Mid and Small Caps?

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stocknoob4111
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Mid and Small Caps?

Post by stocknoob4111 » Wed Nov 07, 2018 7:43 pm

Was reading this article that makes the case of investing in MidCaps as well...

https://seekingalpha.com/article/408345 ... t-25-years

I have most of my portfolio in the S&P500 index which many have regarded as adequate diversification. However, when I ran a backtest from 1972, Large Cap vs Mid Cap vs Small Cap was surprised to find that Mid and Small cap ending balances were 200% that of Large Cap. Anyone here investing in these classes as well?

Also, I see that VTSAX - Total Stock Market is primarily large cap as it says "Large Cap Blend" and Median capitalization of $74 billion!

samsdad
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Re: Mid and Small Caps?

Post by samsdad » Wed Nov 07, 2018 7:54 pm

We’re 1/3 each S&P 500, 400, and 600. Play around with portfoliovisualizer and read the “midcaps anyone?” thread viewtopic.php?t=34838 paying extra special attention to what poster Trev H says.

If you get lucky, Mel might show up and grace us with His Presence.

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arcticpineapplecorp.
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Re: Mid and Small Caps?

Post by arcticpineapplecorp. » Wed Nov 07, 2018 7:54 pm

did a search for Mel's Unloved Midcaps (Mel Lindauer that is) and found this:

https://www.google.com/search?sitesearc ... ed+midcaps

happy reading!
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Wed Nov 07, 2018 8:32 pm

stocknoob4111 wrote:
Wed Nov 07, 2018 7:43 pm
Was reading this article that makes the case of investing in MidCaps as well...

https://seekingalpha.com/article/408345 ... t-25-years

I have most of my portfolio in the S&P500 index which many have regarded as adequate diversification. However, when I ran a backtest from 1972, Large Cap vs Mid Cap vs Small Cap was surprised to find that Mid and Small cap ending balances were 200% that of Large Cap. Anyone here investing in these classes as well?

Also, I see that VTSAX - Total Stock Market is primarily large cap as it says "Large Cap Blend" and Median capitalization of $74 billion!
Many of us use either a dedicated small cap or small cap value fund to add diversification to our portfolios. I'm reluctant to generalize, but I'd say most people who are doing this are allocating between 20% and 50% of their U.S. equities to small cap or small cap value (though I think some forum regulars go higher).

The basic phenomenon is that smaller stocks have generally outperformed larger stocks, so if your portfolio is holding both large and small stocks there is no additional benefit from also holding mid-cap stocks: you can replicate the performance of mid cap stocks with a simple combination of large and small cap stocks.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

stocknoob4111
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Re: Mid and Small Caps?

Post by stocknoob4111 » Wed Nov 07, 2018 8:54 pm

Thanks all for the links, very interesting!
vineviz wrote:
Wed Nov 07, 2018 8:32 pm
you can replicate the performance of mid cap stocks with a simple combination of large and small cap stocks.
So, VSMAX (Vanguard Small Cap) seems to be a good pick to diversify into the small caps. It does not track the Russell 2000 but has a much lower expense ratio.

samsdad
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Re: Mid and Small Caps?

Post by samsdad » Wed Nov 07, 2018 9:07 pm

Trev H wrote:
Sat Mar 21, 2009 9:00 am
.
I still have some of those older crunches using CRSP data saved.

Found one and posted it below. This was sort of a look at it from the range of possible outcomes perspective.

Notice where Mid Caps or a 1/3 each mix of Large/Mid/Small placed in each of the 4 - 20 year spans.

From the range of possible outcomes perspective a serious bet on Large or Small both shines and stinks. A neutral position of 50/50 Large/Small or 1/3 Each L/M/S lands you very near the center of (what was possible) during the timeframe.

