whos' just about had it w/ SCV ?

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feh
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whos' just about had it w/ SCV ?

Post by feh »

YTD and 5 year comparisons between VBR and total US.

To put things mildly, it stinks.

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MotoTrojan
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

Paging nedsaid for a thread of capitulaters to make you happy!

I am happily buying, as I always do. This is why there is a small & factor premium, because of these periods of underperformance; it's a risk-premium. If it just steadily beat Total US by 0.5-2.5% year-in and year-out, the advantage would quickly and easily be arbitraged away. In other words, I am glad this is happening and view it as a great sign that the outperformance will last for years to come.
theorist
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Re: whos' just about had it w/ SCV ?

Post by theorist »

Seeing today was another big down day, I tossed some extra discretionary $ into small caps — but blend instead of value, just to be diversified. (My plan was to buy large cap and mid cap value today, which I did, but I contributed some extra to get in on the ever cheaper small caps.)
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tetractys
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Re: whos' just about had it w/ SCV ?

Post by tetractys »

Small cap value has eliminated a good portion of my taxes for this year, and I ended up gleaning a whole bunch of free shares when I bought back in after 30 days. Also having SCV in my tax sheltered accounts has produced fairly consistent rebalancing bonuses over the years. So to be honest I haven't had enough.
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steve roy
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Re: whos' just about had it w/ SCV ?

Post by steve roy »

Neither buying nor selling but staying the course.
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Re: whos' just about had it w/ SCV ?

Post by vencat »

Have long invested in Tax managed small cap and Dimensional targeted value (thru' wife's 401K).
Since this crash have been buying VIOV on the dips. (along with VSS, and smaller amounts of MTUM, VWO, VOO)
Tempted with AVUV but holding off.
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Doc
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Re: whos' just about had it w/ SCV ?

Post by Doc »

Using VBR as a proxy for small cap value is "iffy".

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White Coat Investor
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Re: whos' just about had it w/ SCV ?

Post by White Coat Investor »

feh wrote: Wed Apr 15, 2020 2:57 pm YTD and 5 year comparisons between VBR and total US.

To put things mildly, it stinks.

Image
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If you think the 5 year data is bad, look at the 15 year data.

But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

Doc wrote: Wed Apr 15, 2020 3:18 pm Using VBR as a proxy for small cap value is "iffy".

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It has tracked fairly well but certainly has a bit of mid-caps thrown in for good measure. Pretty good fund overall, especially for someone that may be prone to freaking out if there is more substantial tracking error compared to the broad market. I use it in my 401k as there isn't anything better (VSIAX to be clear) but prefer the S&P600 offers in taxable/IRAs for a deeper tilt, especially for size.
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Re: whos' just about had it w/ SCV ?

Post by Dominic »

20% of my US equity is in small-cap value (VIOV), and 25% of my international equity is in small-cap (VSS). (They're each 10% of my portfolio.)

I only introduced this tilt in the last couple of months. If the small and value premiums show up, great. If the net premium is zero but there's at least a non-1 correlation between the premiums and beta, also great. The only way to lose is if the premium is actually negative over my next 40 years of contributions. I don't think that's likely, so I'll stick with it.
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David Jay
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Re: whos' just about had it w/ SCV ?

Post by David Jay »

White Coat Investor wrote: Wed Apr 15, 2020 3:21 pmIf you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
When one tilts away from a market portfolio, one is essentially guaranteed under- or over-performance. What is critical is that you believe in the underlying value proposition of your tilt enough to convince yourself to stay the course though a decade or more of under-performance.

Never tilt without understanding and belief, otherwise you will bail on emotion.
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Doc
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Re: whos' just about had it w/ SCV ?

Post by Doc »

MotoTrojan wrote: Wed Apr 15, 2020 3:22 pm [VBR] has tracked fairly well but certainly has a bit of mid-caps thrown in for good measure.
And most of the time the S&P 500 track the Russell 1000 fairly well.

For me the key to using a small segment of the market does not depend on "most of the time" but rather on non-ordinary times.
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Re: whos' just about had it w/ SCV ?

