Fama/French example portfolio

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Fama/French example portfolio

Postby fishdrzig » Thu Mar 14, 2013 7:45 am

Could someone provide a sample portfolio of an all Vanguard fund/ETF Fama/French 3F portfolio for 75% stocks 70/30 US/Int 25% fixed with a scv tilt.
I would like to do some comparisons with it. Thank you
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Re: Fama/French example portfolio

Postby BBL » Thu Mar 14, 2013 7:49 am

Any other requirements? There are a huge number of rough approximations possible. How 'pure' do you want it to be? Any limitation on the number of funds? Any location issues/constraints?

EDIT: While I'm asking questions - do you have any particular factor loadings in mind?
Last edited by BBL on Thu Mar 14, 2013 8:16 am, edited 1 time in total.
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Re: Fama/French example portfolio

Postby BBL » Thu Mar 14, 2013 8:11 am

27.5 US MCV / VOE
25.0 TBM / BND
25.0 US SCV / VBR
22.5 INT SB / VSS (30% of equity in international)

Without any further parameters - just something to play around with, this is a rather highly tilted, VG only, example with 75/25 and 70/30.
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Re: Fama/French example portfolio

Postby hoppy08520 » Thu Mar 14, 2013 8:22 am

Using Vanguard funds exclusively, see below. You could tilt the small/value holding more or less than what's shown below. Many recommend starting with a total market index fund for US and International and then adding a small-cap fund on top of that at anywhere from 25% - 50%, e.g. anywhere from 75% Total-Market / 25% Small-Cap to 50%/50%. For the sample portfolio below, the tilt is 60/40 Total/SmallValue. You could ratchet that up or down. Also, I made the US/International split at 2/3 to 1/3 so the numbers are rounded for simplicity. You could easily dial this to 70/30.

US Stocks (50% of portfolio)
30% Vanguard Total Stock Market Index Fund
20% Vanguard Small-Cap Value Index Fund (VISVX / VSIAX / VBR)

International Stocks (25% of portfolio, 1/3rd of stocks)
15% Vanguard Total International Stock Market Index Fund (VGTSX / VXUS )
10% Vanguard FTSE All-World ex-US Small-Cap (VFSVX / VSS) (small cap, with a slight value tilt)

Bonds
25% Vanguard Total Bond Market Index Fund

Note that FTSE All-World ex-US Small-Cap currently has a slightly more value than growth, but it's not a true "value" fund. There are a few International SCV funds out there; search forum for more.
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Re: Fama/French example portfolio

Postby fishdrzig » Thu Mar 14, 2013 9:16 am

that is what I was looking for as a starting point, thank you
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Re: Fama/French example portfolio

Postby BBL » Thu Mar 14, 2013 9:18 am

fishdrzig wrote:that is what I was looking for as a starting point, thank you


Good. That was easy. :beer
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Re: Fama/French example portfolio

Postby Aptenodytes » Thu Mar 14, 2013 9:43 am

Fama/French only applies to equities, so if I were doing this I would compare only the equity portion of a portfolio.

The Vanguard funds are not very finely targeted at the FF factors, so I think a reasonable example would have to go much higher on the small and value funds than what hoppy08520 shows.

This is close to what I have:

Vanguard Total Stock Market 15%
Vanguard Small-Cap Value 25%
Vanguard Value 15%
Vanguard Total International 23%
Vanguard FTSE All-World Ex-US Small Cap 22%

Roughly 38% small / 50% value / 20% small value

I think this is a pretty reasonable example of a F/F inspired portfolio.
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Re: Fama/French example portfolio

Postby EDN » Thu Mar 14, 2013 8:45 pm

The Fama/French research reported two additional factors that drive equity returns (size and price), and two factors that drive fixed income returns (term and credit). So any portfolio that makes intentional allocations according to stock vs bond, small vs large, value vs growth, as well as interest rate and credit risk on the bond side is modeling its allocation after FF research.

FF have not offered any guidance on optimal or ideal portfolios. They believe advisors are better positioned to determine that on behalf of their clients than a fund company. In partnership with DFA, they simply help create products that efficiently target size and value factors to varying degrees in the equity space, and bond products that either target term or credit risk (or both) in bonds, as well as fixed products that dial back the term/credit exposure significantly relative to the market for those who want to minimize risk.

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Re: Fama/French example portfolio

Postby BornInCA » Sat Mar 16, 2013 8:33 am

I posted a 4 Vanguard fund equity portfolio a few weeks ago:
viewtopic.php?f=10&t=111362

I wonder how that is for a simple low-fee low-maintainence FF equity portfolio
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