If you started investing today, would you tilt?

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new2bogle2
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If you started investing today, would you tilt?

Post by new2bogle2 »

I know tilting can be a highly debated topic on here, but what if you were staring today . . . Would you tilt?

Originally I assumed I’d only be asking this question to people who currently tilt, knowing some might hand had success but wouldn’t recommend it to someone starting out early in investing. And others might have not had success with their tilt but don’t plan to change as they made a decision to buy and hold, and may or may not suggest a new investor tilt.

But I’m sure there are some with a 3 fund portfolio who may want to make a comment and I want to welcome those points of view too.

I’d like to assume someone who has maybe already put some money aside after a few years of working and not just an 18 year old fresh out of school. So, for this theoretical question let’s assume the person is 30 years old with $200k saved in retirement accounts and they will be working 30-40 more years. Knowing what you’ve been through and knowing they are setting fresh today, what’s your recommendation on tilting and if your pro tilting, in what way should they tilt?
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CrazyCatLady
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Re: If you started investing today, would you tilt?

Post by CrazyCatLady »

I wouldn’t. It adds too much complexity for not much return. I tilt small cap (originally small cap value). My 401(k) doesn’t have a small cap value option (only growth) so I used my Roth IRA (which is dwarfed by my 401(k) and taxable accounts). To keep my portfolio at 7.5-10% small cap, I had to buy small cap growth in my 401(k) since taxable would not have been tax efficient. I realized that made no sense, so I stopped buying small cap and am letting my percentage naturally reduce. I think I’m down to about 4% now.
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Lawrence of Suburbia
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Re: If you started investing today, would you tilt?

Post by Lawrence of Suburbia »

I'd be shorting windmill stocks.

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UpperNwGuy
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Re: If you started investing today, would you tilt?

Post by UpperNwGuy »

I do not and, if I were starting today, would not tilt toward factors. I hold less than market weight of international stocks, so I tilt toward US stocks.
8301
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Re: If you started investing today, would you tilt?

Post by 8301 »

I shouldn't now and wouldn't later.
impatientInv
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Re: If you started investing today, would you tilt?

Post by impatientInv »

Biggest problem I had with tilting was complexity - multiple funds, balancing and keeping up with it for long term. For tilting to work, one has to keep doing it long term, 20+ years. And during this time there will be long stretches when it won't seem to work. And one would want to just drop it.
Rick Ferri wrote: Fri Jul 10, 2020 10:21 am A portfolio is like a birthday cake:

Your allocation to stocks, bonds, and cash are the layers of the cake;
Your allocation to International stocks vs. US stocks, and corporate bond vs governments is the icing on the cake;
Small-value and other factor tilts are decorations on top of the icing;
Commodities, bit-coin, and other alternatives are bright glowing candles - soon to be blown out and forgotten.

Rick Ferri
viewtopic.php?t=319820

That said, I remember Rick saying in a podcast that in his personal portfolio, he has a factor tilt.

The new Avantis fund of funds AVGE is best if one believes in factor tilts. For simplicity I started buying VT, though I preferred only 30% international. I am considering switching to AVGE instead
Last edited by impatientInv on Fri Jan 13, 2023 9:54 pm, edited 1 time in total.
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Ocean77
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Re: If you started investing today, would you tilt?

Post by Ocean77 »

Back in my 20s when I started investing, I tilted quite a bit. But now I'm having only an occasional glass of wine.
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FrugalInvestor
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Re: If you started investing today, would you tilt?

Post by FrugalInvestor »

UpperNwGuy wrote: Fri Jan 13, 2023 9:16 pm I do not and, if I were starting today, would not tilt toward factors. I hold less than market weight of international stocks, so I tilt toward US stocks.
+1
I'm essentially a 2-funder today and well into retirement, but I wasn't always. If I were 30 again, and know what I know now I'd be a 3-funder (again).
Last edited by FrugalInvestor on Fri Jan 13, 2023 10:53 pm, edited 1 time in total.
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unclescrooge
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Re: If you started investing today, would you tilt?

Post by unclescrooge »

Yes I would tilt.

I currently slice and dice as well.
secondopinion
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Re: If you started investing today, would you tilt?

