For those of you who have a factor diversified portfolio, what is yours?

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YRT70
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For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Sat Jun 15, 2019 11:18 am

If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.

markcoop
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by markcoop » Sat Jun 15, 2019 12:17 pm

I just tilt using a small value fund in my 401K run by Vanguard that tracks the Russel 2K. It has an .04% expense ratio. I have about 20% of my domestic stock in it. On the int'l side, I overweight small with Vanguard FTSE All-World ex-US Small-Cap Index in my Roth IRA. That is about 25% of my int'l. I've been doing this for more than 15 years, although I have to admit I have changed the percentages a bit over time. So, not the hardcore factor portfolios people talk about these days, but I have been curious about them.
Mark

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YRT70
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Sun Jun 16, 2019 10:23 am

markcoop wrote:
Sat Jun 15, 2019 12:17 pm
I just tilt using a small value fund in my 401K run by Vanguard that tracks the Russel 2K. It has an .04% expense ratio. I have about 20% of my domestic stock in it. On the int'l side, I overweight small with Vanguard FTSE All-World ex-US Small-Cap Index in my Roth IRA. That is about 25% of my int'l. I've been doing this for more than 15 years, although I have to admit I have changed the percentages a bit over time. So, not the hardcore factor portfolios people talk about these days, but I have been curious about them.
Thanks for sharing. Interesting to hear how other people do this.

livesoft
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by livesoft » Sun Jun 16, 2019 11:24 am

I guess I have a factor diversified portfolio. It goes basically like this:

Start with total market weight portfolio of Total US, Total Int'l, Total Bond.

Then add a US small-cap value index fund in about the same dollar amount as the Total US fund. Also as a small-cap foreign index fund in the same amount as the Total Int'l fund.

Then add MTUM in the same amount as the other 2 US funds.

Then add another bond fund, namely a short-term corporate bond index fund.

Finally, use a portfolio analysis that shows the 9-box style grid as shown in this thread along with the RBD technique to manage things.

Something that is NOT done: Don't calculate factors and just don't worry about factor weights.
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Sun Jun 16, 2019 12:50 pm

livesoft wrote:
Sun Jun 16, 2019 11:24 am
I guess I have a factor diversified portfolio. It goes basically like this:

Start with total market weight portfolio of Total US, Total Int'l, Total Bond.

Then add a US small-cap value index fund in about the same dollar amount as the Total US fund. Also as a small-cap foreign index fund in the same amount as the Total Int'l fund.

Then add MTUM in the same amount as the other 2 US funds.

Then add another bond fund, namely a short-term corporate bond index fund.

Finally, use a portfolio analysis that shows the 9-box style grid as shown in this thread along with the RBD technique to manage things.
Very interesting. Thanks for sharing. I'll check out that thread.

Can you expand on: "Something that is NOT done: Don't calculate factors and just don't worry about factor weights."?

I've seen someone else calculating exposure to each factor, which seemed good to know to me, but I don't know much about this topic.

livesoft
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by livesoft » Sun Jun 16, 2019 3:19 pm

YRT70 wrote:
Sun Jun 16, 2019 12:50 pm
Can you expand on: "Something that is NOT done: Don't calculate factors and just don't worry about factor weights."?

I've seen someone else calculating exposure to each factor, which seemed good to know to me, but I don't know much about this topic.
I cannot expand because I decided that is too much work for me. If you look at some posts by Robert T, I think he calculates factors. I don't.

I will state this: Sometimes the 3-fund market weight portfolio outperforms a small-cap value tilted portfolio. Sometimes it doesn't. If one creates a portfolio that is a mix of a total market weight portfolio and a small-cap value tilted portfolio, then one gets a performance intermediate between the two. Well, duh!
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by MotoTrojan » Sun Jun 16, 2019 3:36 pm

My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by grabiner » Sun Jun 16, 2019 3:43 pm

I overweight small and value, but not other factors.

For US stock, I have 1/8 LG, 3/8 LV, 1/8 SG, 3/8 SV, with large defined as the top 80%, and value defined as the lower half of P/B or P/E (corresponding to the split in traditional value indexes, although my value is held in Vanguard's VFMF). This actually requires only three funds, not four, as VFMF has exactly this large/small split; it used to be four funds when I used Vanguard's large-cap and small-cap value indexes.

