Small Cap Value heads Rejoice !!!

[hdas]

IJS / QQQ

[whodidntante]

LOL. Alrighty then.

[livesoft]

Yes, but it now kinda makes sense to sell small-cap value and buy total US stock market today because this one-day thing ain't gonna last, right?

[quantAndHold]

I think you are right. I’ve been holding VBR for the past 10 years. I finally capitulated, changed my IPS to not tilt to SCV, and sold it last Friday.

[nisiprius]

Just to be clear... you're saying small-cap value has crashed and therefore must be "cheap," "on sale," "less risky than before," "higher expected return than before." Is that right?

[azanon]

Hmm, let me see here - VFVA up 1.24%, VTI down 0.20%. Yup, that's a win for TODAY. It's been painful many other days though. *

* Full disclosure: I'm long VFVA

[steve roy]

Sarcasm never goes out of style ...

[Random Walker]

Emerging Markets had a good day as well

Dave

[hdas]

[Deleted]

[Sandtrap]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

[sf_tech_saver]

Every day is a great day to buy VTI

[rascott]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

What are we supposed to learn from a 1 year chart?

[sf_tech_saver]

Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

Tilt research seems like a hobby to me not a strategy per se.

Just buy more VTI and your gains will likely increase

It seems a shame to take a beautiful thing like VTI and complicate it.

[Dialectical Investor]

Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

There's usually more money in selling tools, ideas, etc. for other people to use than to use them yourself, except for the most capable or lucky users.

[Sandtrap]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

What are we supposed to learn from a 1 year chart?

Vanguard Total Stock
Vanguard Small Cap Value

[rascott]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

What are we supposed to learn from a 1 year chart?

Vanguard Total Stock
Vanguard Small Cap Value

The small cap there starts in 2011, vs 2009 for TMI.

Do SLYV for the 10 full years. Basically identical to VTI.

Then try 20 years. Value has underperformed growth this bull market, no question. But that's one cycle.

[heyyou]

With equal slices of both funds, and several others, I don't know which one was best today, nor do I care.

[azanon]

Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

Tilt research seems like a hobby to me not a strategy per se.

Just buy more VTI and your gains will likely increase

It seems a shame to take a beautiful thing like VTI and complicate it.

Yes, they actually can (earn more) unless nobody really knows nothing.

Can you imagine that - nobody really knows nothing? That'd mean all those experts, panelists, charters, researchers, that appear on CNBC, write articles and books, are all fooling themselves. Maybe that is true. But I'd find it far more strange if the reality is nobody knows nothing, and can never change that.

[rascott]

Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

Tilt research seems like a hobby to me not a strategy per se.

Just buy more VTI and your gains will likely increase

It seems a shame to take a beautiful thing like VTI and complicate it.

My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.

There is basically zero difference in return of the SP500 and the TMI, due to the cap weighting. For every $100 invested, $20 is going into ten mega-cap companies. And only like $3 goes into all the small-cap value stocks in existence (an asset class that's historically outperformed large caps over long periods).

That doesn't feel very diversified, for me personally. YMMV.

If there is no small/value premium....I'll end up in the same place. If there is, like history has shown, I'll do better over next 30+ years. It's worth it to me to take a few hours/yr to take the shot.

[azanon]

Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

Tilt research seems like a hobby to me not a strategy per se.

Just buy more VTI and your gains will likely increase

It seems a shame to take a beautiful thing like VTI and complicate it.

My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.

There is basically zero difference in return of the SP500 and the TMI, due to the cap weighting. For every $100 invested, $20 is going into ten mega-cap companies. And only like $3 goes into all the small-cap value stocks in existence (an asset class that's historically outperformed large caps over long periods).

That doesn't feel very diversified, for me personally. YMMV.

If there is no small/value premium....I'll end up in the same place. If there is, like history has shown, I'll do better over next 30+ years. It's worth it to me to take a few hours/yr to take the shot.

Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).

[caklim00]

Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).

I'm the worst at timing my purchases in the short term so take this with a grain of salt... I believe Larry recently published a study showing that factor momentum was even stronger then individual stock momentum. So, maybe there is something to it. I'm not going to be changing anything with my strategy as I can't time it anyway. And if I could, I've be using a leveraged strategy.

[azanon]

Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).

I'm the worst at timing my purchases in the short term so take this with a grain of salt... I believe Larry recently published a study showing that factor momentum was even stronger then individual stock momentum. So, maybe there is something to it. I'm not going to be changing anything with my strategy as I can't time it anyway. And if I could, I've be using a leveraged strategy.

