Small Cap Value heads Rejoice !!!

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Robert T
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Re: Small Cap Value heads Rejoice !!!

Post by Robert T »

MotoTrojan wrote: Wed Aug 26, 2020 6:13 pm Carlisle is one of my favorite people to listen to but I don't like the lack of transparency on ZIG and the expense is spicy to say the least. Maybe someday I'll throw $10K into it just for fun and to support him.
Carlisle's book The Acquirer's Multiple is well written and insightful. My main concern was about the robustness of the backtested return results in the book (it did not go through the out-of-sample hoops and robustness tests as Fama-French did). Don't like that the ZIG fund is long-short. Would have been good to see how a long-only fund would have performed, but perhaps he was trying to develop a more differentiated product from QVAL. Hope his fund performs will - will be interesting to see.
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Re: Small Cap Value heads Rejoice !!!

Post by Robert T »

nedsaid wrote: Thu Aug 27, 2020 12:13 am In all seriousness, the valuation gap between Growth and Value is at all time highs. My source is Larry Swedroe and you can get his comments off of his Twitter feed. My best guess is that Cliff Asness at AQR is saying the same thing. The hyperbole is mostly from me, I am needling those who once were rock solid for Small/Value tilting who are now vacillating, Rick Ferri being chief among them. Rick was influential along with Paul Merriman in convincing me about the academic research. Larry Swedroe came to my attention after I had increased my Small/Value tilting in 2008-2009. I probably became aware of Larry in 2012 or so.

The problem is, the reversion of the mean from Growth to Value and from Large to Small has always happened in the past but there is no guarantee this will happen in the future. Growth and Value take turns in leading the stock market as do Large and Small. The Large Growth trend in the market could be permanent but market history suggests that it wont be. These trends can last longer than anyone would believe but in more recent market history, these seem to last about a decade. So one could say that we are due for a reversion pretty soon as we are about 11 years in this trend. Markets don't have to follow our timetables or our expectations, markets do what markets do. The Large Growth trend could continue for a while.
Avantis did this recent piece on valuation: https://www.avantisinvestors.com/conten ... thier.html

It has indeed been interesting to see how 1-2 years of (significant) value underperformance has shaken the resolve of may people, including financial advisors. It is one thing to see tracking error on paper but another thing to actually experience it. It reminds me of Bernstein's earlier 1997 piece on The Loneliness of the Long Distance Asset Allocator. http://www.efficientfrontier.com/ef/497/lonely.htm
So which period do we rely on for guidance -- the past decade of US large cap outperformance or the longer period of global portfolio dominance? There is no sure answer to this dilemma. However, it is likely that longer periods provide more reliable data. Asset return divergences generally revert; the underperformance of foreign assets during the past decade is probably simply "payback" for their overperformance before 1987. If this is true then the next 10 years should again provide handsome rewards for foreign diversification.

Hence, the loneliness of the long distance asset allocator. Holding foreign assets during the past decade has been a lonely, frustrating experience. Few things offend human nature more than watching helplessly as your neighbors become effortlessly rich investing in the big blue chips. Keep the faith -- your day will come.
Same is true for Small Value investors today.

In January, 1997 Bernstein developed the Academic Cowards Portfolio - http://www.efficientfrontier.com/ef/197/cowar197.htm
  • 25% DFA US Large Cap Value
    25% DFA US Small Cap Value
    25% DFA Int'l Value
    25% DFA Int'l Small Cap Value

1997-2019 performance: https://www.portfoliovisualizer.com/bac ... tion6_2=50
1997-2020 performance: https://www.portfoliovisualizer.com/bac ... tion6_2=50 (an now valuation spreads are at/near the extreme ends historically).

Also note the rolling returns: https://www.portfoliovisualizer.com/bac ... tion6_2=50

10 year rolling return low (from the rolling returns tab)" Academic cowards = 4.42%, market = 0.64%
15 year rolling return low (from the rolling returns tab) Academic cowards = 6.74%, market = 3.98%

Bernstein seems to be staying to course with a tilted portfolio - at least as of the 2019 White Coat investor podcast - from the transcript:
Well, I’m a geezer and so I don’t have a lot of human capital ahead of me. I had a fair amount of investment capital, so I’m less than 50/50 stock bond. I think at the present time, my own personal investments are 45/55 stocks and bonds and they’re very heavily value in small based and I’m a little overweight in foreign because, I have foreign stocks because I think that they are cheaper, which is precisely what we do for clients.
And we should not forget the earlier Fama-French paper on volatility lessons: https://famafrench.dimensional.com/essa ... ssons.aspx
The average monthly premium of the Market return over the one-month T-Bill return is substantial, as are average premiums of value and small stocks over Market. As the return horizon increases, premium distributions become more disperse, but they move to the right (toward higher values) faster than they become more disperse. There is, however, some bad news. Even if future expected premiums match high past averages, high volatility means that for the three- and five-year periods commonly used to evaluate asset allocations, the probabilities of negative realized premiums are substantial, and the probabilities are nontrivial for ten-year and 20-year periods.
So important to have realistic expectations. Then there are the 'this time is different arguments' - viewtopic.php?p=5388972#p5388972 - low inflation, zero interest rates, new economy, natural (growth company) monopolies etc (and I understand the arguments behind them). But there has also been low inflation and zero interest rates in Non-US Developed Markets for much longer than in the US.

Invesco FTSE RAFI Dev Mkts ex-US S/M ETF [PDN] / iShares MSCI EAFE Index [EFA]
  • YTD: -4.8 / -4.2
    1 yr: 8.2 / 7.3
    3 yr: 0.2 / 2.4
    5 yr: 5.4 / 4.9
    10 yr: 6.6 / 6.0
The RAFI fund is ahead over 1yr, 5yr, and 10yr periods.

Obviously no guarantees. If there were, there would be no risk.

We are all prone to 'confirmation bias' (looking for information that matches our own particular views - we, as humans, have a tendency to do this - including me), and I am sure people will be quick to point to other data points that match their only "market" or only "US market" views - with endless debates that go nowhere.