Post by secondopinion »

new2bogle2 wrote: Fri Jan 13, 2023 8:57 pm I know tilting can be a highly debated topic on here, but what if you were staring today . . . Would you tilt?

Originally I assumed I’d only be asking this question to people who currently tilt, knowing some might hand had success but wouldn’t recommend it to someone starting out early in investing. And others might have not had success with their tilt but don’t plan to change as they made a decision to buy and hold, and may or may not suggest a new investor tilt.

But I’m sure there are some with a 3 fund portfolio who may want to make a comment and I want to welcome those points of view too.

I’d like to assume someone who has maybe already put some money aside after a few years of working and not just an 18 year old fresh out of school. So, for this theoretical question let’s assume the person is 30 years old with $200k saved in retirement accounts and they will be working 30-40 more years. Knowing what you’ve been through and knowing they are setting fresh today, what’s your recommendation on tilting and if your pro tilting, in what way should they tilt?
Being very close to the type of person you are asking for, I would say that it is greatly contingent on the person.

I tilted value in selected stocks before I knew there was such a factor; I thought that was good business. I no longer maintain singleton stocks (because of the effort required; I did just fine with returns). Because I think the dynamics of value stocks are favorable in my situation, I continue the tilt.

Tilts are not meant for everyone; it is easiest not to have one. But for those who want to put in a little effort, it can be a way to tailor a portfolio to meet needs slightly better (which is subjective).
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
smooth_rough
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Re: If you started investing today, would you tilt?

Post by smooth_rough »

Why not nano caps?
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tetractys
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Re: If you started investing today, would you tilt?

Post by tetractys »

If I ever experience a steady trend of reverse aging, I will hire a wealth manager to do all my tilting.
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Metsfan91
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Re: If you started investing today, would you tilt?

Post by Metsfan91 »

new2bogle2 wrote: Fri Jan 13, 2023 8:57 pm I know tilting can be a highly debated topic on here, but what if you were staring today . . . Would you tilt?

I’d like to assume someone who has maybe already put some money aside after a few years of working and not just an 18 year old fresh out of school. So, for this theoretical question let’s assume the person is 30 years old with $200k saved in retirement accounts and they will be working 30-40 more years. Knowing what you’ve been through and knowing they are setting fresh today, what’s your recommendation on tilting and if your pro tilting, in what way should they tilt?
If I were to start today, yes, I'll be tilting - small-cap value... I won't hold any bond right now and for many years to the future because I have got some 30-40 years for investing. I'll hold 70% US and 30% International. I'll use total market funds.

For reference, I started some years ago, and I am all in equity - roughly 50/50 US/Ex-US and with small-value tilt.
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Mel Lindauer
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Re: If you started investing today, would you tilt?

Post by Mel Lindauer »

No, I wouldn't do it and I wouldn't recommend that my family or friends do it.
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Nathan Drake
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Re: If you started investing today, would you tilt?

Post by Nathan Drake »

Yes. Tilting shouldn’t have anything to do with timing. It should be in your AA if you are convinced, like I and many others believe, that it enhances your portfolio.
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WhiteMaxima
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Re: If you started investing today, would you tilt?

Post by WhiteMaxima »

Emerging market , value index (small and large) non US market index.
muffins14
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Re: If you started investing today, would you tilt?

Post by muffins14 »

new2bogle2 wrote: Fri Jan 13, 2023 8:57 pm I know tilting can be a highly debated topic on here, but what if you were staring today . . . Would you tilt?

Originally I assumed I’d only be asking this question to people who currently tilt, knowing some might hand had success but wouldn’t recommend it to someone starting out early in investing. And others might have not had success with their tilt but don’t plan to change as they made a decision to buy and hold, and may or may not suggest a new investor tilt.

But I’m sure there are some with a 3 fund portfolio who may want to make a comment and I want to welcome those points of view too.

I’d like to assume someone who has maybe already put some money aside after a few years of working and not just an 18 year old fresh out of school. So, for this theoretical question let’s assume the person is 30 years old with $200k saved in retirement accounts and they will be working 30-40 more years. Knowing what you’ve been through and knowing they are setting fresh today, what’s your recommendation on tilting and if your pro tilting, in what way should they tilt?

Yes, tilting to value, profitability. Expected returns and safe withdrawal rates are higher.
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gtwhitegold
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Re: If you started investing today, would you tilt?

