Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

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AndroAsc
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Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

Post by AndroAsc » Mon Oct 08, 2018 9:18 pm

Been updating myself. There's this new slew of Vanguard Factor funds released this year. They seem similar to the old factor funds that I know of.

- Vanguard US Value Factor ETF (VFVA) vs Vanguard Value Index Inv Fund (VIVAX) for example, both are value-tilted funds
- Vanguard U.S. Quality Factor ETF (VFQY) vs Vanguard Dividend Appreciation Index Fund (VDADX). For VDADX it was 'approximating' the quality factor in GMO reports, which I assume is similar to Vanguard's quality factor.

If you are using the old factor funds to tilt towards value, quality... should one switch to the new 2018 factor funds?

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grabiner
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Re: Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

Post by grabiner » Tue Oct 09, 2018 9:01 pm

I did switch, because the new ETF gives better exposure to the factors. (All numbers from Vanguard.)

Vanguard Value Index has a 17.6 P/E, 2.4 P/B.
Vanguard Small-Cap Value Index has a 15.8 P/E, 1.9 P/B.
VFVA has 12.0 P/E, 1.5 P/B.

VFVA has about the same large/small split as a 50/50 split of Value and Small-Cap Value, which happens to be my target, so I switched the two funds for the one ETF.
Wiki David Grabiner

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woof755
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Re: Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

Post by woof755 » Wed Oct 10, 2018 2:05 am

Thanks for posting this. I'm confused, too.

My domestic allocation is currently 65% VG small cap value index and 35% VG US Multifactor Admiral. This is a change from 65% SCV / 35% VG Total Stock Market, after I read Larry's updated Black Swan and the Factor Based investing book.
Internationally, I'm 80% VG International small cap (not a value fund) and 20% EWX (Emerging markets small cap, which to my eye actually does have a value tilt)

My bonds are all US treasuries, 40/40 short term and intermediate term, 20% TIPS.
Overall, I'm 60/40 at age 44, with 17 more years of working until I am eligible to retire with lump sum pension.

My question:
One thing I could never really grasp is what is a reasonable allocation to small, to value (I have for my entire investing "career" not invested in large caps because I am a believer in the anti-black swan approach), and also to the other factors--namely momentum and quality?

Since I believe in investing in risky asset classes and increasing my bond allocation a la Black Swan recs, do I keep a focus on SCV and small internationsl and include the Multifactor fund to capture other factors, including adding some large? Or would I rationally reduce my SCV further to either increase the allocation to the Multifactor fund or increase allocations to the individual factor ETFs.

I guess what Larry's two books leaves out is how one incorporates this new knowledge into the other investing philosophy.

Mahalo, Bogleheads
"By singing in harmony from the same page of the same investing hymnal, the Diehards drown out market noise." | | --Jason Zweig, quoted in The Bogleheads' Guide to Investing

Momus
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Re: Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

Post by Momus » Wed Oct 10, 2018 2:13 am

grabiner wrote:
Tue Oct 09, 2018 9:01 pm
I did switch, because the new ETF gives better exposure to the factors. (All numbers from Vanguard.)

Vanguard Value Index has a 17.6 P/E, 2.4 P/B.
Vanguard Small-Cap Value Index has a 15.8 P/E, 1.9 P/B.
VFVA has 12.0 P/E, 1.5 P/B.

VFVA has about the same large/small split as a 50/50 split of Value and Small-Cap Value, which happens to be my target, so I switched the two funds for the one ETF.
So, you just sell all and pay cap gain?

How do people "switch"?

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grabiner
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Re: Difference between Vanguard New (2018) Factor Funds vs Old Factor Funds?

Post by grabiner » Wed Oct 10, 2018 8:35 pm

Momus wrote:
Wed Oct 10, 2018 2:13 am
grabiner wrote:
Tue Oct 09, 2018 9:01 pm
I did switch, because the new ETF gives better exposure to the factors. (All numbers from Vanguard.)

Vanguard Value Index has a 17.6 P/E, 2.4 P/B.
Vanguard Small-Cap Value Index has a 15.8 P/E, 1.9 P/B.
VFVA has 12.0 P/E, 1.5 P/B.

VFVA has about the same large/small split as a 50/50 split of Value and Small-Cap Value, which happens to be my target, so I switched the two funds for the one ETF.
So, you just sell all and pay cap gain?
This was in my Roth IRA, so there were no tax consequences; the only cost was the spread on buying the ETF.

I wouldn't have sold in a taxable account because there would be a huge gain. If I need to switch in my taxable account, I will sell only those shares which don't have a significant gain, make new purchases (including dividends) into the new fund, and use the old fund for contributions to charity.
Wiki David Grabiner

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