I would do the same in international, but the funds are too expensive. There is no reasonable international small-value fund which I can use. DLS/DGS are dividend-weighted, which is not the best weighting, and the dividend weighting also makes them undesirable in the taxable account where I would need to hold them. I do use IVLU for international large value, but the 0.30% expense ratio offsets the benefit, so I don't have as much overweight. (Small-cap is fine with Vanguard's VSS.) My current target is 1/8 devloped LG, 1/4 developed LV, 1/4 developed small, 1/4 emerging large, 1/8 emerging small (again, the funds are too expensive to do this separately, but I get some from the small-cap in Emerging Markets Index and the emerging in VSS).
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Wyodoc » Sun Jun 16, 2019 3:46 pm

I’m 35% total US, 20% small value, 20% small intl, 15% EM, 10% bonds. So SV tilt US and only have small intl. As above, if an accessible, reasonably priced SV for intl was around I’d use that too.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by whodidntante » Sun Jun 16, 2019 5:33 pm

grabiner wrote:
Sun Jun 16, 2019 3:43 pm
I would do the same in international, but the funds are too expensive. There is no reasonable international small-value fund which I can use. DLS/DGS are dividend-weighted, which is not the best weighting, and the dividend weighting also makes them undesirable in the taxable account where I would need to hold them. I do use IVLU for international large value, but the 0.30% expense ratio offsets the benefit, so I don't have as much overweight. (Small-cap is fine with Vanguard's VSS.) My current target is 1/8 devloped LG, 1/4 developed LV, 1/4 developed small, 1/4 emerging large, 1/8 emerging small (again, the funds are too expensive to do this separately, but I get some from the small-cap in Emerging Markets Index and the emerging in VSS).
My thoughts are similar regarding ex-USA factor funds. Another thing I'll add is that some funds reintroduce price by overriding the factor weighting to keep sector and/or country weights similar to a benchmark index. MSCI factor indexes tend to do this. It cuts the factor loading in the name of reducing tracking error. :oops:

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Mon Jun 17, 2019 10:38 am

grabiner wrote:
Sun Jun 16, 2019 3:43 pm
I overweight small and value, but not other factors.

For US stock, I have 1/8 LG, 3/8 LV, 1/8 SG, 3/8 SV, with large defined as the top 80%, and value defined as the lower half of P/B or P/E (corresponding to the split in traditional value indexes, although my value is held in Vanguard's VFMF). This actually requires only three funds, not four, as VFMF has exactly this large/small split; it used to be four funds when I used Vanguard's large-cap and small-cap value indexes.

I would do the same in international, but the funds are too expensive. There is no reasonable international small-value fund which I can use. DLS/DGS are dividend-weighted, which is not the best weighting, and the dividend weighting also makes them undesirable in the taxable account where I would need to hold them. I do use IVLU for international large value, but the 0.30% expense ratio offsets the benefit, so I don't have as much overweight. (Small-cap is fine with Vanguard's VSS.) My current target is 1/8 devloped LG, 1/4 developed LV, 1/4 developed small, 1/4 emerging large, 1/8 emerging small (again, the funds are too expensive to do this separately, but I get some from the small-cap in Emerging Markets Index and the emerging in VSS).
Thanks for the detailed answer. What fund did you choose for US SV?

As for Int SV, how about FNDC? http://portfolios.morningstar.com/fund/summary?t=FNDC
Wyodoc wrote:
Sun Jun 16, 2019 3:46 pm
I’m 35% total US, 20% small value, 20% small intl, 15% EM, 10% bonds. So SV tilt US and only have small intl. As above, if an accessible, reasonably priced SV for intl was around I’d use that too.
Thanks. What is your US small value choice?
Last edited by YRT70 on Mon Jun 17, 2019 10:47 am, edited 1 time in total.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Mon Jun 17, 2019 10:39 am

MotoTrojan wrote:
Sun Jun 16, 2019 3:36 pm
My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.
Thank you. What fund did you choose for small value US?

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by MotoTrojan » Mon Jun 17, 2019 10:54 am

YRT70 wrote:
Mon Jun 17, 2019 10:39 am
MotoTrojan wrote:
Sun Jun 16, 2019 3:36 pm
My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.
Thank you. What fund did you choose for small value US?
My preference is for S&P600 (VIOV, IJS, no SYLV unless in IRA) but I currently hold only VSIAX as that is what my 401k has and my Roth/taxable are in other investments. I don't like the Russell 2000 although I think they've started to work through some of their front running problems. Vanguard's fund has good performance and low expenses but the CRSP index it follows is significantly larger cap, more like a 50/50 mid and small cap. S&P600 has deeper small premium and I like that S&P does a quality screen via earnings requirements. It also helps that the S&P600 has outperformed historically :).