Post by gtwhitegold »

Nathan Drake wrote: Sat Jan 14, 2023 12:47 am Yes. Tilting shouldn’t have anything to do with timing. It should be in your AA if you are convinced, like I and many others believe, that it enhances your portfolio.
This. My opinion is that most people who tilt now would likely tilt if they had to do it again and people that don't may be slightly more likely to change, but still unlikely to start tilting. I personally tilt some, but I would likely have much more of a tilt to my portfolio if I had understood it and other things about investing prior to my start to investing over 20 years ago. However, there are many other things about investing that I would like to have done better on earlier than just deciding to tilt or not.
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enad
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Re: If you started investing today, would you tilt?

Post by enad »

No.

Jack Bogle gave a speech in Chicago on June 26, 2002, titled "The Telltale Chart"

On Page 7 (of 17) of the speech he had this to say:

I’ve been excoriated for my views, but I’m comforted by this reported exchange between Dr. Fama and a participant at a recent investment conference: “What do you say to otherwise intelligent people like Jack Bogle who examine this same data and conclude that there is no size or value premium?” His response: “How far are they from the slide? If I get far enough away, I don’t see it either . . . Whether you decide to tilt towards value depends on whether you are willing to bear the associated risk . . . The market portfolio is always efficient . . . For most people, the market portfolio is the most sensible decision.” Amen!

Dr. Fama's response in the exchange was excellent. To tilt is as you say a personal preference.
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blimp
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Re: If you started investing today, would you tilt?

Post by blimp »

Rick Ferri wrote: Fri Jul 10, 2020 10:21 am A portfolio is like a birthday cake:

Your allocation to stocks, bonds, and cash are the layers of the cake;
Your allocation to International stocks vs. US stocks, and corporate bond vs governments is the icing on the cake;
Small-value and other factor tilts are decorations on top of the icing;
Commodities, bit-coin, and other alternatives are bright glowing candles - soon to be blown out and forgotten.

Rick Ferri
This is gold.

I personally do not tilt. My view is that the efficient market theory is always at work, correcting small, temporary inefficiencies. By the time academic research demonstrates a back-tested evidence-based way to tilt (small, value, profitability, momentum, etc), the market may have corrected for it. Surely, once studies are published and Nobel prizes are awarded, eager traders have already bid up the values of favored securities, erasing the advantage.

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Re: If you started investing today, would you tilt?

Post by zero_coupon »

Mel Lindauer wrote: Sat Jan 14, 2023 12:31 am No, I wouldn't do it and I wouldn't recommend that my family or friends do it.
I was under the impression that you believe in the "Mel's Unloved Midcaps" strategy. I even considered using midcap growth as part of a dividend reduction strategy, as discussed in the following thread:

viewtopic.php?t=380774

No more midcaps?
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Re: If you started investing today, would you tilt?

Post by drjd »

I am very nearly the person in your example and I decided, for now, to tilt. That said, I think there are two reasons to tilt and I think one is a good reason and other a not as good reason.

Most common reason I hear to tilt: Increase returns of that section of your portfolio by 1-2%, which increase your total return by 0.1-0.5%, which over 30-40 years is a bunch of money! I think this is fair, but there is just as as likely you underperform by that much and lose out on "a bunch of money." So, if you are tilting for increased returns it may, or may not work out.

Second reason I don't hear talked about: Just to diversify your portfolio for future inflation/economy shocks. I think we all learned a lot about how to manage risk over the last 2-3 years, but if you were retired and had a bucket of SCV to pull from over the last 2 years you would have been WAY better off. So this is the reason I actually have a 10% tilt, not to increase my portfolio returns, but just to have another bucket to pull from if an even like this one happens while I'm retired.
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Re: If you started investing today, would you tilt?

Post by harvestbook »

I started out tilting because paul merriman was the first reasonable person I read on the subject of investing (before Bogle and others). The 10- and 15-year analysis of past performance seemed convincing that I could eke out an extra half to one percent a year over time with a mix of stock indexes. I've rebalanced to that with slight variations over the years-- Vanguard's international value is a bit too expensive for me to justify it so I just mix that in total international.

