What is your opinion about "tilting?"

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.

What is your opinion about "tilting?"

I don't tilt. I think tilting is actually harmful--is actually inferior to holding the total market.
19
4%
I don't tilt. I think tilting is probably harmless; I avoid it but only because I prefer simplicity.
29
6%
I don't tilt. I have no idea whether tilting is harmful or beneficial.
32
7%
I don't tilt. I think it is probably slightly beneficial, but I'm too lazy... or it's too complicated... or I don't have access to the right funds
20
4%
I tilt, but I'm not sure it's worthwhile. I'm convinced it gives a slight statistical edge in the long run but have no idea whether I'll personally see a benefit or not.
112
23%
I tilt, and I think everyone should. The edge is small but it's there, and it's not really that hard or that expensive to do it.
16
3%
I tilt, and I think there are many adequate tools for the job, including Vanguard funds.
98
20%
I tilt, but Vanguard funds are lousy tools for the job and I carefully review ETFs to find ones that are adequate to the task.
12
2%
I tilt, and I think DFA clearly has the best tools for that job.
18
4%
I tilt, and I continually revise my strategy in the light of new research; for example, I now use the Fama-French Five-Factor model.
7
1%
I tilt, I think the evidence is incontrovertible, and people who don't tilt are displaying invincible ignorance.
4
1%
I tilt, and I think that people who do not are imperiling their retirement and the well-being of their loved ones.
3
1%
None of the above
6
1%
Other
11
2%
No soap, radio
14
3%
Potrzebie
15
3%
I like to participate in polls
75
15%
 
Total votes: 491

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nisiprius
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What is your opinion about "tilting?"

Post by nisiprius »

The purpose of this poll is not merely to determine what fraction of poll participants tilt, but something about the intensity of their conviction.

For purposes of this poll, "tilting" includes "multi-asset investing," "slice and dice," "multiple risk factor investing." For purposes of this poll, departure from global cap-weighting between U.S. and international is not considered to be a tilt. Three-fund portfolios, Vanguard's LifeStrategy and Target Retirement funds are not considered to be tilted.

The addition of an intentional overweight to small value, or to REITs, or to value in general, or the use of non-cap-weighted "fundamental" or "enhanced" or "equal-weighted" index funds are examples of "tilting."

You may check more than one box and you can change your vote.
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Re: What is your opinion about "tilting?"

Post by peppers »

I don't tilt, inertia and laziness are my key attributes.
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flyingaway
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Re: What is your opinion about "tilting?"

Post by flyingaway »

I tilt to extended market.
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tetractys
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Re: What is your opinion about "tilting?"

Post by tetractys »

I selected "other" because none of the specific categories seemed to suffice; not even "Potrzebie," which might generally mean something needed, or other things, depending on one's bent.

But seriously, I think tilting will most likely bring a better return than not (it has consistently for me... so far.); but that depends on one's willingness, ability, and need to do the little extra work, or to pay someone a fee to do it for them.

So, Sir, Madame, or Other, is the better return worth the extra effort for you? That I think is the real question. -- Tet
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Re: What is your opinion about "tilting?"

Post by dharrythomas »

I tilt to small, value, and REIT. I think the evidence supports it over the long run. Whether it works out for me depends on my start and end dates, but unlike someone cherry picking the data, I Can't use hindsight.

It may work or it may not. Any of us could be in the cohort with start/end dates where a tilt doesn't pay off. My crystal ball is cloudy.

Good Luck

Harry
columbia
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Re: What is your opinion about "tilting?"

Post by columbia »

I don't: why add the complexity of something that might or might not be beneficial?
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cfs
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Re: What is your opinion about "tilting?"

Post by cfs »

Good Poll.

Shipmates, good poll, as discussed on a separate conversation, you can count me on the Super Minority of non tilters.

You have a Merry Christmas.
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Kenkat
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Re: What is your opinion about "tilting?"