No right answer for everyone. Need to make our own decisions.

Personally happy to be in the company of Bernstein.

Robert
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Re: Small Cap Value heads Rejoice !!!

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I removed a post which was derailing the thread. As a reminder, see: General Etiquette
We expect this forum to be a place where people can feel comfortable asking questions and where debates and discussions are conducted in civil tones.

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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Pepper11 wrote: Wed Aug 26, 2020 11:41 pm I am trying to follow this thread and I frankly cant tell if many of these posts are hyperbole or not - if Small Values continued decline and Large Growths surge are really making people more confident that ever that they now buy SCV at a discounted price.
The part you are missing is that it’s entirely driven by relative multiple expansion. According to this paper there is no relative difference in debt-to-equity or profitability to explain this spread increase. Paper also shows this isn’t a sector driven new-economy story as even sector neutral or ex-tech/mega-cap shows the same 100th percentile spreads.

If SCV firms simply had earnings declining while LCG was skyrocketing, that would be a different story and it would be irrational to feel more and more conviction as it got worse.

https://www.aqr.com/Insights/Perspectiv ... sting-Dead
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Robert T wrote: Thu Aug 27, 2020 5:12 am
MotoTrojan wrote: Wed Aug 26, 2020 6:13 pm Carlisle is one of my favorite people to listen to but I don't like the lack of transparency on ZIG and the expense is spicy to say the least. Maybe someday I'll throw $10K into it just for fun and to support him.
Carlisle's book The Acquirer's Multiple is well written and insightful. My main concern was about the robustness of the backtested return results in the book (it did not go through the out-of-sample hoops and robustness tests as Fama-French did). Don't like that the ZIG fund is long-short. Would have been good to see how a long-only fund would have performed, but perhaps he was trying to develop a more differentiated product from QVAL. Hope his fund performs will - will be interesting to see.
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I haven’t made it through that smaller book but I did enjoy Deep Value, although I caught some points where convenient comparisons of market-weighted deciles to equal-weighted made his case look better that junkier cheap stocks do best (counter to the findings of Quantitative Value).

May I ask what you dislike about ZIG’s long-short approach? Is it not a valid way to increase exposure?
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Re: Small Cap Value heads Rejoice !!!

Post by petulant »

MotoTrojan wrote: Thu Aug 27, 2020 7:55 am
Pepper11 wrote: Wed Aug 26, 2020 11:41 pm I am trying to follow this thread and I frankly cant tell if many of these posts are hyperbole or not - if Small Values continued decline and Large Growths surge are really making people more confident that ever that they now buy SCV at a discounted price.
The part you are missing is that it’s entirely driven by relative multiple expansion. According to this paper there is no relative difference in debt-to-equity or profitability to explain this spread increase. Paper also shows this isn’t a sector driven new-economy story as even sector neutral or ex-tech/mega-cap shows the same 100th percentile spreads.

If SCV firms simply had earnings declining while LCG was skyrocketing, that would be a different story and it would be irrational to feel more and more conviction as it got worse.

https://www.aqr.com/Insights/Perspectiv ... sting-Dead
That was an extremely interesting article, but it still misses one key factor. Will earnings actually grow? Earnings growth is the difference between value and growth stocks. Every single point in that article could be correct, but if the growth companies actually grow earnings at a wide enough clip compared to value, it will work out for them.

Just to illustrate the point, I used the moneychimp DCF calculator and entered the earnings growth reported on the Vanguard website for the Vanguard Growth Index fund, around 20%, for 5 years. Then I used a terminal GDP growth rate of 4% after that. The discount rate that makes the value match the current P/E ratio for that fund (about 38) is 9.2%. If I take that 9.2% discount and apply it to the Value Index's earnings growth rate of 7% for 5 years then 4% terminal growth, I get a value of about $22. Since the current P/E is 15, that would make the Value Index "undervalued."

But what if earnings growth continues more cheerfully than that? I did the same analysis starting with the Vanguard Growth Index fund and extended the earnings growth period from 5 years to 10 years. Nothing else changed, but with the greater growth, I had to move the discount rate to 12.4% to get the DCF to match the current P/E. Plugging that 12.4% discount rate in with the Value Index growth rate of 7% for 10 years then the terminal growth rate, I got a value of about $15--basically the current P/E for the Value Index.

The current price differentials could be entirely rational if earnings growth is rationally expected to be long-lasting and large.

So look at it like this: do you think earnings growth for the universe of growth stocks in the U.S. will be that much bigger for long enough to make it worthwhile? That seems like it takes more analysis and it's a bit of an active bet.
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

Robert T wrote: Thu Aug 27, 2020 6:37 am In January, 1997 Bernstein developed the Academic Cowards Portfolio - http://www.efficientfrontier.com/ef/197/cowar197.htm
  • 25% DFA US Large Cap Value
    25% DFA US Small Cap Value
    25% DFA Int'l Value
    25% DFA Int'l Small Cap Value

1997-2019 performance: https://www.portfoliovisualizer.com/bac ... tion6_2=50
1997-2020 performance: https://www.portfoliovisualizer.com/bac ... tion6_2=50 (an now valuation spreads are at/near the extreme ends historically).
Very interesting. Thanks for sharing.

Just for fun I added a third portfolio of 25% US small cap, 25% US TSM, 25% Int. small cap, 25% Int. TSM. It performs a little better and has lower standard deviation.
https://www.portfoliovisualizer.com/bac ... tion6_3=25
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Dr. Bill Bernstein's Recommendations

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RobertT wrote: In January, 1997 Bernstein developed the Academic Cowards Portfolio - http://www.efficientfrontier.com/ef/197/cowar197.htm
25% DFA US Large Cap Value
25% DFA US Small Cap Value
25% DFA Int'l Value
25% DFA Int'l Small Cap Value
RobertT:

In 2014 (seven years later) Dr. Bernstein recommended The Three-Fund Portfolio in his book, "If You Can."