And Mid Caps Only, did nicely toooooo... :-)

Trev H


Code: Select all

LC.......= Large Caps (CRSP Decile 1-2)
MC.......= Mid Caps.. (CRSP Decile 3-4-5)
SC.......= Small Caps (CRSP Decile 6-7-8)
75/25....= 75% Large / 25% Small
50/50....= 50% Large / 50% Small
1/3 Each.= 1/3 Each Large/Mid/Small


1927-1945

Portfolio....Stdev....10K Growth
================================
SC...........44.82.....54,795.48
MC...........37.98.....45,582.88
1/3 Each.....36.18.....44,405.54
50/50........35.42.....43,629.49
75/25........31.14.....36,633.19
LC...........27.30.....29,518.82

1946-1965

Portfolio....Stdev....10K Growth
================================
MC...........19.30....120,138.35
LC...........15.65....119,992.38
75/25........17.08....116,736.04
1/3 Each.....18.86....115,251.91
50/50........18.69....112,734.26
SC...........22.28....102,935.07


1966-1985

Portfolio....Stdev....10K Growth
================================
SC...........28.32....122,199.62
MC...........22.64.....92,400.76
1/3 Each.....22.03.....84,410.26
50/50........21.80.....80,476.99
75/25........19.16.....62,488.21
LC...........17.21.....47,018.19


1986-2005

Portfolio....Stdev....10K Growth
================================
MC...........16.97....110,065.52
1/3 Each.....17.05....103,098.00
SC...........19.75....100,705.51
50/50........17.25.....99,369.47
75/25........16.98.....96,037.54
LC...........17.43.....91,116.78
For me, the data above shows me that there (has been) enough of a difference between MC and SC that it’s worth holding MC (for me). They’re the turducken of investing apparently.

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Mel Lindauer
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Re: Mid and Small Caps?

Post by Mel Lindauer » Wed Nov 07, 2018 10:49 pm

samsdad wrote:
Wed Nov 07, 2018 7:54 pm
We’re 1/3 each S&P 500, 400, and 600. Play around with portfoliovisualizer and read the “midcaps anyone?” thread viewtopic.php?t=34838 paying extra special attention to what poster Trev H says.

If you get lucky, Mel might show up and grace us with His Presence.
Still around and still loving "Mel's Unloved Mid-Caps". In fact, I've got my grand daughter's 529 Plan (which I fund), entirely in Mid-Caps.
Best Regards - Mel | | Semper Fi

samsdad
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Re: Mid and Small Caps?

Post by samsdad » Wed Nov 07, 2018 10:52 pm

Mel Lindauer wrote:
Wed Nov 07, 2018 10:49 pm
samsdad wrote:
Wed Nov 07, 2018 7:54 pm
We’re 1/3 each S&P 500, 400, and 600. Play around with portfoliovisualizer and read the “midcaps anyone?” thread viewtopic.php?t=34838 paying extra special attention to what poster Trev H says.

If you get lucky, Mel might show up and grace us with His Presence.
Still around and still loving "Mel's Unloved Mid-Caps". In fact, I've got my grand daughter's 529 Plan, which I fund, entirely in Mid-Caps.
Mel, thanks for your work and contributions here over the years. I hope you’re doing well.

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Re: Mid and Small Caps?

Post by JoMoney » Thu Nov 08, 2018 7:06 am

https://dc.etsu.edu/honors/450/
High Returns and Low Volatility: The Case for Mid-Cap Stocks
... This study finds that excess returns of small-cap firms compared to mid-cap firms are not statistically significant in the periods 1946 – 2017 and 1982 -2017. However, mid-cap firms generate significantly higher 3-year average returns relative to small and large-cap firms after the initial identification of the small-cap anomaly (1982 – 2017). Further, mid-cap securities generate a higher risk-adjusted return after the small-cap anomaly was identified. ...

... Additionally, the results suggest non-size related factors such as book-to-market and operating profitability have the smallest impact on mid-cap securities. Therefore, this study concludes excess returns generated by mid-cap securities represent a true anomaly that is not dependent upon non-size related factors. ...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Mid and Small Caps?

Post by MikeG62 » Thu Nov 08, 2018 7:29 am

vineviz wrote:
Wed Nov 07, 2018 8:32 pm

Many of us use either a dedicated small cap or small cap value fund to add diversification to our portfolios. I'm reluctant to generalize, but I'd say most people who are doing this are allocating between 20% and 50% of their U.S. equities to small cap or small cap value (though I think some forum regulars go higher).
FWIW, my target US equity allocation is 50% Large Cap, 25% Mid-Cap and 25% Small Cap (using index ETF's). Sample size of one obviously. Been this way for well over a decade (but not as long as for Mel).
Real Knowledge Comes Only From Experience

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Thu Nov 08, 2018 8:27 am

samsdad wrote:
Wed Nov 07, 2018 9:07 pm
For me, the data above shows me that there (has been) enough of a difference between MC and SC that it’s worth holding MC (for me). They’re the turducken of investing apparently.
I think a reasonable case could be made for owning only mid caps OR for owning a mix of small and large. The performance of midcaps, being effectively a linear combination of small and large, doesn’t provide any significant amount of additional diversification.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Mid and Small Caps?