Well, I would say more important than anything I just said there, is to pick something you can stick with and believe in. I can't really ever believe in a market-cap weighted strategy for reasons already stated, so it wouldn't be right for me personally.

[hdas]

[Deleted]

[Jags4186]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

What are we supposed to learn from a 1 year chart?

Vanguard Total Stock
Vanguard Small Cap Value

[azanon]

That's a nice win there for Vanguard Small Cap value (vs. Total Market and DFA SC Value)*


* I did subtract the industry standard 1% advisory fee as an approximate fee for DFA access. Your actual fee may vary and all other disclaimers.....

[klaus14]

Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).

What is wrong with what's popular? is it overvalued? if it was overvalued, some finance PHD would have picked it.

[azanon]

Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).

What is wrong with what's popular? is it overvalued? if it was overvalued, some finance PHD would have picked it.

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

[klaus14]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.

[Taylor Larimore]

My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.

VTI (Vanguard Total Stock Market ETF) is what it is: The capitalization weighted total U.S. stock market.

Personally, I am glad that I own shares in the largest and most successful companies in the United States.

Best wishes
Taylor

[azanon]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue, international stocks are mispriced.

Yes, for a pure EMH proponent/believer, none of my critiques of market-cap weighted index investing would apply. It would by definition, be a fair price. So to just go on the record, I'm not a pure EMH proponent.

So I guess i invest in a factor fund (VFVA in my case) for presumably the more typical reason people are doing it; because I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.

[rascott]

My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.

VTI (Vanguard Total Stock Market ETF) is what it is: The capitalization weighted total U.S. stock market.

Personally, I am glad that I own shares in the largest and most successful companies in the United States.

Best wishes
Taylor

I want to own them too....and VTI is good part of my equity portfolio.

Cheers.

[Random Walker]

because I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.

Don’t know if you’ve seen this yet, but it should be right up your alley! I’ve read about 20% of it so far.

https://www.amazon.com/Popularity-betwe ... 192&sr=8-1

Dave

[aristotelian]

My 2% SLYV tilt is rocking this week!

[rascott]

FYI:

Vanguard Small Cap Value Index (dark blue)

Compared to S&P 500 (VTSAX Total Stock Tracks This) (green)

Compared to Small Value (orange)

What are we supposed to learn from a 1 year chart?

Vanguard Total Stock
Vanguard Small Cap Value

Thank you.....looking at a 20 year, TSM was so far behind it needed these last 8 or so of over-performance just to "RTM"....back to just trailing SCV by the historic deficiency.


I own them all in fairly equal proportion...so I'm fine with whatever.

[azanon]

because I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.

Don’t know if you’ve seen this yet, but it should be right up your alley! I’ve read about 20% of it so far.

https://www.amazon.com/Popularity-betwe ... 192&sr=8-1

Dave

Wow thanks Dave! That was my favorite price of all (free). I one-clicked purchased it and will read the first chance I get on my ipad.

[stocknoob4111]

still waiting to see when the SP600 will reclaim it's all time high of 1100, it's still 17% below those all time highs last year!!

[MathIsMyWayr]

I do not have to spend a lot of time comparing SCV vs. others. The two ETFs, VTI (Vanguard Total Stock Market Index) and IJS (iShares S&P Small-Cap 600 Value), happen to have their prices close to each other, currently around $143. It is like watching a foot race.

[rascott]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.

I think there is something to the fact that prices are more efficient for large caps.

There are something like 6300+ small cap firms around the world. Most have less than 5 analysts that even cover them....and there are hundreds of firms that have no analysts covering them at all. That seems a recipe for companies to kind of be forgotten for long periods of time.

That certainly isn't happening in the large/mega cap space where pricing is very efficient.

[Random Walker]

I think there is something to the fact that prices are more efficient for large caps.

I do too! In fact, I believe all the other factors (value, momentum, trend, profitability) are more significant premia in the small cap realm.

Dave

[klaus14]

I think there is something to the fact that prices are more efficient for large caps.

There are something like 6300+ small cap firms around the world. Most have less than 5 analysts that even cover them....and there are hundreds of firms that have no analysts covering them at all. That seems a recipe for companies to kind of be forgotten for long periods of time.

