Do I need small caps?

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Jeresoph
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Do I need small caps?

Post by Jeresoph »

I’m a 62 yr old recent convert to the world of Bogleheads and very much value the group’s advice. As per the response to an earlier posting I went ahead and chose a 3 fund portfolio for my 2 retirement accounts.

Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
TropikThunder
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Re: Do I need small caps?

Post by TropikThunder »

Jeresoph wrote: VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
VTI (Vanguard Total Stock Market ETF) is just that, the Total Stock Market: Large, Small, and everything in between, at market weight. Therefore your reach already extends into Small Caps (~9% Small, ~18% Mid in VTI). The same goes for VXUS (Vanguard Total International), which is ~4% Small and ~16% Mid. Does your financial advisor not know this, or is she saying you should be deviating from the Total Market with a Small Cap tilt?
Not to be too cynical, but financial planners can't make any money advising people who use a simple three fund portfolio like yours (which looks perfect to me for a 60/40 allocation).
lack_ey
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Re: Do I need small caps?

Post by lack_ey »

You have small caps already.

The question is if you want to overweight small caps so you have more small cap representation relative to large caps compared to what's available out in the wild. Your current position is neutral with respect to large vs. small caps.

If you shift a bit to small caps, this won't change much, as small caps mostly perform with the rest of the market, most of the time. You'd need a more substantial small cap allocation to move the needle more, in which case you'd definitely end up with a little higher volatility (all things equal, this is not good for somebody in or approaching retirement), with potentially a modest return advantage in theory that may or may not show up in practice as real-life outcomes are highly random over any period you could care about.
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steve roy
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Re: Do I need small caps?

Post by steve roy »

Total Stock Market is one way to own everything, another way would be to own the S& P 500 Index and the Extended Market Index (Mid Cap and Small Cap). To get away from the cap-weighted stock market, you could overweight the Extended Market Index.
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William4u
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Re: Do I need small caps?

Post by William4u »

Total market is all you need.
Alto Astral
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Re: Do I need small caps?

Post by Alto Astral »

Only if you have a small head :) Sorry, poor joke. Please do not take offense.

I believe VTI(total stock) is all you need. I use small caps, but only to mimic total stock in a 401k account. That account has only large and small/mid cap funds. So I need to manually re-balance to 70% large cap and 30% small/mid cap funds.
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Re: Do I need small caps?

Post by Dottie57 »

OP, you are just dandy with your allocation. I would not become any more complicated.

I don't think you need a financial advisor/planner.
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Re: Do I need small caps?

Post by KyleAAA »

The evidence suggests you should tilt at least a little to small cap and value.
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Re: Do I need small caps?

Post by avalpert »

Jeresoph wrote:I’m a 62 yr old recent convert to the world of Bogleheads and very much value the group’s advice. As per the response to an earlier posting I went ahead and chose a 3 fund portfolio for my 2 retirement accounts.

Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
Without knowing your entire financial situation and your target risk/return profile nobody here can honestly tell you what exposures you need - and any who do are speaking ore to their own needs and biases than yours.

That said, if your financial planner honestly didn't know that VTI provides small cap exposure, or thought they could use that angle as a means to having you value their advice as insightful should make you question the true value they bring.
rgs92
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Re: Do I need small caps?

Post by rgs92 »

Well, your question was Do I need small caps?
If you ask Mr. Bogle, you could just substitute the S&P 500 for not only your total stock market holding but also your international component.
He likes to say that the S&P "gives you the weight of the market" and that's all you need. I don't think he feels anyone needs small caps.
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aegis965
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Re: Do I need small caps?

Post by aegis965 »

If you want to overweight small cap to get exposure to the size factor, you should consider your investment horizon. Size factor's valuation is pretty high right now:
https://interactive.researchaffiliates. ... -small-cap
I may be biased.
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Re: Do I need small caps?

Post by AlohaJoe »

When I type "do I need small caps?" into the search box in the top right I get many threads over the years with that same exact title asking the same question (and getting the same replies you've received).