Post by ruralavalon » Thu Nov 08, 2018 1:09 pm

stocknoob4111 wrote:
Wed Nov 07, 2018 7:43 pm
Was reading this article that makes the case of investing in MidCaps as well...

https://seekingalpha.com/article/408345 ... t-25-years

I have most of my portfolio in the S&P500 index which many have regarded as adequate diversification. However, when I ran a backtest from 1972, Large Cap vs Mid Cap vs Small Cap was surprised to find that Mid and Small cap ending balances were 200% that of Large Cap. Anyone here investing in these classes as well?

Also, I see that VTSAX - Total Stock Market is primarily large cap as it says "Large Cap Blend" and Median capitalization of $74 billion!
I use about 25% of U.S. stocks in a small-cap value index fund, and the other 75% in a total stock market index fund. Rick Ferri has suggested using a small-cap value index fund at around 25% of domestic stocks. “My preference is 75 percent to a total market index fund and 25 percent allocation to a small-value index fund“, Rick Ferri, etf.com (7/21/2014), "To Tilt Or Not To Tilt?".

I do think that a S&P 500 index fund is adequate diversification for U.S. stocks. "In a 401(k) plan with limited choices one might very well opt for an S&P 500 index fund to serve as the domestic stock component of a three-fund portfolio." Wiki article, Three-fund portfolio, "Other considerations". An S&P 500 index fund covers 81% of the U.S. stock market investing in stocks of selected large-cap and mid-cap U.S. companies, and in the 26 years since the creation of the first total stock market index fund the total return of the two types of funds has been almost identical. Morningstar, "growth of $10k" graph, VTSAX vs VFIAX.
Last edited by ruralavalon on Thu Nov 08, 2018 1:18 pm, edited 1 time in total.
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Re: Mid and Small Caps?

Post by ahnathan » Thu Nov 08, 2018 1:16 pm

Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Thu Nov 08, 2018 1:25 pm

ahnathan wrote:
Thu Nov 08, 2018 1:16 pm
Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.
I’m having a hard time conceiving of any empirical evidence supporting a “mid-cap tilt”. Mid cap stocks and TSM are so highly correlated as to be virtually interchangeable.

The best case for a mid cap tilt would be for mid cap value, but a small cap value tilt would be more impactful.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Mid and Small Caps?

Post by selters » Thu Nov 08, 2018 1:33 pm

Interestingly, there are only about five stocks that overlap if you compare the ~300 stocks in the CRSP US Mid Cap Index with the 400 stocks on the S&P Mid Cap 400 Index. The companies in the CRSP index have a much higher market cap than the companies in the S&P index. If you compare the holdings of VO (Vanguard Mid Cap) and the holdings of IJH (iShares Mid Cap) to the holdings of VTI ranked by market cap, VO's holds the 300th-600th largest companies in the US, whereas IJH's holdings are from the 600th to 1200th range.

stocknoob4111
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Re: Mid and Small Caps?

Post by stocknoob4111 » Thu Nov 08, 2018 2:44 pm

50% S&P500 Large Cap and 50% VG Small Cap Index fund seems to be a good fit for me, it seems like overall portfolio volatility will be increased but at least based on backtesting returns are substantially increased long term. I have a 20 year time horizon so this seems to make sense.

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Re: Mid and Small Caps?

Post by ahnathan » Sat Nov 10, 2018 4:16 pm

vineviz wrote:
Thu Nov 08, 2018 1:25 pm
ahnathan wrote:
Thu Nov 08, 2018 1:16 pm
Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.
I’m having a hard time conceiving of any empirical evidence supporting a “mid-cap tilt”. Mid cap stocks and TSM are so highly correlated as to be virtually interchangeable.

The best case for a mid cap tilt would be for mid cap value, but a small cap value tilt would be more impactful.
So explain that to me (I am definitely new to this). Everything I keep reading here is that mid caps provide a lot of the upside of small caps but with less volitility. But you are suggesting that they are not an appropriate tilt like small caps but more as a replacement for an S&P or TSM base? Why is that?