Post by asif408 »

Just think about all those folks who are heavy in emerging markets, commodities, and value stocks. They've had a lot longer period and much worse performance than the SCV tilters. If 5 years of underperformance bothers you then you probably shouldn't be deviating much from a boring 3 fund portfolio.
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

Doc wrote: Wed Apr 15, 2020 3:35 pm
MotoTrojan wrote: Wed Apr 15, 2020 3:22 pm [VBR] has tracked fairly well but certainly has a bit of mid-caps thrown in for good measure.
And most of the time the S&P 500 track the Russell 1000 fairly well.

For me the key to using a small segment of the market does not depend on "most of the time" but rather on non-ordinary times.
Not sure I follow... can you show me a time in history where holding VBR instead of VIOV would've dramatically changed the outcome?

Even more unlikely, how about a time where holding VOO instead of VONE?
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Re: whos' just about had it w/ SCV ?

Post by rascott »

Value has sucked compared with growth for a decade.

Small kept up fairly well, until 2018..... then its been in a bear market ever since.

When I look through these indexes at the type of firms and industries SCV is concentrated in.... well it's a lot of stuff that doesn't look promising for likely a very long time.... if ever again. Of course a lot of international investing feels that way too.

That's the difficulty with SCV investing..... you are buying a lot of junk. With the hopes that a strong cyclical rebound will come along and then the roof can blow off these things.
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

asif408 wrote: Wed Apr 15, 2020 3:36 pm Just think about all those folks who are heavy in emerging markets, commodities, and value stocks. They've had a lot longer period and much worse performance than the SCV tilters. If 5 years of underperformance bothers you then you probably shouldn't be deviating much from a boring 3 fund portfolio.
While those groups certainly are hurting, don't ignore Total International investors (part of that boring 3 fund portfolio) who have taken a LOT more pain for many 5 year (consecutive) periods.
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Re: whos' just about had it w/ SCV ?

Post by livesoft »

White Coat Investor wrote: Wed Apr 15, 2020 3:21 pmBut bailing now is the equivalent of selling low.
But that easily may be good thing. We cannot predict the future, so if one puts their money someplace else, then they can always come back anytime they want to. Maybe someplace else loses less money or gains more money before the return if there is one?
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Re: whos' just about had it w/ SCV ?

Post by Massdriver »

I see it as an opportunity to purchase SCV on the cheap relative to where it has been recently. I've been adding to SLYV to keep my tilt in balance on the way down and will continue to stay the course.

It's possible one day I will trim my ~25% SCV tilt of my U.S. equity portion of my portfolio just because I prefer simplicity as I get older and I have fallen more into the VT and chill camp, but I will do it at a time where SCV is outperforming, even if it happens 20 years from now. I think it's a bad time to be throwing away a tilt. Now is the time to stay the course. I believe that SCV will pay off for those of us that have iron stomachs and keep our portfolio allocations where we set them.
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Re: whos' just about had it w/ SCV ?

Post by Doc »

MotoTrojan wrote: Wed Apr 15, 2020 3:37 pm Not sure I follow... can you show me a time in history where holding VBR instead of VIOV would've dramatically changed the outcome?
VBR using the CRSP index hasn't been around very long.
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badapu
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Re: whos' just about had it w/ SCV ?

Post by badapu »

Im buying into SCV for the first time. Not interested in the SP500 at -11% YTD.
Rather take the extra 20% discount for SCV at -33% YTD.
Will see how it turns out after 30 years.
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Re: whos' just about had it w/ SCV ?

Post by whereskyle »

As some have suggested, if you've already dedicated years of investing into this fund, the worst thing you could do is sell now. One thing I can assume is that you've been buying at good prices, so if you really want to ease off and just keep contributing to a total market fund, I think that's never a terrible idea. But yes, you know the rule: do not sell low. If you've tired of the strategy, stop buying, but hold on. Like any part of the market, it's bound to have its day. I for one do not have the patience to wait 15 years for a year or two of amazing outperformance. If you made the decision thinking you could wait, I would say keep waiting. Doesn't mean you have to buy more of it though.
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Re: whos' just about had it w/ SCV ?

Post by rkhusky »

MotoTrojan wrote: Wed Apr 15, 2020 2:59 pm In other words, I am glad this is happening and view it as a great sign that the outperformance will last for years to come.
Or not. That is the nature of true risk. Small value may never outperform again in your lifetime. Or enough to make up for the recent under-performance.
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Re: whos' just about had it w/ SCV ?