That certainly isn't happening in the large/mega cap space where pricing is very efficient.

this makes sense.
however, pricing argument still applies to small caps as a group. Maybe analysts don't have time to individually price them, but they don't need to. Some people say shipping sector is underpriced today. they can just buy SEA ETF.
So individual stocks less efficiently priced doesn't imply whole group is underpriced.

[sf_tech_saver]

The replies are interesting here!

You aren't trying to buy 'mispriced' assets when you are buying index funds but rather attempting to have an efficient vehicle to harvest the growth of the overall economy with your portfolio. If you want to capture the overall economic growth I believe market cap weighting makes total sense.

Bogle investing seems rooted in the bedrock of economic growth vs. asset pricing arbitrage. Once you stray into thinking you have a consensus-beating read on asset pricing why not do far more than just SCV tilting....

[caklim00]

Today is day one, of the resurrection **. Make sure to be fully loaded




** The ratio of SCV/Large Growth had a large reversal today

Update June 4: Just a better chart (data from Tiingo) for ppl to appreciate the opportunity set.

Can someone explain this chart to me? I'm not sure what all the lines indicate.

[2pedals]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.

I think there is something to the fact that prices are more efficient for large caps.

There are something like 6300+ small cap firms around the world. Most have less than 5 analysts that even cover them....and there are hundreds of firms that have no analysts covering them at all. That seems a recipe for companies to kind of be forgotten for long periods of time.

That certainly isn't happening in the large/mega cap space where pricing is very efficient.

For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

https://www.ifa.com/articles/despite_br ... _-_works/

over the last 15 years 92% of active large cap core funds under performed their benchmark
over the last 15 years 97% of active small cap core funds under performed their benchmark

Where is the market gains that market discovery should produce?

[hdas]

[Deleted]

[fennewaldaj]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.

I think there is something to the fact that prices are more efficient for large caps.

There are something like 6300+ small cap firms around the world. Most have less than 5 analysts that even cover them....and there are hundreds of firms that have no analysts covering them at all. That seems a recipe for companies to kind of be forgotten for long periods of time.

That certainly isn't happening in the large/mega cap space where pricing is very efficient.

For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

https://www.ifa.com/articles/despite_br ... _-_works/

over the last 15 years 92% of active large cap core funds under performed their benchmark
over the last 15 years 97% of active small cap core funds under performed their benchmark

Where is the market gains that market discovery should produce?

To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.

[2pedals]

I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.

no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

it's all about prices and no one here can say they are pricing things better than the market.
What you can argue is that right price for you is different than average investor because your risk profile is different than average.

I invest in multifactor funds (VFMF) because
- it underweights tech, i need less tech exposure because i am already working in tech sector.
- i won't need to spend my investments for a long time so my risk tolerance is different than average investor.

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.

I think there is something to the fact that prices are more efficient for large caps.

There are something like 6300+ small cap firms around the world. Most have less than 5 analysts that even cover them....and there are hundreds of firms that have no analysts covering them at all. That seems a recipe for companies to kind of be forgotten for long periods of time.

That certainly isn't happening in the large/mega cap space where pricing is very efficient.

For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

https://www.ifa.com/articles/despite_br ... _-_works/

over the last 15 years 92% of active large cap core funds under performed their benchmark
over the last 15 years 97% of active small cap core funds under performed their benchmark

Where is the market gains that market discovery should produce?

To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.

Ah, true but is a market inefficient in a meaningful way if the cost to harvest it's inefficiencies exceeds it's gains?

[stocknoob4111]

Down 1% again today... very close to bear market territory now.

[Jags4186]

To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.

The only number that matters is what you, the investor, receives. What if I had the secret to outperform the market by 20% year over year and I would be willing to let you in on that secret for a 21% annual fee?

[fennewaldaj]

To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.

The only number that matters is what you, the investor, receives. What if I had the secret to outperform the market by 20% year over year and I would be willing to let you in on that secret for a 21% annual fee?

Right it doesn't help you. The point I was getting at is that it may be that more small cap managers are out performing before fees. This doesn't help the individual investor but it does indicate that there is more advantages to be exploited if it is the case.

[Taylor Larimore]

The point I was getting at is that it may be that more small cap managers are out performing before fees. This doesn't help the individual investor but it does indicate that there is more advantages to be exploited if it is the case.

fennewaldaj:

Sorry, I don't understand your thinking. Investors receive investment returns minus the investment costs. This is a primary benefit of low-cost total market index funds which charge virtually nothing.

Jack Bogle: "You get to keep exactly what you don't pay for."

Best wishes.
Taylor