Here are a few to read that might contain more information and arguments for/against.

"Do I need small cap?"
"Do I need both total stock market and small cap index fund?"
"Do I need small and mid cap?"
"Do I need small cap index and total stock market index"
"Do I need a small cap index if I already have total market ?"
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randomizer
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Re: Do I need small caps?

Post by randomizer »

The short answer is that you don't need them. You might want them, however, if you think that tilting towards small cap may eek out better returns after costs. To learn about that, check out Larry Swedroe's latest book on factor-based investing (I can't remember the exact title). it goes into more detail than you're likely to ever need.

having said all that, I prefer to keep things simple, so I don't tilt.
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wolf359
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Re: Do I need small caps?

Post by wolf359 »

KyleAAA wrote:The evidence suggests you should tilt at least a little to small cap and value.
In terms of a portfolio, the OP is fully diversified, and has a solid plan. True, OP might boost returns slightly or decrease volatility slightly with small caps, but that increases the complexity, and is not needed for most people. In addition, the added returns may take up to 30 years to materialize. Given that small caps and value stocks are at an all-time high right now, we're currently at the end of the last cycle.

OP needs a solid plan they can stick with. Investing in small caps and value will mean the portfolio will underperform the market for long periods of time before it (maybe) finally outperforms. Check out recent performance of small cap value (VSIAX) to Total Stock Market (VTSAX). VSIAX looks great recently, but look for the down days. When VTSAX drops, VSIAX plummets (it may drop 2-3x as much). During an extended downturn (that is pretty scary. Tilting to small cap and/or value is not the best choice for someone just starting to implement the buy-and-hold philosophy, especially if they don't have the time to wait it out (20-30 years for a 62 year old puts him in his 80's to 90's if he has to wait out the full cycle.
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Re: Do I need small caps?

Post by wolf359 »

randomizer wrote:The short answer is that you don't need them. You might want them, however, if you think that tilting towards small cap may eek out better returns after costs. To learn about that, check out Larry Swedroe's latest book on factor-based investing (I can't remember the exact title). it goes into more detail than you're likely to ever need.

having said all that, I prefer to keep things simple, so I don't tilt.
Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today, by Larry Swedroe

Great book.
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Re: Do I need small caps?

Post by ruralavalon »

Jeresoph wrote:I’m a 62 yr old recent convert to the world of Bogleheads and very much value the group’s advice. As per the response to an earlier posting I went ahead and chose a 3 fund portfolio for my 2 retirement accounts.

Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
No you do not "need" more small-cap stocks. They are included at market weight in Vanguard Total Stock Market ETF (VTI).

If you want more, consider adding some Vanguard Small-cap Value ETF (VBR).
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Jeresoph
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Re: Do I need small caps?

Post by Jeresoph »

Thank you all for your smart and practical advice. The consensus seems to be to leave things where they are and to take my advisor's rumblings with a pinch of salt. Or maybe a giant scoop. Be well everyone.
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Re: Do I need small caps?

Post by Jack FFR1846 »

Your financial planner thinks that adding small caps will increase your overall return.

It is a fact that if you fire your planner, you will increase your return by the amount you pay the planner.

I would bet that the second option would return far, far more than the first option.
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dbr
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Re: Do I need small caps?

Post by dbr »

Jack FFR1846 wrote:Your financial planner thinks that adding small caps will increase your overall return.

It is a fact that if you fire your planner, you will increase your return by the amount you pay the planner.

I would bet that the second option would return far, far more than the first option.
Indeed. How much are you paying your adviser? Depending on what that is you probably need to fire your adviser due to unnecessary cost more than you need to add small caps. I am not saying you should fire your advisor due to bad advice or dishonesty. If based on learning about factor investing, you can go in that direction and save the cost of the adviser. But, it depends on what you are paying and what they are doing for you that is worth it to you.

Others have pointed out that there is much discussion that can be read about why one would or wouldn't add a concentration to small caps. The book by Swedroe gives you a way to read that discussion in a thorough and well analyzed way. A warning is that while Larry is honest and even handed and does discuss the why and why not, he is, in the end, basically a champion of factor investing.
Alchemist
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Re: Do I need small caps?