Post by Kenkat »

What, no "all of the above" option?
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nedsaid
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Re: What is your opinion about "tilting?"

Post by nedsaid »

dharrythomas wrote:I tilt to small, value, and REIT. I think the evidence supports it over the long run. Whether it works out for me depends on my start and end dates, but unlike someone cherry picking the data, I Can't use hindsight.

It may work or it may not. Any of us could be in the cohort with start/end dates where a tilt doesn't pay off. My crystal ball is cloudy.

Good Luck

Harry
This is pretty much where I am. I tilt. I think it has been beneficial to me in the past not sure that it will get me excess returns in the future. To me, it is worth the risk. I am not aware of any academic research that says that tilting is harmful to performance. I figure I will get at least market performance with a good shot at squeezing out another 1/2 % to 1 percent a year.

All that being said, this is not a hill I am going to die on. Market weight indexing and the 3-5 fund portfolios are just fine. In recent years, "small" and "value" have done very well and I am wondering if we are in for a few years of underperformance. It is a strategy that requires patience.
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Re: What is your opinion about "tilting?"

Post by nisiprius »

kenschmidt wrote:What, no "all of the above" option?
It's not needed--you can just check all of the checkboxes.
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Aptenodytes
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Re: What is your opinion about "tilting?"

Post by Aptenodytes »

nisiprius wrote:
kenschmidt wrote:What, no "all of the above" option?
It's not needed--you can just check all of the checkboxes.
Yes, I even checked "Vanguard choices are good enough" and "DFA has the best" because I think both are true. And I had to check "No soap, radio."
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Re: What is your opinion about "tilting?"

Post by grabiner »

I believe that tilting increases both returns and risk. And I want to do that, so that I can hold bonds in a portfolio with the same risk as an all-stock portfolio.

Therefore, I tilt when I can do it at very low cost, by holding value index funds in my Roth IRA but not paying an extra tax cost to hold them in my taxable account. In my taxable account, I overweight small-cap and emerging markets.
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Re: What is your opinion about "tilting?"

Post by stlutz »

You didn't really have the perfect choice for me. I used to believe that tilting would significantly increase returns. I no longer do. However, I maintain my tilt because I believe in staying the course than I believe anyone's forecasts about which stocks will out/underperform the market.
lack_ey
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Re: What is your opinion about "tilting?"

Post by lack_ey »

I tilt, but mostly to have more funds (say six rather than three, may increase in the future) that potentially have non-unity correlation. This is for diversification, more potential targets and opportunities to tax-loss harvest, theoretical rebalancing bonuses over the long run, a stupid factor of "hey, it's more likely for me to see green somewhere in the portfolio when checking on it to change something or other if there are more funds in it", and having more granular choices of what to sell off depending on the current tax situation if it comes to that. I am only mildly optimistic about a fractional percentage point of annualized excess returns over a three-fund portfolio over a few decades, most of which may be attributed to excess risk.

As a result, I'm unwilling to pay a significant amount extra for any type of tilt or factor.
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Re: What is your opinion about "tilting?"

Post by BigJohn »

I don't tilt, it might or might not be beneficial but I am sure it is higher risk. Why take more risk for uncertain benefits. I checked "I have no idea whether tilting is harmful of beneficial".

Also checked "Portzebie". Had to look it up but I was a huge Mad fan in my youth.
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Re: What is your opinion about "tilting?"

Post by Sents »

In a 72% stock and 28% bond portfolio, would you all consider this a large tilt?
Core: 35% total usa stock, 16% total international stock
Tilt: total large value (5%), total small stock (5%), total emerging markets (5%), and total REIT (6%).
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fourwedge
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Re: What is your opinion about "tilting?"

Post by fourwedge »

dharrythomas wrote:I tilt to small, value, and REIT. I think the evidence supports it over the long run. Whether it works out for me depends on my start and end dates, but unlike someone cherry picking the data, I Can't use hindsight.