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Mon Jun 17, 2019 10:57 am

MotoTrojan wrote:
Mon Jun 17, 2019 10:54 am
YRT70 wrote:
Mon Jun 17, 2019 10:39 am
MotoTrojan wrote:
Sun Jun 16, 2019 3:36 pm
My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.
Thank you. What fund did you choose for small value US?
My preference is for S&P600 (VIOV, IJS, no SYLV unless in IRA) but I currently hold only VSIAX as that is what my 401k has and my Roth/taxable are in other investments. I don't like the Russell 2000 although I think they've started to work through some of their front running problems. Vanguard's fund has good performance and low expenses but the CRSP index it follows is significantly larger cap, more like a 50/50 mid and small cap. S&P600 has deeper small premium and I like that S&P does a quality screen via earnings requirements. It also helps that the S&P600 has outperformed historically :).
Nice. Thank you. I'm eyeing IJS at the moment. Seems to be the best choice available to me.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by MotoTrojan » Mon Jun 17, 2019 10:59 am

YRT70 wrote:
Mon Jun 17, 2019 10:57 am
MotoTrojan wrote:
Mon Jun 17, 2019 10:54 am
YRT70 wrote:
Mon Jun 17, 2019 10:39 am
MotoTrojan wrote:
Sun Jun 16, 2019 3:36 pm
My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.
Thank you. What fund did you choose for small value US?
My preference is for S&P600 (VIOV, IJS, no SYLV unless in IRA) but I currently hold only VSIAX as that is what my 401k has and my Roth/taxable are in other investments. I don't like the Russell 2000 although I think they've started to work through some of their front running problems. Vanguard's fund has good performance and low expenses but the CRSP index it follows is significantly larger cap, more like a 50/50 mid and small cap. S&P600 has deeper small premium and I like that S&P does a quality screen via earnings requirements. It also helps that the S&P600 has outperformed historically :).
Nice. Thank you. I'm eyeing IJS at the moment. Seems to be the best choice available to me.
Some have concerns with VIOV's liquidity but unless you are trading $100Ks at a time it is fine and arbitrage keeps the spread low. IJS is good too with a slightly higher expense ratio. SYLV has the lowest expense ratio and performs just as well but has some capital gains so best in an IRA.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by rascott » Mon Jun 17, 2019 11:05 am

YRT70 wrote:
Mon Jun 17, 2019 10:57 am
MotoTrojan wrote:
Mon Jun 17, 2019 10:54 am
YRT70 wrote:
Mon Jun 17, 2019 10:39 am
MotoTrojan wrote:
Sun Jun 16, 2019 3:36 pm
My core portfolio is 55% Total US, 25% total international, 20% small value US. I don’t hold enough Int to be worth much complexity but someday I may tilt small (or small value if a good fund is available). The healthy tilt in my US equity keeps my tinkering urges down without too much complexity.
Thank you. What fund did you choose for small value US?
My preference is for S&P600 (VIOV, IJS, no SYLV unless in IRA) but I currently hold only VSIAX as that is what my 401k has and my Roth/taxable are in other investments. I don't like the Russell 2000 although I think they've started to work through some of their front running problems. Vanguard's fund has good performance and low expenses but the CRSP index it follows is significantly larger cap, more like a 50/50 mid and small cap. S&P600 has deeper small premium and I like that S&P does a quality screen via earnings requirements. It also helps that the S&P600 has outperformed historically :).
Nice. Thank you. I'm eyeing IJS at the moment. Seems to be the best choice available to me.

SLYV in retirement accounts. IJS in taxable.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Wyodoc » Mon Jun 17, 2019 11:12 am

Same as above
I use VIOV and some IJS in taxable. SLYV in IRA

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Mon Jun 17, 2019 2:15 pm

Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Quercus Palustris » Mon Jun 17, 2019 4:51 pm

For my 16% small cap value (in an 80/20 portfolio), I use mostly S&P 600 Value (SLYV) which is pretty popular here for SCV, and a bit of SMLF (iShares Small Multifactor US) where I get it commission free.