Best wishes.
Taylor
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

It reminds me of Bernstein's earlier 1997 piece on The Loneliness of the Long Distance Asset Allocator. http://www.efficientfrontier.com/ef/497/lonely.htm

I strongly recommend the William Bernstein piece referenced above for anyone with a portfolio that deviates from TSM/S&P500. He shows that outperforming portfolios will experience a surprising number of individual years underperformance. The specific asset classes used in the example are not as important as the concept. Stay the course.

Dave
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Re: Small Cap Value heads Rejoice !!!

Post by nedsaid »

acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.

Also trying to point out that definitions of Small-Cap and what constitutes Value have their variations. One person's Small-Cap is another person's Mid-Cap. There have been arguments about the definition of Value, Benjamin Graham and his disciples calculate intrinsic Value and margin of safety, they do their analysis company by company. The academics focus on financial ratios like Price/Book, Price/Earnings, Price/Cash Flow, Price/Sales and consider the cheapest 30% of the market to be Value. Another variation of Value is Growth At A Reasonable Price. I can remember star fund manager Bill Miller calling Amazon.com a Value stock. So there is disagreement among reasonable people as to what a Small-Cap stock is and what represents Value. The definitions are not precise.

So I bought a couple of "bad" factor products because I didn't know better. I was told that if I was really smart that I would have been in Bridgeway or DFA instead. I didn't want to pay the 1% Assets Under Management Fee at Merriman to get access to DFA funds so I looked for alternatives. After doing a lot of reading, I came to the conclusion that good enough was good enough and that close enough was close enough. The Vanguard product suited my needs.

Mid-Value gets you most of the benefits of Small-Value, a bit less return but also a bit less volatility. So it really isn't so bad that the Vanguard product has a lot of Mid-Caps in it. Larry Swedroe says this product is well constructed and it does what it designed to do very well. What I have said is that while the Vanguard fund isn't perfect is does its job pretty well.

DFA and other more deeply Size and Value products have struggled as the stock markets around the world have favored Large and Growthy stocks. The market simply prefers something other than what DFA has selected for its Small Value fund. So in this environment, not surprising at all that the so-called "bad" factor products have outperformed the "good" factor products. In fairness, this is precisely what the presenter from Merriman said would happen in an environment that favored Large Growth over Small Value. What happened was predictable.

The presenter from Merriman showed the model portfolio for his firm using mostly DFA funds. He then showed how an investor could replicate the Merriman portfolio with similar Vanguard funds. The presenter pointed out that the DFA products had smaller market caps and better Value characteristics than the similar Vanguard funds. He thought that the DFA portfolio would outperform a similar Vanguard portfolio by 2% a year, putting Merriman investors ahead by 1% a year even after their 1% Assets Under Management fee. In fairness, he said that in an environment that favored Large Growth that the Vanguard portfolio would outperform a similar DFA portfolio and that is exactly what happened.

Using the "good" and the "bad" labels on funds is meant to illustrate a bit of irony here. The "bad" products have been outperforming the "good" products. I am also having a bit of fun here with the language and also pointing out that there is a lot of nuance here. In no way am I telling people to leverage their portfolios, not sure where that idea has come from, it is something that I have never recommended.

No one has died because I called Vanguard Small Cap Value Index ETF a "bad" factor product, particularly when I put quotation marks around bad. So I have no idea why my definition of "good" or "bad" is dangerous. Pretty much I have commented on the never ending pursuit of perfection.

It is not my intention to mislead anyone, I have posted about this again and again in great detail and it is amazing to me that my comments have been misunderstood. I am certainly not here shilling for DFA or any other provider. I have looked into the Avantis Funds and ETFs, the funds require an advisor to access but the ETFs are available to individual investors. Despite my favorable comments about Avantis, I have not switched my Small/Value investments. So far Vanguard and iShares have met my needs very well.
Last edited by nedsaid on Thu Aug 27, 2020 10:58 am, edited 2 times in total.
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Re: Small Cap Value heads Rejoice !!!

Post by Robert T »

MotoTrojan wrote: Thu Aug 27, 2020 7:58 am I haven’t made it through that smaller book but I did enjoy Deep Value, although I caught some points where convenient comparisons of market-weighted deciles to equal-weighted made his case look better that junkier cheap stocks do best (counter to the findings of Quantitative Value).

May I ask what you dislike about ZIG’s long-short approach? Is it not a valid way to increase exposure?
Sorry - yes I meant his Deep Value book. As you know, you need to wait until pg. 194 of 215 to see performance results. He present the following
  • 1951-2013
    8.4% = All Market
    12.5% = All Value (about 100 stocks)
    13.4% = High quality half of all value (about 50 stocks)
    15.7% = Deep value cap-weighted (about 50 stocks)
    21.3% = Deep value equal-weighted
Compare these to the returns from DFA’s matrix book.
  • 11.0% = All Market (CRSP1-10)
    15.7% = Dimensional Small Cap Value (portfolio currently has 980 stocks)
Out of curiosity I did look at (follow) the stocks in the Acquirer’s Multiple Large Cap 1000 stock screen (when it was free). My concern was performance was very sensitive to idiosyncratic risk (number of stocks included) and hard to closely track ‘index’ returns. Case in point – ZIG currently has a >4% tacking error with the The Acquirer’s Index (at the moment in favor of ZIG, but would prefer closer tracking/more robustness in implementation). Personally, I think DFA has more robust approach.

On ZIG – not totally against the fund, just that short positions can potentially add negative skewness risk beyond factor exposure (in times of short-squeezes). The fund is 130/30 i.e. fund asset are used to take ‘long’ positions in securities and then the fund sells short another 30% of the portfolio and buys more securities long with the proceeds. Reminded me of this article: “The decline, fall and afterlife of 130/30” https://www.ft.com/content/fdbf6284-b72 ... 144feabdc0

There is also no back-tested (130/30) performance. It has a limited track record (of performance and or estimation of full cost) with a current >4% lag of the Acquirer’s Index, and a high expense ratio = 0.94%. Hard to currently determine the likely long-term characteristics of the fund (relative to alternative ways of getting factor exposure).