Post by whodidntante »

We've been in an environment where large and growth have been supported more than small and value. The tide may shift, or it may not. I think it will, but I don't know when. Markets and sentiment favor change over stability.

I don't fault those who want to abandon their strategy. I think you're wrong to do so, but I get it. Maybe you should if you spend a lot of time worrying about this. There are no guarantees in investing. The thing you buy instead of SCV might lag SCV for decades. Or maybe it will shoot straight to the moon.

I get an annual bonus each year and it's a significant part of my total compensation. I'm going to throw my money away on USA SCV equities.
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Re: whos' just about had it w/ SCV ?

Post by HEDGEFUNDIE »

SCV still beating TSM performance over the past 20 years, what's the problem?

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Re: whos' just about had it w/ SCV ?

Post by TJSI »

White Coat Investor gave one of the best summaries of SCV tilt investing when he wrote:

" But the bottom line is that SCV tilt is a life long commitment."

That is a great summary of the decision to invest in SCV. The other factor difficult to comprehend is life itself. If you live long enough you will see and experience things you never expected. There will be birth, death, marriage, divorce, children, illness, great jobs, and layoffs. Many things will effect your life often out of your control.

So staying the course with SCV over a lifetime will be for many be too difficult.

TJSI
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Re: whos' just about had it w/ SCV ?

Post by AZAttorney11 »

I increased my SCV tilt a few weeks ago. I think I'll have the last laugh over the next 30-40 years.
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Re: whos' just about had it w/ SCV ?

Post by raven15 »

The only reasons I'm not shoveling money into the SCV hole faster is that 1) I don't have enough and 2) my asset allocation doesn't say to rebalance right now (although it said so twice in March).
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feh
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Re: whos' just about had it w/ SCV ?

Post by feh »

MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

feh wrote: Wed Apr 15, 2020 4:34 pm
MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
That spread has nothing on this 5 year period where the S&P600 value index had a 125% return relative to a -5% overall return for the S&P500. Would you have abandoned the S&P500 then?

I disagree that you were prepared, but I'll happily buy your shares from you.

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Re: whos' just about had it w/ SCV ?

Post by White Coat Investor »

feh wrote: Wed Apr 15, 2020 4:34 pm
MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
Which would suggest future outperformance will also be significant. Sure you don't want to wait around for it with us?
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Re: whos' just about had it w/ SCV ?

Post by index245 »

MotoTrojan wrote: Wed Apr 15, 2020 4:51 pm
feh wrote: Wed Apr 15, 2020 4:34 pm
MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
That spread has nothing on this 5 year period where the S&P600 value index had a 125% return relative to a -5% overall return for the S&P500. Would you have abandoned the S&P500 then?

I disagree that you were prepared, but I'll happily buy your shares from you.

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Yes, I remember when people told me I was foolish to invest in a S&P500 index as the only way to make money was to invest in individual stocks or through active management, as there were too many losers in that bunch. I also remember 15 years ago when anyone without emerging markets had no idea what was going on. Now emerging markets is considered cringeworthy (ha! guess I'm dumb, I still have the EM index)

Tilting involves a discipline that I don't think most buy-and-hold investors have. Makes me wonder about the one fund solution...at least you can't single out the laggards, probably less likely to sell low.
valuables
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Re: whos' just about had it w/ SCV ?

Post by valuables »

This has been widely discussed lately.
viewtopic.php?f=1&t=309194
viewtopic.php?p=5185744#p5185744
viewtopic.php?f=10&t=282533&start=1200

Signs of capitulation happening, means it's time to buy more. All aboard
WhiteMaxima
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Re: whos' just about had it w/ SCV ?

Post by WhiteMaxima »

Just buy total stock market. it has SCV and everything.
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Phineas J. Whoopee
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Re: whos' just about had it w/ SCV ?

Post by Phineas J. Whoopee »

Just about having had it with a factor approach is precisely what the factor advocates say will make it a losing proposition.

Why did you concentrate into that particular collection of stocks? Has the reason changed?

If you get out, it would be better to stay out from here on out.

PJW
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Re: whos' just about had it w/ SCV ?