Post by Alchemist »

Short Answer: No

Slightly less short answer: You already own them in VTI at market weighting, so you are already very well diversified.

Also, probably can do without a financial adviser. What are they charging you, btw?
KyleAAA wrote:The evidence suggests you should tilt at least a little to small cap and value.
This is a very misleading statement and simply is not true. It is particularly inappropriate advice for someone nearing or at retirement age.
dbr wrote: A warning is that while Larry is honest and even handed and does discuss the why and why not, he is, in the end, basically a champion of factor investing.
I agree with the compliments for Larry but have to go a step further in the warning. He is not just a champion of factor investing, his livelihood largely depends on him continuing to be a champion of factor investing. His books are about factor investing, and the advisor firm he works with is founded on the idea of factor investing.
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Re: Do I need small caps?

Post by KyleAAA »

Alchemist wrote:Short Answer: No

Slightly less short answer: You already own them in VTI at market weighting, so you are already very well diversified.

Also, probably can do without a financial adviser. What are they charging you, btw?
KyleAAA wrote:The evidence suggests you should tilt at least a little to small cap and value.
This is a very misleading statement and simply is not true. It is particularly inappropriate advice for someone nearing or at retirement age.
Based on the evidence I've seen my statement is neither misleading nor inappropriate for somebody nearing retirement. I will certainly be tilting to small/value in retirement and it's advice I would give my own mother. The evidence is EXTREMELY convincing. Think of it this way: why would you put all your eggs in the beta basket? More baskets == better diversification. A portfolio that doesn't tilt, based on the very best current research, is NOT fully diversified.
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Re: Do I need small caps?

Post by KyleAAA »

wolf359 wrote:
KyleAAA wrote:The evidence suggests you should tilt at least a little to small cap and value.
In terms of a portfolio, the OP is fully diversified, and has a solid plan. True, OP might boost returns slightly or decrease volatility slightly with small caps, but that increases the complexity, and is not needed for most people. In addition, the added returns may take up to 30 years to materialize. Given that small caps and value stocks are at an all-time high right now, we're currently at the end of the last cycle.
The equity premium might take 30 years to show up, too. Size, value, and beta aren't highly correlated with each other. A truly diversified portfolio needs exposure to all three and preferably momentum as well.
wolf359 wrote: OP needs a solid plan they can stick with. Investing in small caps and value will mean the portfolio will underperform the market for long periods of time before it (maybe) finally outperforms.
No it doesn't. It doesn't follow that just because the size and value premiums doesn't show up for, say, 20 years that small and value stocks must necessarily underperform the total stock market over that period. Reversion to the mean doesn't imply that periods of above-average returns are likely to be followed by periods of below-average returns. And besides, those stocks still have close to a full helping of beta exposure. The most likely outcome is that they just wouldn't increase returns and/or reduce volatility for a while. But it's not like such a portfolio runs a high risk of SIGNIFICANTLY underperforming the total stock market over the course of a decade or two. It doesn't.
wolf359 wrote: Check out recent performance of small cap value (VSIAX) to Total Stock Market (VTSAX). VSIAX looks great recently, but look for the down days. When VTSAX drops, VSIAX plummets (it may drop 2-3x as much). During an extended downturn (that is pretty scary.
Tilting to small cap and/or value is not the best choice for someone just starting to implement the buy-and-hold philosophy, especially if they don't have the time to wait it out (20-30 years for a 62 year old puts him in his 80's to 90's if he has to wait out the full cycle.
This is an unsubstantiated opinion at best.

The research is fairly settled at this point that factor investing is legit. The only part that isn't settled is to what extent the premiums will persist in the future. Will they be reduced? Perhaps, especially to the extent that they are behavioral. But even if that's the case factor investing will still prove superior.
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Re: Do I need small caps?

Post by inbox788 »

No, you don't need small caps.

You already have small caps, in the perfect amount IMO.