Will be interesting to track the performance of the fund. The ProShares Large Cap Core Plus fund, another 130/30 (“multifactor”) fund seems to have done okay - all things considered.

PS - may have to do a couple of google searches on the "The decline, fall and afterlife of 130/30" article. Managed to access it without subscription.
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Re: Small Cap Value heads Rejoice !!!

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Random Walker wrote: Thu Aug 27, 2020 9:31 am It reminds me of Bernstein's earlier 1997 piece on The Loneliness of the Long Distance Asset Allocator. http://www.efficientfrontier.com/ef/497/lonely.htm

I strongly recommend the William Bernstein piece referenced above for anyone with a portfolio that deviates from TSM/S&P500. He shows that outperforming portfolios will experience a surprising number of individual years underperformance. The specific asset classes used in the example are not as important as the concept. Stay the course.

Dave
Good post. It's really cool to read about writers referring to the 90s since we're going though a similar time in terms of how superior US LCG appears to be.

Here's a quote from Roger Gibson. It helps me stay the course:
"Each year, the multiple-asset-class strategy loses relative to some of its component asset classes and wins relative to others. That is the nature of diversification. The frame-of-reference problem, however, is particularly acute during a prolonged period of superior performance by U.S. stocks, such as the second half of the 1990s. At that time, the seemingly unending dominance of U.S. stocks relative to other asset classes fueled investors’ dissatisfaction with the lower returns generated over the same period by a multiple-asset-class strategy. As a friend in the business observed, the problem with diversification is that it works whether you want it to or not."
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

nedsaid wrote: Thu Aug 27, 2020 10:46 am
No one has died because I called Vanguard Small Cap Value Index ETF a "bad" factor product, particularly when I put quotation marks around bad. So I have no idea why my definition of "good" or "bad" is dangerous. Pretty much I have commented on the never ending pursuit of perfection.

It is not my intention to mislead anyone, I have posted about this again and again in great detail and it is amazing to me that my comments have been misunderstood. I am certainly not here shilling for DFA or any other provider. I have looked into the Avantis Funds and ETFs, the funds require an advisor to access but the ETFs are available to individual investors. Despite my favorable comments about Avantis, I have not switched my Small/Value investments. So far Vanguard and iShares have met my needs very well.
Thanks for the detailed write-up, matched my understanding of what you meant. I don't think your comment was misunderstood by those of us that understand factor exposures but I could see the lay-person thinking that DFA used some special academic approach thinking it would be a better product and just flat-out failed when the reality is that DFA did exactly what was intended, and simply underperformed the "bad" products because it was a more extreme tilt. I was simply trying to emphasize this point that the DFA products achieved exactly what they set out to do, and while the returns were worse, the product was as advertised.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Robert T wrote: Thu Aug 27, 2020 10:47 am
MotoTrojan wrote: Thu Aug 27, 2020 7:58 am I haven’t made it through that smaller book but I did enjoy Deep Value, although I caught some points where convenient comparisons of market-weighted deciles to equal-weighted made his case look better that junkier cheap stocks do best (counter to the findings of Quantitative Value).

May I ask what you dislike about ZIG’s long-short approach? Is it not a valid way to increase exposure?
Sorry - yes I meant his Deep Value book. As you know, you need to wait until pg. 194 of 215 to see performance results. He present the following
  • 1951-2013
    8.4% = All Market
    12.5% = All Value (about 100 stocks)
    13.4% = High quality half of all value (about 50 stocks)
    15.7% = Deep value cap-weighted (about 50 stocks)
    21.3% = Deep value equal-weighted
I dug up the old PM I sent a regular in this thread about my issue with the backtest presented. Frankly I think it was borderline deception in his interpretation of the cheaper half-decile being better than the 5-10% range.:
Just got to chapter 10, interesting results indeed but I think there is some tricky business going on here, curious your thoughts.

When comparing the top and bottom of the value decile, he uses a market cap weight of each. Then just afterwards he compares bottom half decile market cap weight to equal weight, showing an additional huge boost in performance, but we never see any other equal weight comparisons. What this indicates to me is that the highest performing stocks were the lowest market cap. This alone could explain why the bottom half decile beat the top half when weighting via market cap.

It would be much more interesting to see an equal weight comparison of the top and bottom of the value decile. As is I’m not sure there’s any benefit in the further tilt suggested.

Also found it interesting how he discredited the novy Marx quality filtering, that’s been an area I’ve been seeking readings in as well as my larger holding in Avantis products uses it as well.
As I noted in this quote, I don't think the backtest presented is a fair justification to hold the cheapest 5% "deep value" rather than 10%.
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

Steve Reading wrote: Thu Aug 27, 2020 11:12 am
Random Walker wrote: Thu Aug 27, 2020 9:31 am It reminds me of Bernstein's earlier 1997 piece on The Loneliness of the Long Distance Asset Allocator. http://www.efficientfrontier.com/ef/497/lonely.htm

I strongly recommend the William Bernstein piece referenced above for anyone with a portfolio that deviates from TSM/S&P500. He shows that outperforming portfolios will experience a surprising number of individual years underperformance. The specific asset classes used in the example are not as important as the concept. Stay the course.

Dave
Good post. It's really cool to read about writers referring to the 90s since we're going though a similar time in terms of how superior US LCG appears to be.