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Re: Mid and Small Caps?

Post by JoMoney » Sat Nov 10, 2018 4:24 pm

selters wrote:
Thu Nov 08, 2018 1:33 pm
Interestingly, there are only about five stocks that overlap if you compare the ~300 stocks in the CRSP US Mid Cap Index with the 400 stocks on the S&P Mid Cap 400 Index. The companies in the CRSP index have a much higher market cap than the companies in the S&P index. If you compare the holdings of VO (Vanguard Mid Cap) and the holdings of IJH (iShares Mid Cap) to the holdings of VTI ranked by market cap, VO's holds the 300th-600th largest companies in the US, whereas IJH's holdings are from the 600th to 1200th range.
Most of the stocks in the CRSP Mid-Cap index are the lower half of the S&P 500.
Here's a post from a couple weeks back where I did a comparison of the overlap and found 256 of the 366 stocks in VIMAX (Vanguard Mid-Cap) as being in VFIAX (Vanguard 500)
viewtopic.php?f=10&t=261799#p4173293
The S&P Mid-Cap 400 has no overlap with the S&P 500.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Mid and Small Caps?

Post by F150HD » Sat Nov 10, 2018 9:16 pm

2 questions.

1) What small cap value index funds are suggested for Fidelity accounts?

I see a small cap index, but its not specifically a 'value' fund. All their 'small cap VALUE' funds have an ER significantly higher the the small cap index fund.

-

2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%

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Re: Mid and Small Caps?

Post by Dottie57 » Sat Nov 10, 2018 9:46 pm

I have had mid and small caps since 401k contained them. They have done well and are part of total stock index.

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Sat Nov 10, 2018 10:22 pm

F150HD wrote:
Sat Nov 10, 2018 9:16 pm
2 questions.

1) What small cap value index funds are suggested for Fidelity accounts?

I see a small cap index, but its not specifically a 'value' fund. All their 'small cap VALUE' funds have an ER significantly higher the the small cap index fund.

-

2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
I’d recommend ETFs at both firms, particularly Index ETFs based on the S&P 600 value index.

At Fidelity the iShares version (IJS) has no transaction fee.

At Vanguard I’d use the same or VIOV, which is a little cheaper.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Mid and Small Caps?

Post by Elysium » Sat Nov 10, 2018 10:54 pm

vineviz wrote:
Thu Nov 08, 2018 1:25 pm
ahnathan wrote:
Thu Nov 08, 2018 1:16 pm
Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.
I’m having a hard time conceiving of any empirical evidence supporting a “mid-cap tilt”. Mid cap stocks and TSM are so highly correlated as to be virtually interchangeable.

The best case for a mid cap tilt would be for mid cap value, but a small cap value tilt would be more impactful.
Surely, everyone understands that EW, ADSK, FISV, ROP, and CXO are interchangeable with AAPL, MSFT, AMZN, BRK, and FB.

Those are just the top holdings in Mid-Cap Index and Total Stock Index, since the five listed mid-cap companies are well known stock symbols everyone can easily recognize, just like the household names listed in TSM, they should be interchangeable :wink: This is one of the problems that happened on BH, people lost common sense and instead got so deep into data mining, they forgot there are actual things called corporations behind these indexes.

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Sat Nov 10, 2018 10:59 pm

Elysium wrote:
Sat Nov 10, 2018 10:54 pm
vineviz wrote:
Thu Nov 08, 2018 1:25 pm
ahnathan wrote:
Thu Nov 08, 2018 1:16 pm
Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.
I’m having a hard time conceiving of any empirical evidence supporting a “mid-cap tilt”. Mid cap stocks and TSM are so highly correlated as to be virtually interchangeable.

The best case for a mid cap tilt would be for mid cap value, but a small cap value tilt would be more impactful.
Surely, everyone understands that EW, ADSK, FISV, ROP, and CXO are interchangeable with AAPL, MSFT, AMZN, BRK, and FB.

Those are just the top holdings in Mid-Cap Index and Total Stock Index, since the five listed are well known stock symbols everyone can easily recognize I am sure as household names listed in TSM, they should be interchangeable. This is one of the problems that happened in BH, people lost common sense and instead got so deep into data mining, they forgot there are actual things called corporations behind these indexes.
I doubt folks “forgot” so much as finally wised up and realized that it doesn’t actually matter that much.