Post by Elysium »

White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy.
They were ill-informed by the cheer leaders for SCV who had made posts after posts touting virtues of SCV outperformance, linking academic studies with backtested data going to 1926 (when no actual funds existed before 1993), with such rationalization as "there has never been a 15 year period when Value underperformed Growth", advice to ignore tracking error (trivializing), so on .. people were clamoring to get on board the DFA train even by paying an access fee. Instead, the message should have been more sober, saying it is a lifelong strategy, it could underperform for 15 or even 30 years, show that these are really risky companies that could do very poorly in economic downturn, have lopsided sector concentration, etc. I blame those who cheer leaded SCV as equally responsible for actions of those who are bailing out now.
White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm But bailing now is the equivalent of selling low.
It isn't. Money moves from one set of stocks into another. Selling SCV and moving into TSM is not selling low, instead the money gains whatever TSM is going to gain (or lose) from here on. The difference could be a net positive or a net negative depending on where either of these go. Sometimes you just have to move into an asset that is losing less.
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Re: whos' just about had it w/ SCV ?

Post by Massdriver »

feh wrote: Wed Apr 15, 2020 4:34 pm
MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
It's tough when periods like this happen and everyone on this forum is talking about how SCV is trash, it will never catch up, and you watch your fund falling relative to your total market funds. But for each of these periods, we believe in periods in the future where SCV will have its day and significantly outperform. These periods have happened before, and many of us are holding till it happens again. Will it happen again? No one can say for sure, but no one can say TSM will continue to outperform going forward either.

If TSM had been underperforming a similar amount, would everyone here be talking about ditching TSM for SCV? I know there is a difference, but it's something to think about. In the not too distant future, many of us that tilted will be celebrating, and in this moment those of us that held firm and bought on the way down could end up outperforming TSM.

If you get out, then the best thing to do is to grab VT and never look back. Don't get sucked back in if SCV starts to outperform in a few years. Make sure you don't regret your decision. Make sure you are forming your allocation and staying the course. Figure out what you're comfortable holding in good times and bad.
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Re: whos' just about had it w/ SCV ?

Post by Elysium »

Massdriver wrote: Wed Apr 15, 2020 5:23 pm If TSM had been underperforming a similar amount, would everyone here be talking about ditching TSM for SCV?
Yes. In fact that is what happened from 2000-2007. See my response to WCI. There was a lot of trashing TSM and praising virtues of Value premium going on. These things will happen again when the cycle changes. Bottomline though is most people were ill-informed about how long Value could under perform, in fact this period is even more testing because Value hasn't underperformed for this many years at a stretch before.
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Re: whos' just about had it w/ SCV ?

Post by Triple digit golfer »

HEDGEFUNDIE wrote: Wed Apr 15, 2020 4:10 pm SCV still beating TSM performance over the past 20 years, what's the problem?

https://www.portfoliovisualizer.com/fun ... mark=VTSMX
Not with regular contributions like most people invest.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
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feh
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Re: whos' just about had it w/ SCV ?

Post by feh »

White Coat Investor wrote: Wed Apr 15, 2020 4:54 pm
feh wrote: Wed Apr 15, 2020 4:34 pm
MotoTrojan wrote: Wed Apr 15, 2020 2:59 pmThis is why there is a small & factor premium, because of these periods of underperformance.
I was prepared for "underperformance". But, over the last 5 years, there is a 57% difference (+45 - -12) between the two.

That's not underperformance; that's a complete and utter thrashing.
Which would suggest future outperformance will also be significant. Sure you don't want to wait around for it with us?
I'm not changing my AA. Just venting.
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Re: whos' just about had it w/ SCV ?

Post by pascalwager »

I owned the DFA Targeted Value Fund (deciles 6-10) for 24 years and finally sold when I did an account transfer to reduce account management fees. The new account lineup didn't offer any value funds. Otherwise I would still be satisfied to own it at it's original AA level. But I wouldn't be dumping cash into it. I still do have a lot of DFA large value, US and int'l.

I don't know if there are factor premiums, but value might offer some diversification benefits. Unfortunately, I bought mine at age 53 which may have been far too old/late.
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Re: whos' just about had it w/ SCV ?