Here's a quote from Roger Gibson. It helps me stay the course:
"Each year, the multiple-asset-class strategy loses relative to some of its component asset classes and wins relative to others. That is the nature of diversification. The frame-of-reference problem, however, is particularly acute during a prolonged period of superior performance by U.S. stocks, such as the second half of the 1990s. At that time, the seemingly unending dominance of U.S. stocks relative to other asset classes fueled investors’ dissatisfaction with the lower returns generated over the same period by a multiple-asset-class strategy. As a friend in the business observed, the problem with diversification is that it works whether you want it to or not."
I’m a huge fan of Gibson’s book. It’s demonstration of the benefits of diversification form the basis of my approach to investing. The specific asset classes he uses in his examples are pretty much irrelevant. What is relevant is how less than perfectly correlated components mix in a portfolio to make a more efficient portfolio. I strongly recommend Gibson’s book. For those interested I’ve linked a fairly short 10-12 page essay which effectively summarizes the main point of his book. Some of the best investment reading I’ve done on a value per page basis.

https://ivinvestor.com/wp-content/uploa ... sting1.pdf

Dave
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Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

Just plugged another decent chunk into AVDV today using my proceeds from my Treasury Futures I sold a few days back. AVDV has quickly become my largest single fund holding (I do hold more S&P 600/600V and AVUV in totality).
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

caklim00 wrote: Thu Aug 27, 2020 1:55 pm Just plugged another decent chunk into AVDV today using my proceeds from my Treasury Futures I sold a few days back. AVDV has quickly become my largest single fund holding (I do hold more S&P 600/600V and AVUV in totality).
:sharebeer I miss buying. Can’t wait for 2021!
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Re: Small Cap Value heads Rejoice !!!

Post by vineviz »

hdas wrote: Tue Sep 01, 2020 2:52 pm
Steve Reading wrote: Fri Aug 21, 2020 3:18 pm Fairly disappointing week for SCV heads. VT basically flat but a value-size tilted portfolio has lost about 4% this past week.
New lows (close print) in the relationship today...maybe tomorrow there's rejoicing. Check the 2 week autocorrelation/partial correlation of this ratio.

Image
Looks a lot like the shape of the same chart from 1996 to 2000 (using a composite of tech & LCG funds instead of actual QQQ, though).

Image
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

vineviz wrote: Tue Sep 01, 2020 3:49 pm

Looks a lot like the shape of the same chart from 1996 to 2000 (using a composite of tech & LCG funds instead of actual QQQ, though).

Image
Your particular composite makes me want to be a 100% growth investor :p. Looks like it crushed QQQ.

https://www.portfoliovisualizer.com/bac ... ymbol5=QQQ
Last edited by MotoTrojan on Tue Sep 01, 2020 4:16 pm, edited 1 time in total.
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Re: Small Cap Value heads Rejoice !!!

Post by Robert T »

.
M* tells me investors in IJS are paying, on average, 46 cents per dollar of sales while investors in QQQ are paying 10 times as much, $4.60 per dollar of sales. And sales growth of QQQ companies have only been about 3 times higher than IJS companies (4.2% vs 12.2%). Perhaps stale M* data, but SV seems on sale relative to large growth/QQQ.
.
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Re: Small Cap Value heads Rejoice !!!

Post by vineviz »

MotoTrojan wrote: Tue Sep 01, 2020 4:14 pm Your particular composite makes me want to be a 100% growth investor :p. Looks like it crushed QQQ.
Hard to say since my chart goes back to 1996 and the inception date for QQQ was in March, 1999.
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Re: Small Cap Value heads Rejoice !!!

Post by Grt2bOutdoors »

Forester wrote: Thu Aug 20, 2020 1:52 pm Latest Arnott interview (9 min): value's rebound could come with a vengeance https://www.youtube.com/watch?v=0YocJ4N8_2o
When?
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Re: Small Cap Value heads Rejoice !!!

Post by Grt2bOutdoors »

Robert T wrote: Tue Sep 01, 2020 4:15 pm .
M* tells me investors in IJS are paying, on average, 46 cents per dollar of sales while investors in QQQ are paying 10 times as much, $4.60 per dollar of sales. And sales growth of QQQ companies have only been about 3 times higher than IJS companies (4.2% vs 12.2%). Perhaps stale M* data, but SV seems on sale relative to large growth/QQQ.
.
They’ve been on sale for a long time now, could get cheaper.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

vineviz wrote: Tue Sep 01, 2020 6:07 pm
MotoTrojan wrote: Tue Sep 01, 2020 4:14 pm Your particular composite makes me want to be a 100% growth investor :p. Looks like it crushed QQQ.
Hard to say since my chart goes back to 1996 and the inception date for QQQ was in March, 1999.
Post 1999.
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Re: Small Cap Value heads Rejoice !!!

Post by Fomalhaut »

nedsaid wrote: Thu Aug 27, 2020 10:46 am
acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.

Mid-Value gets you most of the benefits of Small-Value, a bit less return but also a bit less volatility. So it really isn't so bad that the Vanguard product has a lot of Mid-Caps in it. Larry Swedroe says this product is well constructed and it does what it designed to do very well. What I have said is that while the Vanguard fund isn't perfect is does its job pretty well.
I've owned Vanguard Small Value Index for well over 14 years, and am perfectly happy with it. Now that I've heard that it also contains mid-caps, I think that is a good thing, as my portfolio is a bit low in pure midcaps. Since my 401k only offers an S&P 500 fund, and I have no room in my Roth IRA for a total market, I can put the two funds together and claim I am holding the equivalent of a total market fund. (Not like that was my actual goal, since I was originally tilting...).
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Re: Small Cap Value heads Rejoice !!!

Post by grabiner »

nedsaid wrote: Thu Aug 27, 2020 10:46 am
acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.
I wouldn't use the terms "good" and "bad", but "strong" and "weak". If Fund B has twice the exposure to a factor as Fund A, then you would expect an equal mix of Fund B and a total-market index to have the same performance as Fund A. This doesn't make Fund B better, but it means that you need less of Fund B to get the same exposure. Fund B is better if you want more exposure to the factor than you can get in your available space (either your total portfolio, or your IRA if the factor funds are tax-inefficient).

At different times, I have held Vanguard Small-Cap Value Index (for moderate exposure when it was the S&P 600 Value, then weak exposure when it was the CRSP Small-Cap Value index); Rydex/Guggenheim/Invesco S&P 600 Pure Value (RZV, for strong exposure to both small and value), and I now use Vanguard Factor Value ETF (for weak exposure to small and strong exposure to value, at a much lower cost than RZV).
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Re: Small Cap Value heads Rejoice !!!