It may work or it may not. Any of us could be in the cohort with start/end dates where a tilt doesn't pay off. My crystal ball is cloudy.

Good Luck

Harry
+1 this
I tilt to small, value and reits
Max out your tax sheltered retirement accounts with inexpensive, well diversified, index funds and you will beat 90% of all investors.
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NightOwl
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Re: What is your opinion about "tilting?"

Post by NightOwl »

I have a moderate tilt to small value domestically (my Roth is 100% VG small value), and a somewhat heavier tilt to small within my international equities allocation. I consider my domestic small value tilt a form of REIT tilt as well, though I don't hold a separate REIT fund. I'm not at all evangelical about tilting, though having started out as a tilter, I do plan to stay the course throughout my investing career, come hell, high water, or underperformance. I think these tilts work, if at all, over a long period of time, and I'm fully aware that even over that long period of time I might underperform the 3-fund portfolio.

The poll was fun! I choose the "I like to participate in polls" options whenever Nisi offers it.

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Re: What is your opinion about "tilting?"

Post by Day9 »

Vangurd's small funds aren't the smallest, and their value funds aren't the valuey-est, but you can't beat their low fees. I've got access to some DFA funds in my company retirement plan so I use both.
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Re: What is your opinion about "tilting?"

Post by Awsi Dooger »

I'm a gambler. I want sensible risk. All of this money came from sports betting in the first place.

For the past 6 months or so I've tilted toward Health Care. I sold half of my FSGDX and FSIVX to invest in FHLC, the .12 expense ratio Fidelity Health Care Index ETF. Now when I check my sector allocation on the Fidelity site, compared to the market it shows that I am at least 5% low in Energy but high in Health Care and REITS. I also own FSRVX, the Fidelity REIT index.

I realize it will never show up in long term research but my instinct is that Health Care is separating itself as somewhat bulletproof, or at least with logically more upside than the market in general and lower downside. I want to be high there. I may withdraw from my 9% stake in PONDX to invest further in FHLC. PONDX is a winner in its own category but that category bores me.

REITS have shocked me this year. I bought that fund primarily due to REIT threads I read on this site before registering.

I believe in index funds just like I believe in mechanical betting systems in sports. One of the great joys I ever experienced was when I realized that to succeed as a sports bettor I had to make tons of wagers that I fully expected to lose. The systems would trump my subjective ability. But similar to sports I allow some wiggle room, maybe 90% mechanized and 10% input. I'm convinced it keeps me sharper and happier. Right now I'd be annoyed beyond description if Health Care had soared like this but I'd been on the sidelines.
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Re: What is your opinion about "tilting?"

Post by Levett »

Morningstar describes my (unannuitized) portfolio thusly:

"Your portfolio is moderately risky. Financial planners typically recommend this type of portfolio for investors who have three- to 10-year investment horizons and who are concerned by volatility but not preoccupied by it. Such portfolios often generate a healthy stream of current income."

There may be an "accidental" tilt or two somewhere in there, but basically I have found modest ignorance to provide modest bliss over the years. :wink:

Lev

P.S. But in the past I did an awful lot of tilting when playing pinball--with modest results.
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stemikger
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Re: What is your opinion about "tilting?"

Post by stemikger »

I don't tilt mostly due to the fact that simplicity is very important to me and I fear if you push to much in that direction you may get less than the market is willing to give. I just don't know and don't think it's really worth it or necessary.
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Re: What is your opinion about "tilting?"

Post by Bracket »

I like polls, I think there is evidence tilting may improve returns, I don't think tilting is for everyone, I use vanguard and ishares for my tilts, and I have the ability to take on the added risk, so what the hell, I tilt to SCV and REITs.
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Re: What is your opinion about "tilting?"