It tilts heavily to small, modestly to value, and a bit to quality and momentum. It's a bet costing me 0.15% more than SLYV, who knows if it will pay off but the cost difference seems minor (even less so vs. IJS). It's also possible that at only 16% of total portfolio, the difference is lost to noise. We'll see?

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by fennewaldaj » Mon Jun 17, 2019 5:03 pm

My portfolio is likely excessively subdevided but I have for US
1/4 large blend, 1/8 large value, 1/8 mid value, 1/8 mid cap, 1/4 small value, 1/8 small cap
for international
~1/8 large value ~1/8 small/mid vale, 1/4 small/mid blend 1/2 large blend with a slight tilt to EM. I use more small blend than small value in international due to cost of funds. For developed small value I use a mix of DLS, FNDC ,and an active fund (Pear Tree Polaris Foreign value small cap QUSIX). Emerging small value is the DGS and the same active fund.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Wyodoc » Mon Jun 17, 2019 5:33 pm

YRT70 wrote:
Mon Jun 17, 2019 2:15 pm
Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.
SP 600 small cap value funds also screen for quality as well as small and value. I do have interest in momentum but hard to pick SCV fund AND Mom fund as they can cancel each other out. For that you’d be better off with a multifactor fund like VFMF perhaps.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Tue Jun 18, 2019 3:04 am

Wyodoc wrote:
Mon Jun 17, 2019 5:33 pm
YRT70 wrote:
Mon Jun 17, 2019 2:15 pm
Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.
SP 600 small cap value funds also screen for quality as well as small and value. I do have interest in momentum but hard to pick SCV fund AND Mom fund as they can cancel each other out. For that you’d be better off with a multifactor fund like VFMF perhaps.
Interesting. I guess the same canceling out would happen if you add MTUM? How do you determine the canceling out?

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by wawoodjr » Tue Jun 18, 2019 6:41 am

Don't think I'd call it factor diversified, but I do tilt with SCV,
30% Total US Mkt (VTI)
10% S&P SC 600 Value (IJS)
15% Vanguard Int Dev Mkts (VEA)
5% Vanguard EM (VWO)
40% Fixed Income

Have held IJS (taxable) since 2009. Good fund, although with ER 0.25 there are now cheaper options. However 10 years unrealized gains will keep me put.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by typical.investor » Tue Jun 18, 2019 8:32 am

(for equities)

45% Value (RAFI fundamental indexes, Vanguard midcap Value, Wisdom Tree EM)
45% Market cap
5% Multifactor (RAFI Dynamic Multi-Factor) / iShare Quality
5% REIT

[55% US /45% Intl]

That works out to be 40% mid or small cap. US is more market cap, Intl more value.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by dcabler » Tue Jun 18, 2019 9:17 am

YRT70 wrote:
Tue Jun 18, 2019 3:04 am
Wyodoc wrote:
Mon Jun 17, 2019 5:33 pm
YRT70 wrote:
Mon Jun 17, 2019 2:15 pm
Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.
SP 600 small cap value funds also screen for quality as well as small and value. I do have interest in momentum but hard to pick SCV fund AND Mom fund as they can cancel each other out. For that you’d be better off with a multifactor fund like VFMF perhaps.
Interesting. I guess the same canceling out would happen if you add MTUM? How do you determine the canceling out?
Yes, if you're using MTUM, then it has a negative value factor and you'll get cancelling. You can go to portfoliovisualizer.com and enter either single funds or a portfolio in the "Factor Analysis" section and you'll see. There are some momentum funds out there that deliberately attempt to not have the negative value factor - Larry Swedroe addressed that on the forum recently. Access to such funds can be a challenge and they're not always cheap, plus not much history.

I tilt extremely towards both small and mid cap value. That gives me 3 factors: Beta, Size, and Value. Good enough. Will it outperform a TSM based portfolio? Who knows.

