time to buy small cap value?

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LearningAlot
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time to buy small cap value?

Post by LearningAlot »

My equity portfolio is 100% cap weighted, have had a goal to slightly tilt it with 5% in small cap value.
Noticed YTD small cap value has performed worse than value in general and significantly worse than growth.
Feels like a good time to make this move. I would consider it to be long term investment.

Appreciate any feedback.

Thanks in advance!
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FiveK
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Re: time to buy small cap value?

Post by FiveK »

LearningAlot wrote: Mon May 18, 2020 6:53 am Feels like a good time to make this move.
Nobody can prove otherwise in advance.
Jack FFR1846
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Re: time to buy small cap value?

Post by Jack FFR1846 »

5% is meaningless. Go ahead. Or don't. The results will be indistinguishable.
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Triple digit golfer
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Re: time to buy small cap value?

Post by Triple digit golfer »

If you think it's the time to buy (I hate that term; it has no place in long-term investing), why would it be only time to buy 5%? Because you don't have a lot of faith in it, right? And that means if it underperforms the broad market by 10, 20, or 30% over the next three months or six months or a year, you'll probably sell out of it and chalk it up to "it was only 5%." Instead of a small gain, you'll have a small loss with added complexity.

Either you have a lot of faith in factor investing and therefore can and always will hold it forever, or you don't, or are neutral, and therefore shouldn't do it. Since you haven't owned any small value before, I strongly suspect that you're the latter.
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JoMoney
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Re: time to buy small cap value?

Post by JoMoney »

I'm of the opinion that most people shouldn't actively invest/trade or have portfolio tilts. I think markets are pretty competitive, which leads me to conclude that people who want advice or approval from others about some strategy to actively invest or tilt have wrong ideas about how markets work.
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nisiprius
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Re: time to buy small cap value?

Post by nisiprius »

If something has done poorly, some will call it "underperformance" and therefore a bad investment.
If something has done poorly, some will call it "cheap" and therefore a good investment.
If something has done well, some will call it "outperformance" and therefore a good investment.
If something has done well, some will call it "expensive" and therefore a bad investment.

These are all just ways of expressing a prediction, i.e. you call it "underperformance" if you are predicting it will go down and "cheap" if you are predicting it will go up. I don't think you can make useful predictions simply based on recent visible price movements. Something isn't necessarily "cheap" just because its price has gone down.

The local supermarket regularly puts a "manager's special" sticker on packages of meat when they get close to their sell-by date, but they aren't necessarily "cheap" or a better value. The low price simply reflects the truth: they aren't quite as fresh, and, though safe, aren't quite as tasty.

My belief is that just by sticking to the total market I am going to do well enough. The idea that someone else might do better than me doesn't bother me much. The idea that I might do meaningfully worse than the market average bothers me a lot.
Last edited by nisiprius on Mon May 18, 2020 7:41 am, edited 2 times in total.
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jebmke
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Re: time to buy small cap value?

Post by jebmke »

LearningAlot wrote: Mon May 18, 2020 6:53 am My equity portfolio is 100% cap weighted, have had a goal to slightly tilt it with 5% in small cap value.
Noticed YTD small cap value has performed worse than value in general and significantly worse than growth.
Feels like a good time to make this move. I would consider it to be long term investment.

Appreciate any feedback.

Thanks in advance!
In my opinion, tilting needs to be significant (20-25% or more) or it isn’t worth the trouble. One has to be ready for long periods of significant tracking error. We were in small/mid cap value ~ 60-70% from late 80s to mid 2000s. There were long periods of under performance.
When you discover that you are riding a dead horse, the best strategy is to dismount.
deltaneutral83
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Re: time to buy small cap value?

Post by deltaneutral83 »

Jack FFR1846 wrote: Mon May 18, 2020 7:07 am 5% is meaningless. Go ahead. Or don't. The results will be indistinguishable.
What about if you made the move in August 2018 and only now it's down to 5%?
UpperNwGuy
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Re: time to buy small cap value?

Post by UpperNwGuy »

deltaneutral83 wrote: Mon May 18, 2020 7:44 am
Jack FFR1846 wrote: Mon May 18, 2020 7:07 am 5% is meaningless. Go ahead. Or don't. The results will be indistinguishable.
What about if you made the move in August 2018 and only now it's down to 5%?
Tax loss harvest?
3funder
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Re: time to buy small cap value?

Post by 3funder »

If you're going to tilt, I recommend doing so to the tune of at least 10%; otherwise, it's not worth it.
Last edited by 3funder on Mon May 18, 2020 8:29 am, edited 3 times in total.
livesoft
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Re: time to buy small cap value?

Post by livesoft »

The time to buy was before today's pop. Buy and sell. Buy and sell. Small-cap value is so volatile that it dropped more than 12% from May 12 to early morning May 14. It might actually go up 12% from that intermediate low on 5/14 to later today on 5/18. This is at least the 2nd time since March 23 that such an up/down has happened. (Timing is everything, but not on this forum. Oh, no, no, no!)

Added: Mutual fund owners did not even notice the drop on May 14 because it happened only intraday.
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