And frankly, the presumption that stocks like EW, ADSK, FISV, ROP, and CXO are somehow less desirable than AAPL, MSFT, AMZN, BRK, and FB is part of what makes small and mid caps such good performers.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

Elysium
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Re: Mid and Small Caps?

Post by Elysium » Sat Nov 10, 2018 11:03 pm

vineviz wrote:
Sat Nov 10, 2018 10:59 pm
Elysium wrote:
Sat Nov 10, 2018 10:54 pm
vineviz wrote:
Thu Nov 08, 2018 1:25 pm
ahnathan wrote:
Thu Nov 08, 2018 1:16 pm
Question:

People tend to love the idea of adding “small cap value” to their portfolio. For those that espouse to more of a mid-cap tilt vs small, do they go for mid-cap blend, growth, or value similar to small cap fans?

I am strongly considering going 50/50 tsm and mid cap in both my kids 529s.
I’m having a hard time conceiving of any empirical evidence supporting a “mid-cap tilt”. Mid cap stocks and TSM are so highly correlated as to be virtually interchangeable.

The best case for a mid cap tilt would be for mid cap value, but a small cap value tilt would be more impactful.
Surely, everyone understands that EW, ADSK, FISV, ROP, and CXO are interchangeable with AAPL, MSFT, AMZN, BRK, and FB.

Those are just the top holdings in Mid-Cap Index and Total Stock Index, since the five listed are well known stock symbols everyone can easily recognize I am sure as household names listed in TSM, they should be interchangeable. This is one of the problems that happened in BH, people lost common sense and instead got so deep into data mining, they forgot there are actual things called corporations behind these indexes.
I doubt folks “forgot” so much as finally wised up and realized that it doesn’t actually matter that much.

And frankly, the presumption that stocks like EW, ADSK, FISV, ROP, and CXO are somehow less desirable than AAPL, MSFT, AMZN, BRK, and FB is part of what makes small and mid caps such good performers.
The point is it does matter, very much. The risk/reward associated with these mid-caps are not the same as large well established corporations. That is why there is an expected premium for investing in mid-caps compared to large-caps. They are not interchangeable.

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Re: Mid and Small Caps?

Post by averagedude » Sat Nov 10, 2018 11:46 pm

I have always invested in midcaps but i do believe you can ignore them by splitting between large and small. If i could only invest in only large, mid, or small i would choose midcap. I believe over a long time horizon, midcaps have a decent chance of outperforming both small and large, but i also believe there is a small chance they will be worst of the three. The reason i dont go all in midcap is because they have been the top performer over the last 20 years and im somewhat of a contrarian and i believe there could be a reversion to the mean.

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Re: Mid and Small Caps?

Post by F150HD » Sun Nov 11, 2018 8:45 am

vineviz wrote:
Sat Nov 10, 2018 10:22 pm
F150HD wrote:
Sat Nov 10, 2018 9:16 pm
2 questions.

1) What small cap value index funds are suggested for Fidelity accounts?

I see a small cap index, but its not specifically a 'value' fund. All their 'small cap VALUE' funds have an ER significantly higher the the small cap index fund.

-

2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
I’d recommend ETFs at both firms, particularly Index ETFs based on the S&P 600 value index.

At Fidelity the iShares version (IJS) has no transaction fee.

At Vanguard I’d use the same or VIOV, which is a little cheaper.
Thanks. At Fidelity (talking tax deferred) not sure I can use ETFs, may be limited to only funds in Brokeragelink (was told that by a rep, more then 1x if I recall, plan to call and ask again). Does IJS have a fund equivalent at Fidelity? thanks.

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F150HD
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Re: Mid and Small Caps?

Post by F150HD » Sun Nov 11, 2018 9:16 am

2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
Now am also seeing VTWV - Vanguard Russell 2000 Value ETF ER 0.20%

:confused

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Re: Mid and Small Caps?

Post by HEDGEFUNDIE » Sun Nov 11, 2018 9:18 am

F150HD wrote:
Sun Nov 11, 2018 8:45 am
vineviz wrote:
Sat Nov 10, 2018 10:22 pm
F150HD wrote:
Sat Nov 10, 2018 9:16 pm
2 questions.

1) What small cap value index funds are suggested for Fidelity accounts?