Post by nedsaid »

grabiner wrote: Tue Sep 01, 2020 11:26 pm
nedsaid wrote: Thu Aug 27, 2020 10:46 am
acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.
I wouldn't use the terms "good" and "bad", but "strong" and "weak". If Fund B has twice the exposure to a factor as Fund A, then you would expect an equal mix of Fund B and a total-market index to have the same performance as Fund A. This doesn't make Fund B better, but it means that you need less of Fund B to get the same exposure. Fund B is better if you want more exposure to the factor than you can get in your available space (either your total portfolio, or your IRA if the factor funds are tax-inefficient).

At different times, I have held Vanguard Small-Cap Value Index (for moderate exposure when it was the S&P 600 Value, then weak exposure when it was the CRSP Small-Cap Value index); Rydex/Guggenheim/Invesco S&P 600 Pure Value (RZV, for strong exposure to both small and value), and I now use Vanguard Factor Value ETF (for weak exposure to small and strong exposure to value, at a much lower cost than RZV).
The "good" and "bad" are in quotation marks, I am having a little fun with the language and showing a bit of irony here. Things didn't go quite as expected with my Small/Value tilts but wound up being unexpectedly pleased with my choices. I was "wrong" but at least in the shorter run was "right".

Also trying to illustrate that there is nuance here, tilting correctly isn't so easy, more to it than just picking something with "Small Value" in the name. I call this process looking under the hood, that is taking a look at the portfolio construction to see what is actually there. An example of this was Larry Swedroe's comment that REITs were often in the Small and Mid Value parts of the market and were an important part of Small/Mid Value's performance. If I remember correctly, DFA screens out the REITs. Another thing to watch for in Value funds is sector concentration, right now lots of Energy and Financial companies show up in the Value screens. There has also been a lot of discussion about how factors work together, we talk a lot about Size and Value but DFA later took Momentum into consideration and later Profitability/Quality when constructing their Value funds. Portfolio construction is very important.

Another thing that Grabiner noted is cost. You have to weigh cost vs. factor loading.
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Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

nedsaid wrote: Wed Sep 02, 2020 7:47 am
grabiner wrote: Tue Sep 01, 2020 11:26 pm
nedsaid wrote: Thu Aug 27, 2020 10:46 am
acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.
I wouldn't use the terms "good" and "bad", but "strong" and "weak". If Fund B has twice the exposure to a factor as Fund A, then you would expect an equal mix of Fund B and a total-market index to have the same performance as Fund A. This doesn't make Fund B better, but it means that you need less of Fund B to get the same exposure. Fund B is better if you want more exposure to the factor than you can get in your available space (either your total portfolio, or your IRA if the factor funds are tax-inefficient).

At different times, I have held Vanguard Small-Cap Value Index (for moderate exposure when it was the S&P 600 Value, then weak exposure when it was the CRSP Small-Cap Value index); Rydex/Guggenheim/Invesco S&P 600 Pure Value (RZV, for strong exposure to both small and value), and I now use Vanguard Factor Value ETF (for weak exposure to small and strong exposure to value, at a much lower cost than RZV).
The "good" and "bad" are in quotation marks, I am having a little fun with the language and showing a bit of irony here. Things didn't go quite as expected with my Small/Value tilts but wound up being unexpectedly pleased with my choices. I was "wrong" but at least in the shorter run was "right".

Also trying to illustrate that there is nuance here, tilting correctly isn't so easy, more to it than just picking something with "Small Value" in the name. I call this process looking under the hood, that is taking a look at the portfolio construction to see what is actually there. An example of this was Larry Swedroe's comment that REITs were often in the Small and Mid Value parts of the market and were an important part of Small/Mid Value's performance. If I remember correctly, DFA screens out the REITs. Another thing to watch for in Value funds is sector concentration, right now lots of Energy and Financial companies show up in the Value screens. There has also been a lot of discussion about how factors work together, we talk a lot about Size and Value but DFA later took Momentum into consideration and later Profitability/Quality when constructing their Value funds. Portfolio construction is very important.

Another thing that Grabiner noted is cost. You have to weigh cost vs. factor loading.
I do recall that VBR had quite a lot of REITs. S&P600V had REITs but not quite as many which is why the QDI% was higher. I think there was some analysis to show that S&P600V was actually more tax efficient than TSM (not sure if that still holds true but it did a few years ago). I'm assuming Avantis screens out REITs similar to DFA since most of the ETFs had 100% QDI for 2019. So, I'd expect AVUV to be more tax efficient than SLYV/VIOV which is more tax efficient than VBR.
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Re: Small Cap Value heads Rejoice !!!

Post by Day9 »

I also recall reading some analysis that IJS is better in taxable than VIOV/SLYV (all track the same index). IJS has 10 bps higher expense ratio but the analysis I read determined it was better to hold in taxable despite this. In tax advantaged VIOV/SLYV are better. I also don't know if this is still true today, sorry I can't be more helpful.
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Re: Small Cap Value heads Rejoice !!!

Post by vineviz »

Day9 wrote: Wed Sep 02, 2020 9:21 am I also recall reading some analysis that IJS is better in taxable than VIOV/SLYV (all track the same index). IJS has 10 bps higher expense ratio but the analysis I read determined it was better to hold in taxable despite this. In tax advantaged VIOV/SLYV are better. I also don't know if this is still true today, sorry I can't be more helpful.
VIOV has always been very tax efficient. SLYV had a couple of rough years, but State Street seems to have solved the problem.

Since SLYV and VIOV are both cheaper than IJS, I'd suggest either one over IJS.
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Re: Small Cap Value heads Rejoice !!!

Post by burritoLover »

What are the real-world implications of the low volume of VIOV? Is it more likely Vanguard will eventually close this fund?
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Re: Small Cap Value heads Rejoice !!!

Post by Robot Monster »

burritoLover wrote: Wed Sep 02, 2020 10:45 am What are the real-world implications of the low volume of VIOV? Is it more likely Vanguard will eventually close this fund?
It does have $497.2 million in net assets, while, "... as a general rule of thumb, once a fund surpasses the $50 million mark in AUM [assets under management], it’s far less likely to close."
https://www.etf.com/etf-education-cente ... f-closures
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Re: Small Cap Value heads Rejoice !!!