Cheers

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Tue Jun 18, 2019 9:34 am

dcabler wrote:
Tue Jun 18, 2019 9:17 am
YRT70 wrote:
Tue Jun 18, 2019 3:04 am
Wyodoc wrote:
Mon Jun 17, 2019 5:33 pm
YRT70 wrote:
Mon Jun 17, 2019 2:15 pm
Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.
SP 600 small cap value funds also screen for quality as well as small and value. I do have interest in momentum but hard to pick SCV fund AND Mom fund as they can cancel each other out. For that you’d be better off with a multifactor fund like VFMF perhaps.
Interesting. I guess the same canceling out would happen if you add MTUM? How do you determine the canceling out?
Yes, if you're using MTUM, then it has a negative value factor and you'll get cancelling. You can go to portfoliovisualizer.com and enter either single funds or a portfolio in the "Factor Analysis" section and you'll see. There are some momentum funds out there that deliberately attempt to not have the negative value factor - Larry Swedroe addressed that on the forum recently. Access to such funds can be a challenge and they're not always cheap, plus not much history.

I tilt extremely towards both small and mid cap value. That gives me 3 factors: Beta, Size, and Value. Good enough. Will it outperform a TSM based portfolio? Who knows.

Cheers
Thank you. Maybe a little cancelling out is not so bad as momentum has negative correlation with some other factors anyway?

Beta, size and value is nice. But if possible I'd like to get some momentum and quality too. The last column has them all.

Image
https://thebamalliance.com/blog/managin ... h-factors/

dcabler
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by dcabler » Tue Jun 18, 2019 9:45 am

YRT70 wrote:
Tue Jun 18, 2019 9:34 am
dcabler wrote:
Tue Jun 18, 2019 9:17 am
YRT70 wrote:
Tue Jun 18, 2019 3:04 am
Wyodoc wrote:
Mon Jun 17, 2019 5:33 pm
YRT70 wrote:
Mon Jun 17, 2019 2:15 pm
Thanks guys. So many go with small cap / value funds. How about momentum and quality?

Those seem to be beneficial factors as well.
SP 600 small cap value funds also screen for quality as well as small and value. I do have interest in momentum but hard to pick SCV fund AND Mom fund as they can cancel each other out. For that you’d be better off with a multifactor fund like VFMF perhaps.
Interesting. I guess the same canceling out would happen if you add MTUM? How do you determine the canceling out?
Yes, if you're using MTUM, then it has a negative value factor and you'll get cancelling. You can go to portfoliovisualizer.com and enter either single funds or a portfolio in the "Factor Analysis" section and you'll see. There are some momentum funds out there that deliberately attempt to not have the negative value factor - Larry Swedroe addressed that on the forum recently. Access to such funds can be a challenge and they're not always cheap, plus not much history.

I tilt extremely towards both small and mid cap value. That gives me 3 factors: Beta, Size, and Value. Good enough. Will it outperform a TSM based portfolio? Who knows.

Cheers
Thank you. Maybe a little cancelling out is not so bad as momentum has negative correlation with some other factors anyway?

Beta, size and value is nice. But if possible I'd like to get some momentum and quality too. The last column has them all.

Image
https://thebamalliance.com/blog/managin ... h-factors/
Possibly - one issue, as always, is that factors may also vary over time. So, looking over a long time period may give you once answer about cancellation whereas it might be interesting to look at how the factors vary over different timeframes...

caklim00
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by caklim00 » Tue Jun 18, 2019 1:40 pm

I can't put percentages as they are always all over the place. 85/15 Equity Bonds, 50/50 US/Intl, 75/25 Dev/EM (for Intl), tilt to Small & Value as much as possible given 401k constraints.

Own only SLYV (S&P 600V) and ISCF (Intl SC Multifactor) in IRAs. Own DFVEX (DFA EMV) in previous company 401k. Own mostly ACWI (All Cap World index) in my 401k and S&P 600 (not value) in spouses 403b. Bonds are held in 401k/403b. Taxable has a mish mosh of funds with un-realized cap gains (VTI, VEU, VBR, IJS, VIOV, FNDC, VSS, RZV, VFVA). Current taxable targets are VFMF (US Multifactor) with VFVA (Value factor) as tax loss harvest partner. Curently hold no VFMF as TLH'ed into VFVA late May. All owned funds have unrealized gains at the moment.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by betablocker » Wed Jun 19, 2019 9:15 am

I tilt to momentum and value with a combo of VMOT (which covers international and domestic value and momentum) and I shares international and domestic momentum and DFA international and domestic small value. VMOT also trend follows so adds a bit of that. In my tax deferred accounts I also get exposure to reinsurance and alternative lending. Those aren’t equity factors but separate sources of risk so after the same thing.