Post by FillorKill »

In this arena of the investing world I’m mostly a Larry Swedroe guy. Take that for what it’s worth. I would hold a reasonably close approximation of ‘the Larry’ if I didn’t have constrains preventing me from doing so (I was too far down the road when I learned of it). In my equity portfolio I currently hold 19% TSM and 13% TISM (these are not the targets). The other 68% is tilted to something or another (although regressions indicate a different factor exposure reality from mere fund names but I guess we all know that already...). I make the concession of only using Vanguard for the sake of simplicity. I accept that VG isn’t a value shop and live with it.

RE Poll choices. I was reading an online news publication recently and they had a poll which included the option of ‘I don’t have an internet connection’ which was obviously irresistible. I think it was a cyber Monday poll but I digress….
rkhusky
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Re: What is your opinion about "tilting?"

Post by rkhusky »

I have small tilts to small, value, and emerging markets. I tilt because I don't want to have a completely market cap portfolio and I like to monkey around with my investments (but only a little bit).
crake
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Re: What is your opinion about "tilting?"

Post by crake »

I answered "I don't tilt. I think tilting is actually harmful--is actually inferior to holding the total market." In a friction-less vacuum I think tilting is probably harmless but since it costs more I would say it is probably likely to perform worse on a risk adjusted basis to the total market portfolio.

To those who answered that they do tilt and Vanguard has adequate funds how do you respond to this graph?

Image

Proponents of tilting have said that VISVX is neither small or valuey enough to capture the premium. That is a fine response, however, I become confused when people continue to use those funds to tilt. What are you trying to accomplish when you go against the advice of the very academics who are advocating for tilting in the first place?

One of my biggest grips with those who recommend factor investing on this board is that they lawd the benefits of tilting but then consistently fail to offer up a practical way to tilt without paying 50 basis points and/or advisor fees.
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Re: What is your opinion about "tilting?"

Post by red5 »

I tilt but not much in the case that my tilts over a 30 to 60 year investing cycle do not pan out.

Approximately [at the moment]:

Total US Stock 4 : US Small Cap Value 1
Total International 2 : Small Cap Intl 1 : Emerging Market 1


I have no idea if others would consider that to be light/moderate/heavy tilting?
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SpringMan
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Re: What is your opinion about "tilting?"

Post by SpringMan »

I try not to tilt because Vanguard does not recommend it. I formerly had a value tilt because of the presence of Wellesley Income fund and Equity Income fund. Vanguard has their Portfolio Watch tool which always gave a yellow caution alert that the style emphasized value over growth. To remedy this I switched Equity Income into Primecap, Capital Opportunity and Primecap Core. I needed to use 3 funds because of the 25K limit on each Primecap fund per year. My intent is to promote Primecap and Capital Opportunity to admiral shares next year by transferring in another 25K to each. I do like Vanguard's Primecap funds to add a growth to the value emphasis of Wellington or Wellesley. I understand these funds are closed to many requiring Flagship or higher client status. Similar funds are available from Primecap Odyssey fund company at slightly higher expense ratios. Even their mid cap growth is closed as well.
Best Wishes, SpringMan
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timboktoo
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Re: What is your opinion about "tilting?"

Post by timboktoo »

I don't tilt, though I think it might be beneficial.

If I make my goal portfolio optimization, then I will be tempted to change my portfolio when I'm persuaded by new information. I've found that changing my portfolio has reduced my personal returns and added stress. So in my own case, I strive instead for simplicity, knowing that I will only be average but that average is good enough to reach my goals.

- Tim
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Re: What is your opinion about "tilting?"

Post by FillorKill »

crake wrote:Proponents of tilting have said that VISVX is neither small or valuey enough to capture the premium. That is a fine response, however, I become confused when people continue to use those funds to tilt. What are you trying to accomplish when you go against the advice of the very academics who are advocating for tilting in the first place?

One of my biggest grips with those who recommend factor investing on this board is that they lawd the benefits of tilting but then consistently fail to offer up a practical way to tilt without paying 50 basis points and/or advisor fees.
VISVX isn't the only game in town. VIOV/VIOO/IVOV/IVOO/VTWV/VTWO - and TM Small VTMSX

VIOV: ER 0.2
VTWV: ER 0.2

When a fund offers less premium factor exposure than you want your first, but not final, consideration should be increasing your allocation to compensate.