Stop listening to bad advice from the advisor.
Jack FFR1846 wrote:Your financial planner thinks that adding small caps will increase your overall return.

It is a fact that if you fire your planner, you will increase your return by the amount you pay the planner.

I would bet that the second option would return far, far more than the first option.
Yup! You pay the advisor for advice and you pay again when the advice turns out to be bad much of the time.

It's bad enough the lottery odds are against you, but paying a psychic for which numbers to pick compounds your losses.
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Re: Do I need small caps?

Post by junior »

Alchemist wrote: Larry but have to go a step further in the warning. He is not just a champion of factor investing, his livelihood largely depends on him continuing to be a champion of factor investing. His books are about factor investing, and the advisor firm he works with is founded on the idea of factor investing.
It's weird that people here are all like "investment adivsors suck- go read this book from an investement advisor!"
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Re: Do I need small caps?

Post by dbr »

junior wrote:
Alchemist wrote: Larry but have to go a step further in the warning. He is not just a champion of factor investing, his livelihood largely depends on him continuing to be a champion of factor investing. His books are about factor investing, and the advisor firm he works with is founded on the idea of factor investing.
It's weird that people here are all like "investment adivsors suck- go read this book from an investement advisor!"
Investment advisers suck except the ones that don't. That is possible about lots of things.
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Re: Do I need small caps?

Post by lack_ey »

Usually a book is cheaper than an ongoing AUM fee.
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Re: Do I need small caps?

Post by KyleAAA »

junior wrote:
Alchemist wrote: Larry but have to go a step further in the warning. He is not just a champion of factor investing, his livelihood largely depends on him continuing to be a champion of factor investing. His books are about factor investing, and the advisor firm he works with is founded on the idea of factor investing.
It's weird that people here are all like "investment adivsors suck- go read this book from an investement advisor!"
I can independently verify the conclusions from a book using public data.
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Re: Do I need small caps?

Post by nisiprius »

Jeresoph, the small-caps question is complicated. This forum, or at least the people who post in it, are roughly divided between people (like me) who are skeptical of the value of departing from the "total market," and people who believe the case is strong for "tilted," "slice-and-dice," or "factor-based" portfolios. Just to be perfectly clear, since this is "investing advice inspired by Jack Bogle," John C. Bogle himself in in the "majesty of simplicity" camp.

As you can see,
Image
your VTI holding is classified by Morningstar as being only 23 + 25 + 24 = 72% large-caps; 6 + 6 + 6 = 18% mid-caps; and 3 + 3 + 3 = 9% small-caps. So it is true that you already have small-caps.

Without knowing what your advisor said to you, and neither being a financial planner nor using one, it's hard to judge, but she should have been quite clear that you already do have small-caps, and should have given you an intelligent understanding of why she thinks you should have more.

The case for an additional extra holding of, simply, small-caps (as opposed to small-cap value) seems weak. Over time, on close examination, the original paper that made the case in 1981, has been shown to have flaws in the data set the author used. The factor mavens seem to think that there is still some benefit, but that it is not the most important of the factors, and that it is much more helpful when concentrated into the lower-left-hand style box--small-cap value.

Larry Swedroe has come up with an interesting and heterodox concept, in which he reduces his stock allocation by quite a lot, but holds purely small-cap value. The result is about the same risk and return by the usual measurements, but--to oversimplify considerably--the "black swan" or "tail risk" is reduced, because if you imagine stocks as falling all the way to zero, the lower your stock allocation, the less bad the worst case is. A commitment to "the Larry portfolio" would be a big strategic decision that should involve a lot of discussion.

More generally, a suggestion of small-cap or small-cap value stocks would, nowadays, probably be part of a more complete "factor-based" strategy, and your planner shouldn't just be suggesting "small caps" without an explanation of what her overall strategy is and how it fits in.