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YRT70
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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Wed Jun 19, 2019 11:51 am

caklim00 wrote:
Tue Jun 18, 2019 1:40 pm
I can't put percentages as they are always all over the place. 85/15 Equity Bonds, 50/50 US/Intl, 75/25 Dev/EM (for Intl), tilt to Small & Value as much as possible given 401k constraints.

Own only SLYV (S&P 600V) and ISCF (Intl SC Multifactor) in IRAs. Own DFVEX (DFA EMV) in previous company 401k. Own mostly ACWI (All Cap World index) in my 401k and S&P 600 (not value) in spouses 403b. Bonds are held in 401k/403b. Taxable has a mish mosh of funds with un-realized cap gains (VTI, VEU, VBR, IJS, VIOV, FNDC, VSS, RZV, VFVA). Current taxable targets are VFMF (US Multifactor) with VFVA (Value factor) as tax loss harvest partner. Curently hold no VFMF as TLH'ed into VFVA late May. All owned funds have unrealized gains at the moment.
Thanks for sharing. Always interesting to see how other people do the tilting.
betablocker wrote:
Wed Jun 19, 2019 9:15 am
I tilt to momentum and value with a combo of VMOT (which covers international and domestic value and momentum) and I shares international and domestic momentum and DFA international and domestic small value. VMOT also trend follows so adds a bit of that. In my tax deferred accounts I also get exposure to reinsurance and alternative lending. Those aren’t equity factors but separate sources of risk so after the same thing.
Thanks for sharing. I had not heard of VMOT before. Looks interesting.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by patrick013 » Wed Jun 19, 2019 1:13 pm

https://research.ftserussell.com/Analyt ... 1560961642

The first page has some interesting factor info for FTSE indexes. Quality and size are the 2 with best performance they have. I always like quality for a portfolio stabilizer. A good balance sheet can usually weather a storm when other higher leveraged companies may not. A different kind of diversification strategy.
age in bonds, buy-and-hold, 10 year business cycle

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by hdas » Wed Jun 19, 2019 1:29 pm

YRT70 wrote:
Sat Jun 15, 2019 11:18 am
If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.
See this. :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Wed Jun 19, 2019 1:52 pm

hdas wrote:
Wed Jun 19, 2019 1:29 pm
YRT70 wrote:
Sat Jun 15, 2019 11:18 am
If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.
See this. :greedy
Very interesting! thanks. I could be wrong but it seems like you preferred the loading of quality and low volatility over value and momentum. Can you tell why you that is?
patrick013 wrote:
Wed Jun 19, 2019 1:13 pm
https://research.ftserussell.com/Analyt ... 1560961642

The first page has some interesting factor info for FTSE indexes. Quality and size are the 2 with best performance they have. I always like quality for a portfolio stabilizer. A good balance sheet can usually weather a storm when other higher leveraged companies may not. A different kind of diversification strategy.
Thank you! Reading it now.

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U.S. Factor stocks

Post by Taylor Larimore » Wed Jun 19, 2019 1:55 pm

YRT70 wrote:
Sat Jun 15, 2019 11:18 am
If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.
YRT70:

Many years ago, after considerable experience and study, I chose Vanguard Total Stock Market Index Fund which includes nearly all U.S. stock factors (Value, Low size, Low volatility, High yield, Quality, Momentum, etc.).

You can read my thoughts about factor investing HERE.

http://news.morningstar.com/index/indexReturn.html

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: U.S. Factor stocks

Post by YRT70 » Thu Jun 20, 2019 1:21 am

Taylor Larimore wrote:
Wed Jun 19, 2019 1:55 pm
YRT70 wrote:
Sat Jun 15, 2019 11:18 am
If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.
YRT70:

Many years ago, after considerable experience and study, I chose Vanguard Total Stock Market Index Fund which includes nearly all U.S. stock factors (Value, Low size, Low volatility, High yield, Quality, Momentum, etc.).
I know Taylor :D

But even though you own all those stocks you're only exposed to market beta, and not to the size, value and quality factor. Personally I prefer to be exposed to more than one factor. Each to his own.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by heyyou » Fri Jun 21, 2019 2:10 am

My tilts are away from the Large Growth exposure of TSM and the dismal performance of Small Growth, by holding less Large Blend and Small Blend. I have larger, equal slices of foreign and domestic Large Value, Small Value, and REITs, but no commodities nor precious metals exposure.

