar 25, 2013 9:49 pm

Does anyone have information on what the dominant sector in the small cap value market segment has been at different times (say each decade)?
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Re: Small Cap Value equals small cap financials

Postby zotty » Tue Mar 26, 2013 10:02 am

Just for clarify the outcome of the OP, I was convinced that the high level of "financials" described on the Vanguard site is explainable. If you compare the sector percentages with sector percentages from morningstar, you'll see a big difference. It appears that vanguard lumps real estate stocks with financials. Small Value is 22% financials (as we normally think of them). 15% real estate. Vanguard Reports 39% financials, (22 + 15 + ?2?).

That is, I concluded that the Small Value fund did not constitute a "sector bet" as my original post implies.
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Re: Small Cap Value equals small cap financials

Postby YDNAL » Tue Mar 26, 2013 11:53 am

zotty wrote:Just for clarify the outcome of the OP, I was convinced that the high level of "financials" described on the Vanguard site is explainable. If you compare the sector percentages with sector percentages from morningstar, you'll see a big difference. It appears that vanguard lumps real estate stocks with financials. Small Value is 22% financials (as we normally think of them). 15% real estate. Vanguard Reports 39% financials, (22 + 15 + ?2?).

That is, I concluded that the Small Value fund did not constitute a "sector bet" as my original post implies.

1. Understand that Vanguard SCV currently (as of 2/28/2013) shows it tracks the MSCI US Small Cap Value Index.*
2. Then, look at the GICS (Global Industry Classification Standard) that MSCI follows.
See pages 55-56 in Link - http://www.msci.com/eqb/methodology/met ... Method.pdf

* this will change to CRSP.
Link - https://personal.vanguard.com/us/insigh ... t-10022012
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