EDIT: I don't lawd/recommend/advocate any particular style of investing per se. I'm providing information in response to your post.
Last edited by FillorKill on Wed Dec 10, 2014 9:46 am, edited 1 time in total.
dbr
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Re: What is your opinion about "tilting?"

Post by dbr »

I don't tilt because I don't need to and I don't want to. I have no recommendation either way for others beyond suggesting that if one needs to ask, then one should not.
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Re: What is your opinion about "tilting?"

Post by midareff »

I tilt..... as an opinion I would offer .. In the world where a couple of basis points of cost makes a difference I believe (with conviction) you can get better returns and increased diversification by the judicious use of tilts, sectors and rebalancing for risk control, in both equities and FI.

If you are a beginner, or those who don't have conviction, or are among those who look at excel with fear in their hearts, this may not be for you.
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Kenkat
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Re: What is your opinion about "tilting?"

Post by Kenkat »

nisiprius wrote:
kenschmidt wrote:What, no "all of the above" option?
It's not needed--you can just check all of the checkboxes.
That's a lotsa checks tho...

It was a joke actually - all of the above makes no sense. A smiley was probably in order.

Going back to the poll, the three items I checked happen to be the three most popular choices (at this point at least). That's interesting. Either great minds think alike or we are all mindless drones who have been indoctrinated into a particular way of thinking. Perhaps in the future we will be seen as ahead of our time - or mocked for being so misguided. That's what's great about investing - you just don't really know which it will be! :happy
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Ketawa
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Re: What is your opinion about "tilting?"

Post by Ketawa »

I tilt very heavily. The only box I checked was "I tilt, and I think there are many adequate tools for the job, including Vanguard funds."
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midareff
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Re: What is your opinion about "tilting?"

Post by midareff »

crake wrote:I answered "I don't tilt. I think tilting is actually harmful--is actually inferior to holding the total market." In a friction-less vacuum I think tilting is probably harmless but since it costs more I would say it is probably likely to perform worse on a risk adjusted basis to the total market portfolio.

To those who answered that they do tilt and Vanguard has adequate funds how do you respond to this graph?Image

Proponents of tilting have said that VISVX is neither small or valuey enough to capture the premium. That is a fine response, however, I become confused when people continue to use those funds to tilt. What are you trying to accomplish when you go against the advice of the very academics who are advocating for tilting in the first place?

One of my biggest grips with those who recommend factor investing on this board is that they lawd the benefits of tilting but then consistently fail to offer up a practical way to tilt without paying 50 basis points and/or advisor fees.

If you use the back test excel spreadsheet available through the wiki you can easily see that lower volatility and greater average returns would have been (can be) obtained through tilting and diversification. I can also cherry pick two funds and a time period to show almost anything I might want to show. That's how I respond to your request for a response, respectfully.

As far as proponents who proclaim VISVX as neither small enough or valuey enough..... $10K in VISVX at inception on 5/21/1998 became $40,055.64 to date vs. $24,999.78 for the S&P500. To make that as plain as possible.... $10K in the S&P500 gained 150% in that time period vs. 300%. Roughly 9.1% annually vs. 18.2%. That the difference in the time period graph you used for illustration between small value and small growth is minimal (but still favors value) and certainly shows the small premium is quite sufficient and effective when comparing results to the S&P500.
Last edited by midareff on Wed Dec 10, 2014 11:35 am, edited 2 times in total.
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baw703916
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Re: What is your opinion about "tilting?"

Post by baw703916 »

My opinion about tilting is that we talk about it waaaay too much on this board.
Most of my posts assume no behavioral errors.
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Re: What is your opinion about "tilting?"