But if I started now, I wouldn't. I've encountered the challenge of it's not about knowing what to buy and when, but also what to sell if needed. I rebalance once a year, which isn't much work, but more and more I appreciate the simplicity of just owning everything all the time and not worrying about it or second-guessing.
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Re: If you started investing today, would you tilt?

Post by burritoLover »

You are going to have to define what a tilt means. The Bogle 0-20% international stocks is a tilt away from global market cap. The typical bond portfolio also excludes certain types of bonds (TIPS, junk, ex-US) and the allocation may not be at market weight. Just because you have a 3-fund portfolio doesn't mean your portfolio is tilt-free - it is all in how you define it.
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Re: If you started investing today, would you tilt?

Post by pennywiser »

I find it funny that 90% of people here say they don't tilt. But if you ask them how much international stock they hold, in 99% cases they will say zero or less than market weight.

In my mind, if you don't hold "all world, all caps" index fund you tilt. Probably to developed world large caps...

I personally don't hold EM but I try to keep my developed countries at market weight. I tilt slightly towards small caps.
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Re: If you started investing today, would you tilt?

Post by markjk »

I really wouldn't. After investing for a few decades, I'm convinced it's best to just buy the entire market and keep it simple.

I'm not against strategies like tilting. I look at them like any other bet. They are just that, a bet. I don't think it's possible to know what tilt or specific strategy may work over some future time period. So, I don't see any value in doing it. I think it adds additional thought and work without any way to know if it's going to pay off. So, I choose to avoid it.
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Re: If you started investing today, would you tilt?

Post by Triple digit golfer »

No. Every day I wake up and can invest however I want to.
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CyclingDuo
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Re: If you started investing today, would you tilt?

Post by CyclingDuo »

harvestbook wrote: Sat Jan 14, 2023 6:24 amI started out tilting because paul merriman was the first reasonable person I read on the subject of investing (before Bogle and others). The 10- and 15-year analysis of past performance seemed convincing that I could eke out an extra half to one percent a year over time with a mix of stock indexes. I've rebalanced to that with slight variations over the years-- Vanguard's international value is a bit too expensive for me to justify it so I just mix that in total international.

But if I started now, I wouldn't. I've encountered the challenge of it's not about knowing what to buy and when, but also what to sell if needed. I rebalance once a year, which isn't much work, but more and more I appreciate the simplicity of just owning everything all the time and not worrying about it or second-guessing.
On a side note, I have a little experiment going on with the Three Fund Portfolio vs. Merriman's Ultimate Buy & Hold Portfolio both invested 70/30 with the same exact funding amounts each and every week/month/year. The accounts are automatically rebalanced with each additional investment and all dividends are reinvested. It's all set up on automatic pilot on a weekly basis, so there is no fuss involved on my part. I am now in year six of the experiment and as of yesterday's close, the Three Fund Portfolio is $4 higher than the Ultimate Buy & Hold. Although the Ultimate was $2 higher last week. :mrgreen:

Rob Berger did a dive into the Ultimate Buy & Hold here...

https://www.youtube.com/watch?v=OWOs9kGNT6I

Plans are to continue funding these accounts for a full ten years while working, and beyond that I will determine the funding strategy as we will be in our decumulation years at that point, so the funding would come from excess pension/SS income to continue the experiment and most likely pass the accounts on to our heirs at TOD after 30-35 years. Maybe once these portfolios get to the 30 year point I can answer the OP's question a bit better. Look for a post in 2048. :twisted:

CyclingDuo
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Re: If you started investing today, would you tilt?

Post by jcjc »

If tilting it would be small cap blend for me VOO. It has some mid caps in that index too I believe. In retirement it would be a dividend fund not to open a can a worms 😂.
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Re: If you started investing today, would you tilt?

Post by Artsypenguin »

I started investing last year. I have some small fractional shares of small cap funds and mid cap funds where I wish I had just put the money into VTI or SPY.
I originally envisioned my portfolio as a third spy a third vti and a third qqq but I got shook about the nasdaq as it fell harder. Still dcad into one share of it so i can sell it when I'm positive but that's it. Now i just do VTI, SPY, BND and a little VXUS
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Re: If you started investing today, would you tilt?