Jared Kizer, an advocate of factor-based investing, has written:{quote]Any transparent strategy, which applies to everything outlined in this piece [specifically size, value, momentum, and low-beta], is capable of extended periods of underperformance. There is nothing that preordains these strategies to work over any period of any length. Investors should either commit to these strategies over an extremely long time horizon or not tilt toward these factors at all.[/quote]So, a discussion of factor-based investing should include a discussion of whether you personally have the conviction to commit to it. Kizer doesn't say how long "extremely long" is, but it can definitely be longer than a decade.
Last edited by nisiprius on Fri Mar 10, 2017 7:51 pm, edited 1 time in total.
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Re: Do I need small caps?

Post by snowshoes »

junior wrote: It's weird that people here are all like "investment adivsors suck- go read this book from an investement advisor!"
I'm sure if you do the numbers and actually consider the dynamics between you, your advisor, and your money, you'll understand why junior. Numbers do not lie. As to SCTilt, it's a tilt many consider, or like Nisprius so eloquently said, it has its many pros and cons. Good luck!
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Re: Do I need small caps?

Post by junior »

KyleAAA wrote:
junior wrote:
Alchemist wrote: Larry but have to go a step further in the warning. He is not just a champion of factor investing, his livelihood largely depends on him continuing to be a champion of factor investing. His books are about factor investing, and the advisor firm he works with is founded on the idea of factor investing.
It's weird that people here are all like "investment adivsors suck- go read this book from an investement advisor!"
I can independently verify the conclusions from a book using public data.
At best you can decide whether you agree with the book's interpretation of data. Turns out different advisors, even well respected boglehead approved advisor-authors, can interpret data differently.

Disclosure: I'm slightly tilted towards small cap because an advisor who wrote a book often recommended here suggested it.
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Re: Do I need small caps?

Post by MikeG62 »

You do need small cap exposure. The question is whether you feel you are getting enough with the funds you are using (both US and overseas).

Personally, I prefer a bit more weighting to small cap's than one gets with VTI, which is why I have assembled my own collection of ETF's instead of using a one stop shopping approach such as VTI. Will my asset allocation outperform in the future, there is no way to know in advance. You have to make the decision for yourself.

Nothing wrong with the three fund portfolio at all. Nice and simple and "easy to manage".
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Re: Do I need small caps?

Post by nedsaid »

Jeresoph wrote:I’m a 62 yr old recent convert to the world of Bogleheads and very much value the group’s advice. As per the response to an earlier posting I went ahead and chose a 3 fund portfolio for my 2 retirement accounts.

Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
The US Total Stock Market already has small-caps in it. I don't think you absolutely need additional small-caps in your portfolio, the simple three fund portfolio is a pretty good one. Total International Stock also has International Mid-Small Cap.

I do like the idea of adding small-caps and particularly small-cap value for a few reasons. First, the US Total Stock Market Index is really a mega-cap index. The top 100 companies have just over 50% of the market capitalization of the entire index! I can think of a lot dumber ideas than owning the top 100 most successful companies in the United States! Still, I think one wants less concentration in their portfolio. Second, small-caps and large-caps outperform each other at different times, thus you should get a diversification benefit. Third, over long periods of time, small-caps tend to outperform large-caps.

But at your age, I can see why you want simplicity in your portfolio. Adding a small-cap index to your mix would perhaps smooth the ride a bit and maybe boost performance a bit. Hard to say how much each effect would be. What you have is very good, it is up to you if you want to try to "improve" your portfolio. Over your remaining lifetime, you may or may not see the benefits that I described.
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Jeresoph
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Re: Do I need small caps?

Post by Jeresoph »

Some great responses here and very much appreciated.
I shall ask my advisor for the basis of her recommendation and point out that VTI has some decent small cap
Coverage. I'll also her if this isn't sufficient why is more needed....
Grateful.
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Re: Do I need small caps?

Post by *3!4!/5! »

Jeresoph wrote:I’m a 62 yr old recent convert to the world of Bogleheads and very much value the group’s advice. As per the response to an earlier posting I went ahead and chose a 3 fund portfolio for my 2 retirement accounts.

Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps?