Post by richard »

>>I tilt, and I think everyone should. The edge is small but it's there, and it's not really that hard or that expensive to do it.>>

For those who checked this, please explain how it is possible for everyone to tilt.

The only portfolio everyone can hold is the market portfolio. If one person tilts in one direction, another person has to tilt in the opposite direction.
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Re: What is your opinion about "tilting?"

Post by garlandwhizzer »

I tilt but with a modest 25% of my portfolio, the rest in TSM. I think the small factor will be negative going forward for at least a year perhaps more due to the current overvaluation of small cap stocks. Therefore I no longer tilt to small, only to value and momentum, and at present predominantly in large cap stocks which I believe represents better value. I do not overweight anything that I believe to be fundamentally overvalued. LCV is an area where many investors and many academics have given up which has appeal to me as a contrarian. Value seems not to work in LC if you use P/B as a screen but it does seem to work if you use P/E. My current LCV fund has an attractive P/E relative to the market as a whole so I believe it's worth a shot. I'm not certain that these tilts will work out but I think the using both value plus momentum together will likely provide diversification benefits to each other and perhaps better returns than beta.

Garland Whizzer
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Epsilon Delta
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Re: What is your opinion about "tilting?"

Post by Epsilon Delta »

There are at least 13 people who apparently don't like to participate in polls but do so anyway. Should we trust them?
dkturner
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Re: What is your opinion about "tilting?"

Post by dkturner »

baw703916 wrote:My opinion about tilting is that we talk about it waaaay too much on this board.
As a diehard tilter I agree with you 100%. Some of the Bozos still don't understand tilting - let's keep it that way! 8-)
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Re: What is your opinion about "tilting?"

Post by rkhusky »

richard wrote:>>I tilt, and I think everyone should. The edge is small but it's there, and it's not really that hard or that expensive to do it.>>

For those who checked this, please explain how it is possible for everyone to tilt.

The only portfolio everyone can hold is the market portfolio. If one person tilts in one direction, another person has to tilt in the opposite direction.
You gave the answer: "If one person tilts in one direction, another person has to tilt in the opposite direction". Some tilt towards value while others tilt towards growth. Some tilt towards large while others tilt towards small. And the definitions of small/large, value/growth change as the market changes. If everyone piled into value stocks, it would turn them into growth stocks.
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Epsilon Delta
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Re: What is your opinion about "tilting?"

Post by Epsilon Delta »

dkturner wrote:As a diehard tilter I agree with you 100%. Some of the Bozos still don't understand tilting - let's keep it that way! 8-)
I agree, but which side are the Bozos on? :? :twisted:
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FrugalInvestor
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Re: What is your opinion about "tilting?"

Post by FrugalInvestor »

I voted that I don't tilt but it's probably harmless. However, I do think that for those who are not well educated on the subject and disciplined in their approach that it likely raises the risk and increases the temptation of making poor investment decisions.
Have a plan, stay the course and simplify. Then ignore the noise!
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Re: What is your opinion about "tilting?"

Post by CABob »

I don't tilt, but, I did up until recently. My tilts were of the REIT and SV type.
My reasons for giving up on the tilting was for simplicity and not sure whether I had enough of a time horizon to take advantage of the tilts.
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Re: What is your opinion about "tilting?"

Post by kolea »

Simple portfolios are, well, boring. I tilt for the fun of it mostly. I hope it give me an edge but I really don't know if it will. Anyway, it spices things up.

My tilts:
- mid cap growth
- high risk bond fund
- bank funds
- health care market

These total less than 10% of assets.
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raven15
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Re: What is your opinion about "tilting?"

Post by raven15 »

richard wrote:>>I tilt, and I think everyone should. The edge is small but it's there, and it's not really that hard or that expensive to do it.>>

For those who checked this, please explain how it is possible for everyone to tilt.