I see a small cap index, but its not specifically a 'value' fund. All their 'small cap VALUE' funds have an ER significantly higher the the small cap index fund.

-

2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
I’d recommend ETFs at both firms, particularly Index ETFs based on the S&P 600 value index.

At Fidelity the iShares version (IJS) has no transaction fee.

At Vanguard I’d use the same or VIOV, which is a little cheaper.
Thanks. At Fidelity (talking tax deferred) not sure I can use ETFs, may be limited to only funds in Brokeragelink (was told that by a rep, more then 1x if I recall, plan to call and ask again). Does IJS have a fund equivalent at Fidelity? thanks.
Brokeragelink allows ETFs

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vineviz
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Re: Mid and Small Caps?

Post by vineviz » Sun Nov 11, 2018 9:46 am

F150HD wrote:
Sun Nov 11, 2018 8:45 am
Thanks. At Fidelity (talking tax deferred) not sure I can use ETFs, may be limited to only funds in Brokeragelink (was told that by a rep, more then 1x if I recall, plan to call and ask again). Does IJS have a fund equivalent at Fidelity? thanks.
HEDGEFUNDIE is correct.
HEDGEFUNDIE wrote:
Sun Nov 11, 2018 9:18 am
Brokeragelink allows ETFs
Also, keep in mind that it is not necessary to have EVERY asset class in EACH account you own.

If, for instance, you chose not to use ETFs at Fidelity you could just put all the SCV in your Vanguard account (where you have plenty of good choices) and use your Fidelity account for other allocations (say, total stock market or international) that are more plentiful. This might be a LITTLE complicated if the accounts are very different in size, but treating the portfolio as an aggregate unit keeps you from thinking you have to live with suboptimal funds in some accounts.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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F150HD
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Re: Mid and Small Caps?

Post by F150HD » Sun Nov 11, 2018 10:10 am

HEDGEFUNDIE wrote:
Sun Nov 11, 2018 9:18 am
Brokeragelink allows ETFs
didnt want this thread to drift to that discussion & take the thread off course....w/ DCA in tax deferred have been told multiple times it cannot, as stated going to call again Monday & reinquire. Guessing it has something to do w/ the auto-investing when money comes in- easier to put into a fund at days end value. Thanks.
vineviz wrote:
Sun Nov 11, 2018 9:46 am
Also, keep in mind that it is not necessary to have EVERY asset class in EACH account you own.
Of course. Though separate accounts may be left to different beneficiaries, so I like to keep them separate vs viewing all my investments as "one entity". Also, diff accounts are earmarked for different things in the future so...
Didn't want to pull this thread off track, good info on SC and MC here. Thanks again.
Last edited by F150HD on Sun Nov 11, 2018 10:38 am, edited 2 times in total.

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Re: Mid and Small Caps?

Post by vineviz » Sun Nov 11, 2018 10:12 am

F150HD wrote:
Sun Nov 11, 2018 9:16 am
2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
Now am also seeing VTWV - Vanguard Russell 2000 Value ETF ER 0.20%

:confused
Most investors (probably the vast majority) here who have decided to use a small cap value fund have concluded that a fund tracking the S&P 600 Value Index is almost always the best choice among those readily available in most plans. There are enough funds tracking this index that you can usually get access to one.

iShares S&P Small-Cap 600 Value ETF (IJS) the the largest and is available at no transaction fee at Fidelity.

SPDR® S&P 600 Small Cap Value ETF (SLYV) has the lowest expense ratio (and is no transaction fee at many brokerages, though not Fidelity) but is somewhat less tax-efficient than the others so I only recommend it for IRAs or 401(k) plans.

Vanguard S&P Small-Cap 600 Value ETF (VIOV) has a lower ER than IJS and is more tax-efficient than SLYV so it's a good choice for taxable accounts.

These ETFs are so widely available I'd be hard pressed to think of a reason to recommend any others. Unfortunately, apart from ETFs there just aren't many firms running passively managed (and low-cost) small cap value mutual funds. Vanguard and Dimensional Fund Advisors (DFA) are pretty much it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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F150HD
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Re: Mid and Small Caps?

Post by F150HD » Sun Nov 11, 2018 10:22 am

vineviz wrote:
Sun Nov 11, 2018 10:12 am
F150HD wrote:
Sun Nov 11, 2018 9:16 am
2) At VG, what is the difference between these 2? one has a higher ER. Would either do?