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Re: U.S. Factor stocks

Post by Taylor Larimore » Fri Jun 21, 2019 9:47 am

YRT70 wrote:
Thu Jun 20, 2019 1:21 am
But even though you own all those stocks you're only exposed to market beta, and not to the size, value and quality factor. Personally I prefer to be exposed to more than one factor. Each to his own.
YRT70]

It is obvious to me that if I own the market weight in nearly all U.S. stocks that I also own each factor stock in the U.S. stock market.

Unfortunately, owning separate factor stocks results in over-weighting "factor" stocks and reducing total market diversification. It also means factor proponents think they are smarter than the market. Possible but unlikely.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: U.S. Factor stocks

Post by YRT70 » Fri Jun 21, 2019 10:59 am

Taylor Larimore wrote:
Fri Jun 21, 2019 9:47 am
YRT70 wrote:
Thu Jun 20, 2019 1:21 am
But even though you own all those stocks you're only exposed to market beta, and not to the size, value and quality factor. Personally I prefer to be exposed to more than one factor. Each to his own.
YRT70]

It is obvious to me that if I own the market weight in nearly all U.S. stocks that I also own each factor stock in the U.S. stock market.
Yeah owning the market is not the same as having significant exposure to each factor.

Like I said, each to his own. Good luck.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Van Down By Da River » Fri Jun 21, 2019 11:12 am

My portfolio tilts towards value, quality, and low volatility

My portfolio is also 95% stocks, so the tilt helps the keep down the daily stress of hearing about market swings and helps me sleep better at night

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Re: U.S. Factor stocks

Post by Dialectical Investor » Fri Jun 21, 2019 11:22 am

Taylor Larimore wrote:
Fri Jun 21, 2019 9:47 am
YRT70 wrote:
Thu Jun 20, 2019 1:21 am
But even though you own all those stocks you're only exposed to market beta, and not to the size, value and quality factor. Personally I prefer to be exposed to more than one factor. Each to his own.
YRT70]

It is obvious to me that if I own the market weight in nearly all U.S. stocks that I also own each factor stock in the U.S. stock market.

Unfortunately, owning separate factor stocks results in over-weighting "factor" stocks and reducing total market diversification. It also means factor proponents think they are smarter than the market. Possible but unlikely.

Best wishes.
Taylor
If you go back and read the threads where you have repeated these types of statements, and people have tried to explain to you why you are wrong, you might learn something. Your post is also off-topic.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by ardrum » Fri Jun 21, 2019 12:53 pm

45% Total U.S.
30% Total ex-U.S.
15% U.S. small/mid-cap value
7.5% ex-U.S. small
2.5% emerging markets
"The stock market is a device for transferring money from the impatient to the patient." - Warren Buffett

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by abuss368 » Fri Jun 21, 2019 5:22 pm

Over the last decade I have heard more and read more about “factors” than ever. I can’t help but wonder if this strategy is overcrowded? Did it work better at one time? Has a lot of money rush in? Will it be the same in the future? Are a lot of investors chasing the same thing?

I simply don’t know.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by stan1 » Fri Jun 21, 2019 5:43 pm

abuss368 wrote:
Fri Jun 21, 2019 5:22 pm
Over the last decade I have heard more and read more about “factors” than ever. I can’t help but wonder if this strategy is overcrowded? Did it work better at one time? Has a lot of money rush in? Will it be the same in the future? Are a lot of investors chasing the same thing?

I simply don’t know.
Are the FAANG overcrowded? Has a lot of money rushed in? Will it be the same in the future? Are a lot of investors chasing the same thing?

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by hdas » Fri Jun 21, 2019 5:45 pm

YRT70 wrote:
Wed Jun 19, 2019 1:52 pm
hdas wrote:
Wed Jun 19, 2019 1:29 pm
YRT70 wrote:
Sat Jun 15, 2019 11:18 am
If you have a portfolio that's diversified over several factors: what is yours and why did you choose that one?

I'm in the process of building a portfolio that diversifies risk over market, size, value, momentum and maybe quality too and I would like to see how other people have build theirs.