Post by burritoLover »

Robot Monster wrote: Wed Sep 02, 2020 10:56 am
burritoLover wrote: Wed Sep 02, 2020 10:45 am What are the real-world implications of the low volume of VIOV? Is it more likely Vanguard will eventually close this fund?
It does have $497.2 million in net assets, while, "... as a general rule of thumb, once a fund surpasses the $50 million mark in AUM [assets under management], it’s far less likely to close."
https://www.etf.com/etf-education-cente ... f-closures
Interesting - thanks.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Mid/large-value kind of day it seems. QVAL up 2.5% last I checked!
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Re: Small Cap Value heads Rejoice !!!

Post by nzahir »

Good links for why some of you guys like small value over small blend? Seems kind of un-bogle-like

My best 401k option for small cap is VSMAX, small cap blend. Is that fine? There are small growth and value, but much higher fees, so they are out the picture.

Thinking of tilting my 401k to some more small cap. VTI/VTSAX has the value of small cap, but I also don't like that 5 companies are now 25% of the S&P and a good portion of a world market fund. Really over-concentrated, even though when stocks really fall, small, mid, and large all fall
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Re: Small Cap Value heads Rejoice !!!

Post by Forester »

I note also with the momentum ETF QMOM vs QVAL, the market seems to have started its "parabolic" stage in late 2019, with March being an accelerant. Probably growth would have melted up anyway. We're still waiting for the moment Rob Arnott describes, of investors without warning and without co-ordination, deciding enough is enough on paying up for growth.
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

nzahir wrote: Thu Sep 03, 2020 2:10 am Good links for why some of you guys like small value over small blend?
Ben Felix explains it well imo: https://youtube.com/watch?v=uErHwq4M6pg

I also enjoyed this article: https://www.whitecoatinvestor.com/small ... -strategy/
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

nzahir wrote: Thu Sep 03, 2020 2:10 am Good links for why some of you guys like small value over small blend? Seems kind of un-bogle-like
Small blend seems un-bogle-like to me, so if you are going to tilt you might as well go where history/theory says you'll come out ahead.

Take backtests that use index data with a grain of salt, but you can see historically that small-caps did help outperform the market (on an absolute, not risk-adjusted basis) while small-value obliterated it, even on a risk-adjusted basis.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
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Re: Small Cap Value heads Rejoice !!!

Post by nedsaid »

caklim00 wrote: Wed Sep 02, 2020 8:18 am
nedsaid wrote: Wed Sep 02, 2020 7:47 am
grabiner wrote: Tue Sep 01, 2020 11:26 pm
nedsaid wrote: Thu Aug 27, 2020 10:46 am
acegolfer wrote: Tue Aug 25, 2020 10:19 am
I think his definition is misleading/dangerous. Using his definition, a leveraged SP500 fund will be a "good" fund and VTI will be a "bad" fund.
Let me clarify the definitions of a "good" factor fund and a "bad" factor fund. Notice too, the quotation marks.

A "good" factor fun has more exposure to the Size and Value factors than a "bad" factor fund. In other words, "good" funds have smaller market caps and cheaper stocks than the "bad" funds.

My famous example of Vanguard Small-Cap Value Index, the one based on the CRSP index, has a lot of Mid-Caps and Core stocks in it. I have called it a "bad" factor fund. It really isn't a bad product, I have owned it for probably 12 plus years now. It actually has performed rather well, 5 star compared to 3 star for the similar DFA fund that loads better on Size and Value. I have also commented that DFA and Bridgway are the "good" factor products.
I wouldn't use the terms "good" and "bad", but "strong" and "weak". If Fund B has twice the exposure to a factor as Fund A, then you would expect an equal mix of Fund B and a total-market index to have the same performance as Fund A. This doesn't make Fund B better, but it means that you need less of Fund B to get the same exposure. Fund B is better if you want more exposure to the factor than you can get in your available space (either your total portfolio, or your IRA if the factor funds are tax-inefficient).

At different times, I have held Vanguard Small-Cap Value Index (for moderate exposure when it was the S&P 600 Value, then weak exposure when it was the CRSP Small-Cap Value index); Rydex/Guggenheim/Invesco S&P 600 Pure Value (RZV, for strong exposure to both small and value), and I now use Vanguard Factor Value ETF (for weak exposure to small and strong exposure to value, at a much lower cost than RZV).
The "good" and "bad" are in quotation marks, I am having a little fun with the language and showing a bit of irony here. Things didn't go quite as expected with my Small/Value tilts but wound up being unexpectedly pleased with my choices. I was "wrong" but at least in the shorter run was "right".

Also trying to illustrate that there is nuance here, tilting correctly isn't so easy, more to it than just picking something with "Small Value" in the name. I call this process looking under the hood, that is taking a look at the portfolio construction to see what is actually there. An example of this was Larry Swedroe's comment that REITs were often in the Small and Mid Value parts of the market and were an important part of Small/Mid Value's performance. If I remember correctly, DFA screens out the REITs. Another thing to watch for in Value funds is sector concentration, right now lots of Energy and Financial companies show up in the Value screens. There has also been a lot of discussion about how factors work together, we talk a lot about Size and Value but DFA later took Momentum into consideration and later Profitability/Quality when constructing their Value funds. Portfolio construction is very important.