Vanguard Small-Cap Value ETF (VBR) ER 0.07%

Vanguard S&P Small-Cap 600 Value ETF (VIOV) ER 0.20%
Now am also seeing VTWV - Vanguard Russell 2000 Value ETF ER 0.20%

:confused

Most investors (probably the vast majority) here who have decided to use a small cap value fund have concluded that a fund tracking the S&P 600 Value Index is almost always the best choice among those readily available in most plans. There are enough funds tracking this index that you can usually get access to one.

iShares S&P Small-Cap 600 Value ETF (IJS) the the largest and is available at no transaction fee at Fidelity.

SPDR® S&P 600 Small Cap Value ETF (SLYV) has the lowest expense ratio (and is no transaction fee at many brokerages, though not Fidelity) but is somewhat less tax-efficient than the others so I only recommend it for IRAs or 401(k) plans.

Vanguard S&P Small-Cap 600 Value ETF (VIOV) has a lower ER than IJS and is more tax-efficient than SLYV so it's a good choice for taxable accounts.

These ETFs are so widely available I'd be hard pressed to think of a reason to recommend any others. Unfortunately, apart from ETFs there just aren't many firms running passively managed (and low-cost) small cap value mutual funds. Vanguard and Dimensional Fund Advisors (DFA) are pretty much it.
Perfect, thanks. Doing reading this AM.....ended up on Paul Merrimans site.

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Re: Mid and Small Caps?

Post by vineviz » Sun Nov 11, 2018 10:34 am

F150HD wrote:
Sun Nov 11, 2018 10:10 am
HEDGEFUNDIE wrote:
Sun Nov 11, 2018 9:18 am
Brokeragelink allows ETFs
didnt want this thread to drift to that discussion & take the thread off course....w/ DCA in tax deferred have been told multiple times it cannot, as stated going to call again Monday & reinquire. Guessing it has something to do w/ the auto-investing when money comes in- easier to put into a fund at days end value. Thanks.
Automatic 401k contributions directed to BrokerageLink are usually deposited into a money market (MM) fund or possibly some other mutual fund. This fund is called a "sweep account". From what I can gather, different employers have different restrictions on what that sweep account can be. Yours might allow some non-MM funds but not any ETFs. That's a totally real possibility.

If that's the case, you have some options. One is to do what I mentioned earlier, and just use Fidelity for low-cost total stock market or total international mutual fund and keep your SCV at Vanguard.

Another option is to regularly contribute to a low-cost small cap fund in BrokerageLink (like Fidelity Small Cap Index Fund, FSSNX) and then periodically do a manual exchange from FSSNX to IJS. I think you can do that once you have a minimum of $2,500 in BrokerageLink.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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F150HD
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Re: Mid and Small Caps?

Post by F150HD » Sun Nov 11, 2018 11:01 am

vineviz wrote:
Sun Nov 11, 2018 10:34 am
Automatic 401k contributions directed to BrokerageLink are usually deposited into a money market (MM) fund or possibly some other mutual fund. This fund is called a "sweep account". From what I can gather, different employers have different restrictions on what that sweep account can be. Yours might allow some non-MM funds but not any ETFs. That's a totally real possibility.

If that's the case, you have some options. One is to do what I mentioned earlier, and just use Fidelity for low-cost total stock market or total international mutual fund and keep your SCV at Vanguard.

Another option is to regularly contribute to a low-cost small cap fund in BrokerageLink (like Fidelity Small Cap Index Fund, FSSNX) and then periodically do a manual exchange from FSSNX to IJS. I think you can do that once you have a minimum of $2,500 in BrokerageLink.
Thanks, my contribution hits my sweep account first, then is partitioned into my fund choices by % I select... Based upon past calls to Fido, my employer does not allow ETFs hence my quandry. I don't know why they don't, going to call and re-inquire to establish my options.

Already have $$ in the small cap index at Fido, hence my inquiries about a small cap value fund there I might use instead of or as well as (fund, not ETF). Have been looking at the 'manual' exchange you mentioned above (put into FSSNX then move it manually or something similar) I want to call Fido and inquire about my options. Just wanted the fund tickers available when I call and setup my plan.

Hoping (thinking) I can at least manually move the $$ from a MM fund into an ETF. If not, may just have to stick w/ the small cap index.

Thanks again.

