Adding SCV Tilt...placement and fund choice

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SpartanBull
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Adding SCV Tilt...placement and fund choice

Post by SpartanBull »

If deciding to add a 25% SCV Tilt to ones portfolio, should taxable vs Roth IRA vs I401k be considered? Or should SCV be treated just like VTSAX, in that you can put it anywhere. Additionally, Is there any disadvantage to using a non vanguard fund for this? Also it seems that SCV really only comes in ETF form, is that about right? Looking at the following funds.
-IJS (iShares S&P Small Cap 600 Value)
-IWN (iShares Russell 2000 Value)
-VTWV (Vanguard Russell 2000 Value)
-VIOV (Vanguard S&P 600 Value)
KlangFool
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Re: Adding SCV Tilt...placement and fund choice

Post by KlangFool »

OP,

1) What do you mean by 25% SCV tilt? 25% of your total portfolio = SCV?

2) You should treat it the same as VTSAX.

3) My preference is on the taxable account since it is highly volatile and it presents many opportunities for "Tax Loss Harvest" and "Tax Gain Harvest".

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
SpartanBull
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Re: Adding SCV Tilt...placement and fund choice

Post by SpartanBull »

Sorry, 25% of Equities.
KlangFool
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Re: Adding SCV Tilt...placement and fund choice

Post by KlangFool »

OP,

In my case, it was very simple. I used up all my tax advantage account space for the bond index fund and Wellington fund. Hence, I must put all my stock fund in my taxable account.

Are you sure that you have a choice?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
livesoft
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Re: Adding SCV Tilt...placement and fund choice

Post by livesoft »

1. You want SCV in taxable when it gets to dropping because then you can tax-loss harvest.

2. You want SCV in tax-advantaged because it is going to go up lots and you will need to sell at substantial gains when rebalancing.

3. It doesn't matter which SCV fund you buy because all the others will do better than the one you chose.

Seriously, on placement: It will depend what you kick out of taxable and put in tax-advantaged that will decide whether SCV goes in taxable or tax-advantaged. That is, it is not all about SCV.
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Theoretical
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Re: Adding SCV Tilt...placement and fund choice

Post by Theoretical »

Don't do either Russell 2000 Value ETF, as its a notoriously bad index that can and is easily front-run. For the S&P 600 Value, there's another option in SLYV from State Street. IJS is actually more tax efficient historically than Vanguard Total Stock Market Index due to the lower yield.

I'd also look at these three:

FNDA - Schwab Fundamental Small Cap - .32
PRFZ - Powershares FTSE 1500 Fundamental Small Cap .39
JKL - Ishares Morningstar Small Cap Value - .30

I'm assuming you're for something a bit deeper than Vanguard Small Value (VBR).

Stated Costs matter, but the expense ratio is not everything with small cap value funds.

Take a close look at the annual reports of any ETFs you find and pay attention to the annual securities lending income. For small cap value, especially deeper and smaller funds, the lending income partially or totally eliminates the expense ratio, if the fund shares its revenues with its investors. At the most extreme example, IWC, the Ishares Russell Microcap fund, obliterates its .60% expense ratio with so much lending revenue it's effectively a .05-.1% NEGATIVE expense ratio. That's not an endorsement of the fund, but it's one important factor.

On the other hand, some other ETFs don't share most or all of the revenue, leaving you with the full expense ratio.
btenny
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Re: Adding SCV Tilt...placement and fund choice

Post by btenny »

I hold VBR in my taxable account. It is 10% of my stock allocation.

Good Luck.
boglephreak
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Re: Adding SCV Tilt...placement and fund choice

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mongstradamus
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Re: Adding SCV Tilt...placement and fund choice

Post by mongstradamus »

For my SCV tilt i use viov , vanguard s&p 600 value etf. i know VBR, vanguards small cap value etf, is a bit cheaper, but its not as small cap valuey for me.
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grabiner
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Re: Adding SCV Tilt...placement and fund choice

Post by grabiner »

Small-cap value ETFs are reasonably tax-efficient, but I would expect them to be slightly less tax-efficient than Total Stock Market or Total International, and more tax-efficient than large-cap value ETFs.

Thus, if you have the choice, it is better to put small-cap value in tax-deferred, but you may not have the choice.

All my small-cap value is in tax-deferred (Roth IRA and HSA); Total Stock Market is my only taxable US holding.
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Doc
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Re: Adding SCV Tilt...placement and fund choice

Post by Doc »

grabiner wrote:Small-cap value ETFs are reasonably tax-efficient, but I would expect them to be slightly less tax-efficient than Total Stock Market or Total International, and more tax-efficient than large-cap value ETFs.

Thus, if you have the choice, it is better to put small-cap value in tax-deferred, but you may not have the choice.

All my small-cap value is in tax-deferred (Roth IRA and HSA); Total Stock Market is my only taxable US holding.
If you want more space in tax-advantaged consider breaking up one's Total Bond Market into it's components and putting the short Treasuries and possibly short corporates into taxable.

The only domestic equity funds we have in taxable are large cap blend and a small amount of VG Tax Managed Small Cap. (Most of our small cap is value and is in tax-advantaged.)
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