Another thing that Grabiner noted is cost. You have to weigh cost vs. factor loading.
I do recall that VBR had quite a lot of REITs. S&P600V had REITs but not quite as many which is why the QDI% was higher. I think there was some analysis to show that S&P600V was actually more tax efficient than TSM (not sure if that still holds true but it did a few years ago). I'm assuming Avantis screens out REITs similar to DFA since most of the ETFs had 100% QDI for 2019. So, I'd expect AVUV to be more tax efficient than SLYV/VIOV which is more tax efficient than VBR.
Vanguard Small Cap Value Index ETF (VBR) has been very tax efficient as I recall, I own it within an IRA so that doesn't matter.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

nedsaid wrote: Thu Sep 03, 2020 8:42 am re tax efficient than VBR.
Vanguard Small Cap Value Index ETF (VBR) has been very tax efficient as I recall, I own it within an IRA so that doesn't matter.
[/quote]

~70% QDI in 2019 vs. @77% for S&P600 value; much closer than I thought but maybe a 1-off year as I recall S&P600 being much higher. Either way, in 2019 neither was very efficient.

https://advisors.vanguard.com/VGApp/iip ... endfigures
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Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

MotoTrojan wrote: Thu Sep 03, 2020 8:54 am
nedsaid wrote: Thu Sep 03, 2020 8:42 am re tax efficient than VBR.
Vanguard Small Cap Value Index ETF (VBR) has been very tax efficient as I recall, I own it within an IRA so that doesn't matter.
~70% QDI in 2019 vs. @77% for S&P600 value; much closer than I thought but maybe a 1-off year as I recall S&P600 being much higher. Either way, in 2019 neither was very efficient.

https://advisors.vanguard.com/VGApp/iip ... endfigures
[/quote]
Avantis has a really nice QDI page that they post: https://www.avantisinvestors.com/conten ... ncome.html

Makes me think that although these aren't specifically tax managed that they still make decisions with tax implications in mind. Only ETF that had non-qualified dividends was International SCV AVDV and even then it was 85.8% QDI which is alot higher than VSS which was only 47.17% in 2019 (ouch).

I'm not sure why Vanguard is so poor in comparison. Perhaps because they don't take tax considerations into account.
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Re: Small Cap Value heads Rejoice !!!

Post by Cantrip »

Avantis has a really nice QDI page that they post: https://www.avantisinvestors.com/conten ... ncome.html

Makes me think that although these aren't specifically tax managed that they still make decisions with tax implications in mind. Only ETF that had non-qualified dividends was International SCV AVDV and even then it was 85.8% QDI which is alot higher than VSS which was only 47.17% in 2019 (ouch).

I'm not sure why Vanguard is so poor in comparison. Perhaps because they don't take tax considerations into account.
The reason Vanguard is "poor in comparison" is that the ETF expense ratio is deducted from non-qualified dividends. Higher expense ratio funds/etfs almost always have 100% qualified dividends.

This is the same reason why IJS is "more tax efficient" than VIOV. It is not. You are paying more for the fund.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Cantrip wrote: Thu Sep 03, 2020 9:30 am
Avantis has a really nice QDI page that they post: https://www.avantisinvestors.com/conten ... ncome.html

Makes me think that although these aren't specifically tax managed that they still make decisions with tax implications in mind. Only ETF that had non-qualified dividends was International SCV AVDV and even then it was 85.8% QDI which is alot higher than VSS which was only 47.17% in 2019 (ouch).

I'm not sure why Vanguard is so poor in comparison. Perhaps because they don't take tax considerations into account.
The reason Vanguard is "poor in comparison" is that the ETF expense ratio is deducted from non-qualified dividends. Higher expense ratio funds/etfs almost always have 100% qualified dividends.

This is the same reason why IJS is "more tax efficient" than VIOV. It is not. You are paying more for the fund.
Good point, although if you were okay paying the higher expense for some gain (factor exposure), does that not make the remaining yield more tax-efficient indeed?
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Re: Small Cap Value heads Rejoice !!!

Post by Forester »

Value bottom is in?
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Forester wrote: Thu Sep 03, 2020 10:17 am Value bottom is in?
Wouldn't be the 1st false positive but it is nice to see.
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Re: Small Cap Value heads Rejoice !!!

Post by nzahir »

MotoTrojan wrote: Thu Sep 03, 2020 7:19 am
nzahir wrote: Thu Sep 03, 2020 2:10 am Good links for why some of you guys like small value over small blend? Seems kind of un-bogle-like
Small blend seems un-bogle-like to me, so if you are going to tilt you might as well go where history/theory says you'll come out ahead.

Take backtests that use index data with a grain of salt, but you can see historically that small-caps did help outperform the market (on an absolute, not risk-adjusted basis) while small-value obliterated it, even on a risk-adjusted basis.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
How so? You guys say you don't know what will go up or down, so why tilt to value and not blend
MotoTrojan
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Joined: Wed Feb 01, 2017 8:39 pm

Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

nzahir wrote: Thu Sep 03, 2020 12:11 pm
MotoTrojan wrote: Thu Sep 03, 2020 7:19 am
nzahir wrote: Thu Sep 03, 2020 2:10 am Good links for why some of you guys like small value over small blend? Seems kind of un-bogle-like
Small blend seems un-bogle-like to me, so if you are going to tilt you might as well go where history/theory says you'll come out ahead.

Take backtests that use index data with a grain of salt, but you can see historically that small-caps did help outperform the market (on an absolute, not risk-adjusted basis) while small-value obliterated it, even on a risk-adjusted basis.

https://www.portfoliovisualizer.com/bac ... ion3_3=100
How so? You guys say you don't know what will go up or down, so why tilt to value and not blend
Tilting to small is no different than tilting to value in my view, both are deviations from the market. If you consider that bogleheads want to buy the haystack then both of these seems un-bogle to me. I personally don't consider myself a pure boglehead at all, I am a systematic investor with pretty strong factor tilts (size, value, quality).

Most "true" bogleheads do tilt (or solely hold) US stocks which I feel is against the spirit of the teachings as well, but it is what Bogle himself preaches so it sticks around.
Massdriver
Posts: 113
Joined: Tue Jan 02, 2018 12:05 pm

Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

Scooped up a small amount of AVDV and SLYV today. Feels good.
MotoTrojan
Posts: 10708
Joined: Wed Feb 01, 2017 8:39 pm

Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Massdriver wrote: Thu Sep 03, 2020 1:15 pm Scooped up a small amount of AVDV and SLYV today. Feels good.
NIce! I haven't bought in a while, miss that feeling.

Perspective is still important though. AVUV for example is still nearly 65% above it's March low :twisted:.
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