Post by Noobvestor »

White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm
feh wrote: Wed Apr 15, 2020 2:57 pm YTD and 5 year comparisons between VBR and total US.

To put things mildly, it stinks.

Image
Image
If you think the 5 year data is bad, look at the 15 year data.

But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
On a lark, I did just that (the bolded suggestion above). For the first 10 of the last 15 years, SCV returns were slightly higher than TSM: http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
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Re: whos' just about had it w/ SCV ?

Post by striker79 »

SCV is the cheapest thing you can buy right now, it's the most down over the past several years. After that would be mid cap value. Value has been taking a beating. When we have a normal stock market again, I predict that these will go up more than everything else for 1-2 years, not sure how long it will last. Low interest rates are here for a long time. As of right now, the more the market moves down, SCV will move down the most as it has done already and it has also gained the least when we have up days. SCV is the cheapest its been since the financial crisis. It will have its day eventually, but who knows when and who know after how much longer it goes down.
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Re: whos' just about had it w/ SCV ?

Post by Elysium »

striker79 wrote: Wed Apr 15, 2020 7:08 pm When we have a normal stock market again, I predict that these will go up more than everything else for 1-2 years...
Low interest rates are here for a long time.
This statement has a contradiction with your two different predictions, one is the prediction SCV will go up more than anything else, two is that low interest rates are here for a long time. Since SCV is 30% financial services sector, how can these two go together, is low interest rates for the foreseeable future good for financials sector or bad? how can you tell one way or other since they may be interdependent on two variables.
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Re: whos' just about had it w/ SCV ?

Post by JamesDean44 »

Focusing on a few years of recent performance is silly and may lead to harmful performance chasing.

If someone thought that SCV was a free lunch guaranteed to return a consistent, annual premium to the S&P 500, they were just fooling themselves.

If tracking "error" scares you, then, by definition, you should never have titled away from the benchmark (my comment is not directed specifically at the OP--just making a general observation).
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Re: whos' just about had it w/ SCV ?

Post by Nicolas Perrault »

What I find most annoying with US SCV is the 15% withholding taxes Uncle Sam charges me on the dividends as a Canadian investor. They are often larger than for US TSM by a few basis points because of differences in dividend yield, really annoying :annoyed
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

striker79 wrote: Wed Apr 15, 2020 7:08 pm SCV will move down the most as it has done already and it has also gained the least when we have up days.
You haven't been paying enough attention on recent up days :twisted:.
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Re: whos' just about had it w/ SCV ?

Post by HomerJ »

White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
What if you get a 20-25 year period of underperformance while expecting 5-15 year periods?

When is it okay to bail?

It does seem like every time something is "discovered" in finance, it stops working going forward...
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
MotoTrojan
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Re: whos' just about had it w/ SCV ?

Post by MotoTrojan »

HomerJ wrote: Wed Apr 15, 2020 9:05 pm
White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
What if you get a 20-25 year period of underperformance while expecting 5-15 year periods?

When is it okay to bail?

It does seem like every time something is "discovered" in finance, it stops working going forward...
Just because it isn't working in the US, doesn't mean it hadn't worked elsewhere. If the discovery Fama & French made was so obvious that it killed returns in the US I can't imagine it wouldn't be exploited equally abroad.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
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Re: whos' just about had it w/ SCV ?

Post by vencat »

HomerJ wrote: Wed Apr 15, 2020 9:05 pm
White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
What if you get a 20-25 year period of underperformance while expecting 5-15 year periods?

When is it okay to bail?

It does seem like every time something is "discovered" in finance, it stops working going forward...
Whenever it's ok to bail out of international stocks......
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Re: whos' just about had it w/ SCV ?

Post by White Coat Investor »

HomerJ wrote: Wed Apr 15, 2020 9:05 pm
White Coat Investor wrote: Wed Apr 15, 2020 3:21 pm But the bottom line is that a SCV tilt is a life long commitment. If you didn't expect 5-15 year periods of underperformance along the way, you were simply ill-informed to adopt this strategy. But bailing now is the equivalent of selling low.
What if you get a 20-25 year period of underperformance while expecting 5-15 year periods?

When is it okay to bail?

It does seem like every time something is "discovered" in finance, it stops working going forward...
This worked for a long time after being discovered before this current period of underperformance.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course
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