The discussions about the "new" factors mostly lead by Larry Swedroe has convinced me that I am not such a complete idiot for not being 100% indexed in my investments.
My first real investment was a taxable mutual fund, which I still own. My IRA investments were bank certificates of deposit. Later on, I started my workplace savings plan.
About 1988, a friend called me. He had gone into the brokerage business and wanted my account. He was at an office that had two Money Magazine All-Star Brokers who both were value investors. So my friend and a successor broker schooled me in value investing. I did this with individual stocks. So I invested in the "Value Premium".
I have never believed in the "cigar butt" definition of value investing. I have attempted to buy quality at a good price.
Somewhere along the line, I wanted more diversification and went to mutual funds in my workplace plan. My IRA was a brokerage IRA and was mostly individual stocks. So I opened an IRA at my favorite mutual fund company which had a lot of funds that emphasized earnings and price momentum. So I invested in the "Momentum Premium." The fund company later opened international, value, and real estate funds and I bought into all three. I had never heard of DFA and didn't realize
REITs were a non-correlating asset to stocks but had similar returns. I bought because it seemed a smart diversification move. In my brokerage account, I bought a couple international value mutual funds.
My favorite mutual fund company looked for growing earnings and secondly price momentum. The theory was that the best companies in the world to invest in have earnings that grow at an increasing rate. Was this an attempt to capture the "quality" premium that Mr. Swedroe talks about?
Back at the Brokerage Account ranch, though I was a Value Investor, my first broker and his successors taught me to not only buy Value but to get good quality companies. Good companies with temporary problems that caused their price to be depressed. And my brokers all liked dividends. Getting paid while you wait. Plus I had the dividends to reinvest. So perhaps without the sophisticated screens that DFA has, I was trying to do what DFA is trying to do now.
At my favorite mutual fund company, I learned that their mid/small cap funds seemed to do better than their large cap funds. I sort of stumbled into the small cap premium. A couple of their mid cap growth stock funds gave me really good performance over the years, certainly better than their large cap cousins.
After my insurance company reviewed my portfolio, they said that I needed more small caps. So I bought an S&P 600 Small Cap Index ETF.
After learning about DFA, I de-emphasized the role of individual stocks in my brokerage account and started buying ETFs to get into asset classes that I felt I needed. Microcap, International mid/small cap, US Small Cap Value. I decided I needed more REITs, so I bought a REIT ETF as well. I started tilting to "small" and "value".
Later on I learned about indexing. So now I am indexing a bit more than 1/4 of my portfolio to cut costs and to assure a market return for that portion of my portfolio. My largest holding is a US Total Stock Market Index fund.
So I own individual stocks (mostly value and quality oriented), price and earnings momentum funds, value funds, ETF's trying to capture the "small and value" premiums, a Micro-Cap EFT attempting to capture a liquidity premium, and of course bond funds.
So after reading all these threads, I give myself an A for effort in attempting to capture the premiums that Mr. Swedroe talks about. Some of this did because it just made sense. But I didn't know that there was academic research to back these up. I went by the advice of people with experience and by what I learned in the markets.
Have I outperformed the market? Hard to say. My investments have performed about what one would expect. I track my returns on Quicken but it is hard to say exactly how my returns compare to the market indexes. My suspicion is that I am close. Maybe a bit over or a bit under.
So am I brilliant? Or am I the idiot that Shakespeare referred to when talking about "sound and fury, signifying nothing!?"
A fool and his money are good for business.