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Re: Mid and Small Caps?

Post by stocknoob4111 » Sun Nov 11, 2018 12:19 pm

One more question about VSMAX (VG Small Cap Fund) - so I am considering getting into this one to complement my S&P500 Fund (VFIAX). This would be in taxable. However, I see the fund has a 15% turnover and the yield is 1.6%. The yield is a bit lower than VFIAX which is fine however I am more concerned about any capital gains distributed due to turnover. I am trying to find the distribution history to see what kind of average capital gain this fund distributes but the only distribution I see is a dividend in the last few years (looking at the distributions in Yahoo Finance). Any ideas where I can find this?

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Re: Mid and Small Caps?

Post by vineviz » Sun Nov 11, 2018 3:08 pm

stocknoob4111 wrote:
Sun Nov 11, 2018 12:19 pm
One more question about VSMAX (VG Small Cap Fund) - so I am considering getting into this one to complement my S&P500 Fund (VFIAX). This would be in taxable. However, I see the fund has a 15% turnover and the yield is 1.6%. The yield is a bit lower than VFIAX which is fine however I am more concerned about any capital gains distributed due to turnover. I am trying to find the distribution history to see what kind of average capital gain this fund distributes but the only distribution I see is a dividend in the last few years (looking at the distributions in Yahoo Finance). Any ideas where I can find this?
VSMAX has an ETF share class (ticker VB) which it can use to reduce its need to distribute capital gains to Investor or Admiral share class investors. I don't think it's ever had a capital gain distribution.

However, let me call your attention to another fund: Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX). In addition to tracking a superior index (IMHO), it has historically managed to create taxable distributions that are about 40% less than those created by VSMAX. The combination of those two advantages makes VTMSX clearly the better fund, I think.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Mid and Small Caps?

Post by Dead Man Walking » Sun Nov 11, 2018 5:17 pm

vineviz wrote:
Sun Nov 11, 2018 3:08 pm
stocknoob4111 wrote:
Sun Nov 11, 2018 12:19 pm
One more question about VSMAX (VG Small Cap Fund) - so I am considering getting into this one to complement my S&P500 Fund (VFIAX). This would be in taxable. However, I see the fund has a 15% turnover and the yield is 1.6%. The yield is a bit lower than VFIAX which is fine however I am more concerned about any capital gains distributed due to turnover. I am trying to find the distribution history to see what kind of average capital gain this fund distributes but the only distribution I see is a dividend in the last few years (looking at the distributions in Yahoo Finance). Any ideas where I can find this?
VSMAX has an ETF share class (ticker VB) which it can use to reduce its need to distribute capital gains to Investor or Admiral share class investors. I don't think it's ever had a capital gain distribution.

However, let me call your attention to another fund: Vanguard Tax-Managed Small-Cap Fund Admiral Shares (VTMSX). In addition to tracking a superior index (IMHO), it has historically managed to create taxable distributions that are about 40% less than those created by VSMAX. The combination of those two advantages makes VTMSX clearly the better fund, I think.
+1 This is the fund I hold in my taxable portfolio for the reasons cited by vineviz.

DMW

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Re: Mid and Small Caps?

Post by stocknoob4111 » Sun Nov 11, 2018 7:24 pm

thanks... I noticed that VTMSX has assets of only 7 billion vs 96 billion for VSMAX. Any reason for that? Also, VTMSX tracks 597 stocks vs 1412 stocks for VSMAX. Does this give both funds a fairly equivalent risk profile?

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Re: Mid and Small Caps?

Post by vineviz » Sun Nov 11, 2018 8:46 pm

stocknoob4111 wrote:
Sun Nov 11, 2018 7:24 pm
thanks... I noticed that VTMSX has assets of only 7 billion vs 96 billion for VSMAX. Any reason for that? Also, VTMSX tracks 597 stocks vs 1412 stocks for VSMAX. Does this give both funds a fairly equivalent risk profile?
VSMAX is Vanguard’s oldest index fund, and was founded in 1960: before there even WAS a Vanguard. It has an ETF share class and an investor share class, which VTSMX lacks. Finally, VTSMX is a tax-managed fund which makes it a tough sell in tax-advantaged accounts like IRAs and 401ks.

They do have similar levels of risk. There may be some technical reasons that VTSMX had higher expected returns, but it has enough other advantages that you need not rely on that.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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