For those of you that have chosen the regular market weighted portfolio: I respect your choices but that's not what I'm looking for in this thread.
See this. :greedy
Very interesting! thanks. I could be wrong but it seems like you preferred the loading of quality and low volatility over value and momentum. Can you tell why you that is?
I don't think you know how to read the table correctly. Notice how my portfolio has significant (from a stat point of view) loadings in ALL THE FACTORS except credit. :greedy
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by abuss368 » Fri Jun 21, 2019 5:50 pm

stan1 wrote:
Fri Jun 21, 2019 5:43 pm
abuss368 wrote:
Fri Jun 21, 2019 5:22 pm
Over the last decade I have heard more and read more about “factors” than ever. I can’t help but wonder if this strategy is overcrowded? Did it work better at one time? Has a lot of money rush in? Will it be the same in the future? Are a lot of investors chasing the same thing?

I simply don’t know.
Are the FAANG overcrowded? Has a lot of money rushed in? Will it be the same in the future? Are a lot of investors chasing the same thing?
Exactly! No one knows.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by Longtermgrowth » Fri Jun 21, 2019 6:22 pm

:D
I use the aforementioned WisdomTree funds (DLS, DGS) for international small value and VSS for international small blend. They make up over half of my international holdings, with the rest being in VXUS (total international).

Domestically I tilt heavily to large value and slightly to small value via dividend funds (VYM, SCHD, DES).

I am curious to see what you end up using for international, OP. Please keep us updated.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Sat Jun 22, 2019 3:15 am

hdas wrote:
Fri Jun 21, 2019 5:45 pm
I don't think you know how to read the table correctly. Notice how my portfolio has significant (from a stat point of view) loadings in ALL THE FACTORS except credit. :greedy
I did see that the loading was still significant. What I was getting at is that the loading on value and momentum seems relatively small compared to quality and size. So I was wondering if you designed it that way.
Longtermgrowth wrote:
Fri Jun 21, 2019 6:22 pm
:D
I use the aforementioned WisdomTree funds (DLS, DGS) for international small value and VSS for international small blend. They make up over half of my international holdings, with the rest being in VXUS (total international).

Domestically I tilt heavily to large value and slightly to small value via dividend funds (VYM, SCHD, DES).

I am curious to see what you end up using for international, OP. Please keep us updated.
Thanks for the info. I bought my first pieces of IJS and DLS yesterday. DGS is my next target :)

Unless I find out there's a better choice of course.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by YRT70 » Sat Jun 22, 2019 3:19 am

abuss368 wrote:
Fri Jun 21, 2019 5:22 pm
Over the last decade I have heard more and read more about “factors” than ever. I can’t help but wonder if this strategy is overcrowded? Did it work better at one time? Has a lot of money rush in? Will it be the same in the future? Are a lot of investors chasing the same thing?

I simply don’t know.
In case you haven't read this yet: Has the Value Trade Become Overcrowded? by Larry Swedroe, 6/13/19
https://www.advisorperspectives.com/art ... vercrowded

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Re: U.S. Factor stocks

Post by DecumulatorDoc » Sat Jun 22, 2019 6:13 am

Taylor Larimore wrote:
Fri Jun 21, 2019 9:47 am
YRT70 wrote:
Thu Jun 20, 2019 1:21 am
But even though you own all those stocks you're only exposed to market beta, and not to the size, value and quality factor. Personally I prefer to be exposed to more than one factor. Each to his own.
YRT70]

It is obvious to me that if I own the market weight in nearly all U.S. stocks that I also own each factor stock in the U.S. stock market.

Unfortunately, owning separate factor stocks results in over-weighting "factor" stocks and reducing total market diversification. It also means factor proponents think they are smarter than the market. Possible but unlikely.

Best wishes.
Taylor
Taylor, the OP asked a specific question addressed to those who factor diversify. Not to debate its merits. Lets save those arguments for other threads.

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Re: For those of you who have a factor diversified portfolio, what is yours?

Post by abuss368 » Sat Jun 22, 2019 6:26 am

YRT70 wrote:
Sat Jun 22, 2019 3:19 am
abuss368 wrote:
Fri Jun 21, 2019 5:22 pm
Over the last decade I have heard more and read more about “factors” than ever. I can’t help but wonder if this strategy is overcrowded? Did it work better at one time? Has a lot of money rush in? Will it be the same in the future? Are a lot of investors chasing the same thing?

I simply don’t know.
In case you haven't read this yet: Has the Value Trade Become Overcrowded? by Larry Swedroe, 6/13/19
https://www.advisorperspectives.com/art ... vercrowded
Thank you for sharing!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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