The only portfolio everyone can hold is the market portfolio. If one person tilts in one direction, another person has to tilt in the opposite direction.
I selected it, and also the more skeptical option above it. I "tilt" towards riskier things as a result of my age and lack of existing assets, in other words I have a total of $6,000 invested right now and will be adding $12,000 per year. My research into the subject seems to show that investors in my situation benefit from higher than market weight volatility. As a result I am investing relatively heavily in things like emerging markets and long term treasuries. If one of these takes a 50% dive the $1,000 I have already invested in it won't matter much, but the $2,000 I will dump in at the lower price will be a very good deal. For me, price drops will be as good as or better than price gains for several more years. If in the future I have $1,000,000 in something that takes a 50% dive, my $2,000 contribution won't matter much; I may never recover from this larger loss. In fact, I will need to gradually reduce my risk starting sometime in the next 4-8 years.

It should be possible for everyone to tilt like this, because age and level of wealth will naturally sort everyone appropriately, with older people and those with larger nest eggs holding less risky assets. I largely discovered this on my own, but it isn't a new concept. In olden days when people rode horses and mammoths and the U.S. was an emerging market there was "your age in bonds". Recently there has been "mortgage your retirement" which advocates starting with 2x leverage and scaling back gradually as you accumulate more wealth. There is clear evidence that volatile investments are more beneficial to those starting with little and making large regular contributions, and less beneficial to those who are no longer contributing, or whose contributions are small relative to their existing wealth.

Now for the more skeptical selection. Is the value of an investment determined by the market, or by its existing assets and discounted future earnings relative to its current price? The market argument is compelling, but so is the other. As a result, I expect I may keep a value tilt. I do not necessarily buy into the smaller must be better argument, especially if everyone else is. Finally, a "slice and dice" portfolio should be able to gain a small rebalancing bonus from holding volatile uncorrelated assets through thick and thin, but it is harder to say that the advantage will remain after expenses and potential investor errors.
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Re: What is your opinion about "tilting?"

Post by ruralavalon »

My on personal category -- I tilt to domestic small cap value & REIT, I think its probably worthwhile. I think it gives an edge in the long run, and it's not really that hard or that expensive to do it.

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"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: What is your opinion about "tilting?"

Post by placeholder »

I set my original portfolio up years ago to be slice and dice with small and value tilts and I stick with the Boglehead's mantra "stay the course".
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Re: What is your opinion about "tilting?"

Post by Alchemist »

Could tilting over the long haul provide better returns? Maybe. Might even go so far as to say probably. I don't think tilting per say is harmful. I think the mindset that leads one to attempt a successful tilting strategy is, on average, probably harmful because it causes people to be more active and embark on higher costs means of investing. After all for those who tilt, how often have you adjusted your tilt one way or the other? This invites behavioral errors even if tilting itself would give excess returns if implemented "correctly". Additionally even the best evidence for tilting gives periods of under performance long enough to mean that if you started it at the wrong time you could hurt yourself quite badly.

So I do not tilt. This is not an admonition against it, just pointing out that the increased volatility risks are not the only risks you are taking on if you tilt. It is worth pointing out that my behavioral reasons for avoiding tilting (or any complexity adding strategy) can also happen when people constantly adjust AA to meet some kind of sought after optimum. Ultimately investor returns will lag any proposed strategy if the behavioral influences are not adequately mitigated. For me, holding and continuing to buy the Total Market with enough "dry powder" (be it bonds, cash, CDs, ect) to let me sleep at night is far more likely to give me actual returns over time than any strategy that invites me to tinker or do something other than "just stand there" when it counts the most.
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Re: What is your opinion about "tilting?"

Post by DVMResident »

I voted for "I tilt, and I think everyone should. The edge is small but it's there, and it's not really that hard or that expensive to do it.", but I would add it's only worth doing if your investment time horizon is long.

Tilting is by-far one of the least important aspects of investing, dwarfed by saving rates, wise use tax-advantaged accounts, diversification, appropriate stock/bond splits to match risk profile, and using low-cost funds. I think most tilters here would agree on this statement.
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