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Vanguard small cap value

Posted: Tue Aug 04, 2020 11:13 am
by Mario2222
I'm thinking to add a small cap value to my Roth IRA portfolio. I like VIOV: vanguard S&P 600 small cap value etf as a pure small cap value and VSIAX: vanguard small cap value index fund Admiral shares for the automated contributions and fractional shares buying. Any thoughts?

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 11:19 am
by KyleAAA
VIOV is much smaller and more value-y than VSIAX. Tilters tend to strongly prefer VIOV or IJS. You can use less of it to achieve the same factor loadings.

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 11:20 am
by stan1
A number of people here use the S&P 600 Value index because it also has a profitability screen.

Some use the Vanguard Value factor ETF (VFVA) which does have a slight lower expense ratio than VIOV.

Others who are fans of DFA are now using Avantis AVUV which is managed by former DFA executives.

I think any of the above is fine given there is no way to predict the future.

As far as VSIAX goes if you believe in the theory you may as well dive into the deep end with one or more of the above rather than dipping your toes in the water to see how it feels.

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 11:21 am
by Mario2222
:thumbsup

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 12:01 pm
by Glockenspiel
I use the IJS etf ( iShares small cap S&P 600) instead for reasons others listed above, smaller and more valu-ey. It’s only 15% of my portfolio though.

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 12:34 pm
by Anon9001
I keep wondering what is the point of factors or smart beta. You are deviating from the market yet you are taking a huge risk that the metrics you use might be obsolete. Price to Book is not working for example recently. There is also a risk that you could be buying fraud companies. Also just because a company is trading at good valuations might just mean it's junk. Government owned companies are trading at very low P/E's,low P/B's and high dividend yields relative to market for long time yet they keep under-performing. Do you know why? The owner does not care about shareholders. I wonder how the quants manage this.

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 12:37 pm
by stan1
Anon9001 wrote: Tue Aug 04, 2020 12:34 pm I keep wondering what is the point of factors or smart beta. You are deviating from the market yet you are taking a huge risk that the metrics you use might be obsolete. Price to Book is not working for example recently. There is also a risk that you could be buying fraud companies. Also just because a company is trading at good valuations might just mean it's junk. Government owned companies are trading at very low P/E's,low P/B's and high dividend yields relative to market for long time yet they keep under-performing. Do you know why? The owner does not care about shareholders. I wonder how the quants manage this.
Huh? Which "fraud companies" and "government owned companies" are you talking about?

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 12:43 pm
by HawkeyePierce
Anon9001 wrote: Tue Aug 04, 2020 12:34 pm I keep wondering what is the point of factors or smart beta. You are deviating from the market yet you are taking a huge risk that the metrics you use might be obsolete. Price to Book is not working for example recently. There is also a risk that you could be buying fraud companies. Also just because a company is trading at good valuations might just mean it's junk. Government owned companies are trading at very low P/E's,low P/B's and high dividend yields relative to market for long time yet they keep under-performing. Do you know why? The owner does not care about shareholders. I wonder how the quants manage this.
There's also a risk that the S&P500 contains the next Enron. Fraud isn't contained to a single segment of the market.

Does the S&P600 value index even contain any government-owned companies?

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 12:44 pm
by Anon9001
stan1 wrote: Tue Aug 04, 2020 12:37 pm
Anon9001 wrote: Tue Aug 04, 2020 12:34 pm I keep wondering what is the point of factors or smart beta. You are deviating from the market yet you are taking a huge risk that the metrics you use might be obsolete. Price to Book is not working for example recently. There is also a risk that you could be buying fraud companies. Also just because a company is trading at good valuations might just mean it's junk. Government owned companies are trading at very low P/E's,low P/B's and high dividend yields relative to market for long time yet they keep under-performing. Do you know why? The owner does not care about shareholders. I wonder how the quants manage this.
Huh? Which "fraud companies" and "government owned companies" are you talking about?
I am just providing example. Here India Government companies trade cheaply for obvious reasons yet the quant fund would buy it any-way. It is a warning that cheap doesn't mean it won't get cheaper. Don't know about US. Maybe your country has less amount of government companies compared to India. Fraud companies exist every-where especially in Small Cap space. I don't know the quants deal with this problem of trusting the balance sheet to be accurate.

Re: Vanguard small cap value

Posted: Tue Aug 04, 2020 3:23 pm
by stan1
Anon9001 wrote: Tue Aug 04, 2020 12:44 pm
stan1 wrote: Tue Aug 04, 2020 12:37 pm
Anon9001 wrote: Tue Aug 04, 2020 12:34 pm I keep wondering what is the point of factors or smart beta. You are deviating from the market yet you are taking a huge risk that the metrics you use might be obsolete. Price to Book is not working for example recently. There is also a risk that you could be buying fraud companies. Also just because a company is trading at good valuations might just mean it's junk. Government owned companies are trading at very low P/E's,low P/B's and high dividend yields relative to market for long time yet they keep under-performing. Do you know why? The owner does not care about shareholders. I wonder how the quants manage this.
Huh? Which "fraud companies" and "government owned companies" are you talking about?
I am just providing example. Here India Government companies trade cheaply for obvious reasons yet the quant fund would buy it any-way. It is a warning that cheap doesn't mean it won't get cheaper. Don't know about US. Maybe your country has less amount of government companies compared to India. Fraud companies exist every-where especially in Small Cap space. I don't know the quants deal with this problem of trusting the balance sheet to be accurate.
Thank you for that clarification, agree it might be a concern in India. Should be much less of a concern in the US where we have extensive securities and corporate governance laws.