As always very grateful for any advice.
VTI already has "small cap representation". Your financial planner is an idiot, if they didn't even know this, or else is extremely dishonest if they didn't clearly explain it to you. Regardless which is the case, you have to ditch this financial planner.
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Re: Do I need small caps?

Post by dbr »

*3!4!/5! wrote:
VTI already has "small cap representation". Your financial planner is an idiot, if they didn't even know this, or else is extremely dishonest if they didn't clearly explain it to you. Regardless which is the case, you have to ditch this financial planner.
Of course if the advisor has been reading about factor investing the statement would be that there is no factor exposure to small caps, and that would be true. This point has confused more than a few people. However, it does sound like the advisor is not very knowledgeable altogether.

Also, in any case, this advisor should not be used.
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Re: Do I need small caps?

Post by *3!4!/5! »

dbr wrote:
*3!4!/5! wrote:VTI already has "small cap representation". Your financial planner is an idiot, if they didn't even know this, or else is extremely dishonest if they didn't clearly explain it to you. Regardless which is the case, you have to ditch this financial planner.
Of course if the advisor has been reading about factor investing the statement would be that there is no factor exposure to small caps, and that would be true. This point has confused more than a few people. However, it does sound like the advisor is not very knowledgeable altogether.

Also, in any case, this advisor should not be used.
To understand the OP's issue I think the whole factor/tilting debate is a red herring. The issue is that regardless of what caused the words in the OP, the financial planner is useless and/or deceptive, and needs to be gone.
smackboy1
Posts: 1239
Joined: Wed Mar 14, 2007 9:41 pm

Re: Do I need small caps?

Post by smackboy1 »

Jeresoph wrote:Both accounts are split equally in dollar amounts and invested in the same funds in the same allocations. AA is 60:40 equities to bonds.

VTI 45% (Vanguard index funds, US)
VXUS 15% (Vanguard total Intl stock)
AGG 40% (Ishares Core US aggregate bond)

My financial planner said, amongst other things, that she felt I should have some small cap representation. So my question is, is she right? Am I too bare-boned and should I broaden my reach to incorporate small caps.
IMHO this is a question none of us here on the board can answer. There's not enough data provided and nobody here has gone through the calculations and simulations to give you a good answer. Perhaps your planner has, or maybe she hasn't. Plus nobody here knows your risk tolerance. In simplistic terms the issues are:

- Total US and total international already contain SC, but in the cap weighted proportion of the entire market. Compared to the total market, SC stocks have increased expected returns and increased risk (one measure of increased risk is higher standard deviation). That can be both good and bad.

- How the planner proposes to incorporate SC tilting will effect the overall portfolio expected returns and risk. It makes no sense to talk just about SC in isolation. It's the entire portfolio that matters.

- How does the addition of SC change the probability of success/failure in a Monte Carlo simulation? How comfortable are you with that level of risk and reward?

- For example, what if the planner came up with an factor tilted portfolio that had the same expected returns, lower SD, and greater probability of meeting your retirement goals in a MC sim than your 60:40 portfolio. Is that something you are interested in? What if by increasing SC tilt even more, the portfolio could have higher expected returns, same SD and same % probability of success. Would that be more or less attractive to you?

- How upset would you be and would you be able to stay the course if in the future, despite the theory, the actual portfolio underperforms the broad market for years on end by pure chance?

- If you're going to consider the size factor, what about the others? Value, momentum etc.
Disclaimer: nothing written here should be taken as legal advice, but I did stay at a Holiday Inn Express last night.
Grt2bOutdoors
Posts: 23208
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Do I need small caps?

Post by Grt2bOutdoors »

Jeresoph wrote:Some great responses here and very much appreciated.
I shall ask my advisor for the basis of her recommendation and point out that VTI has some decent small cap
Coverage. I'll also her if this isn't sufficient why is more needed....
Grateful.

I would not point out anything, agree with others, your financial planner is incompetent. Even if they did not know the composition of your holdings, basic financial tools could have shown the make-up includes small caps. Less of a financial planner, more like some one who should be in another occupation. I would fire them.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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