Post by Nathan Drake »

Artsypenguin wrote: Sat Jan 14, 2023 9:32 am I started investing last year. I have some small fractional shares of small cap funds and mid cap funds where I wish I had just put the money into VTI or SPY.
I originally envisioned my portfolio as a third spy a third vti and a third qqq but I got shook about the nasdaq as it fell harder. Still dcad into one share of it so i can sell it when I'm positive but that's it. Now i just do VTI, SPY, BND and a little VXUS
Sounds like you are heavily tilting you just apparently don’t realize it
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Apathizer
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Re: If you started investing today, would you tilt?

Post by Apathizer »

impatientInv wrote: Fri Jan 13, 2023 9:53 pm Biggest problem I had with tilting was complexity - multiple funds, balancing and keeping up with it for long term. For tilting to work, one has to keep doing it long term, 20+ years. And during this time there will be long stretches when it won't seem to work. And one would want to just drop it.
Rick Ferri wrote: Fri Jul 10, 2020 10:21 am A portfolio is like a birthday cake:

Your allocation to stocks, bonds, and cash are the layers of the cake;
Your allocation to International stocks vs. US stocks, and corporate bond vs governments is the icing on the cake;
Small-value and other factor tilts are decorations on top of the icing;
Commodities, bit-coin, and other alternatives are bright glowing candles - soon to be blown out and forgotten.

Rick Ferri
viewtopic.php?t=319820

That said, I remember Rick saying in a podcast that in his personal portfolio, he has a factor tilt.

The new Avantis fund of funds AVGE is best if one believes in factor tilts. For simplicity I started buying VT, though I preferred only 30% international. I am considering switching to AVGE instead
Tilting is pretty simple now. In addition to AVGE, it can also be done with two slanted ETFs like AVUS and DFAX.

Your assertion 'tilting takes 20 years to work' is fallacious. I started tilting about 3 years ago, which has mitigated losses compared to a MCW portfolio. Any factor can underperform in the short term or even several years, but it's unlikely the 5 most relevant factors will all perform poorly simultaneously over an extended period.
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Charles Joseph
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Re: If you started investing today, would you tilt?

Post by Charles Joseph »

I wish I had just invested in total stock and total bond markets from day one. That's where I am now. I choose all US because all markets are not created equal and that's often impossible to price in. For example how do you price in the lack of transparency of so many markets around the world? US is good enough for me.
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Taylor Larimore
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Re: If you started investing today, would you tilt?

Post by Taylor Larimore »

Bogleheads:
"Tilted funds are benchmarked against common index funds and then enhanced with additional securities that "lean" towards a certain investment strategy, in an effort to outperform the baseline fund." Investopedia
In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
Christine Benz, Morningstar Director of Personal Finance: "The Bogleheads' "Three-Fund Portfolio" (not tilted) is the ultimate in elegant minimalism."

Bill Bernstein: "When you buy the market, you are hiring the aggregate judgment of the most brilliant and well-informed minds in finance."

John Bogle: "Never think you know more than the market. Nobody does."

Bogleheads' Guide to The Three-Fund Portfolio: “As an investor, you have a choice: You can be like the gamblers who try to beat the casino or you can be the casino by investing in total market index funds. It’s an easy choice once your understand the odds.”

Warren Buffett, famed investor: "The only way an investor can get killed is by high fees or by trying to outsmart the market."

Andrew Clarke, co-author of Wealth of Experience: "If your stock portfolio looks very different from the broad stock market, you're assuming additional risk that may, or may not, pay off."

"Jonathan Clements, author and Wall Street Journal columnist: "If you want a surefire strategy for outpacing most other U.S. stock investors, simply shovel money into an index fund that tracks a broad U.S. market."

Jim Dahle, adviser and author of The White Coat Investor: When interviewing potential advisers, one of the first questions I would ask is: “Can you beat the market yourself or choose mutual fund managers who can?” If the answer is "yes", stand up and walk out."

Aswarth Damodaran, NYU Professor and author of 20+ finance books: "Beating the market is never easy and anyone who argues otherwise is fighting history and ignoring the evidence."

Douglas Diamond, Nobel Laureate: "Asked what he’ll do with his share of the (Nobel) prize money, Diamond said he’ll probably put it in a total market index fund."

Prof. Eugene Fama, Nobel Laureate: " For most people, the market portfolio is the most sensible decision."

Forbes Advisor: "Total stock market index funds are an ideal choice to diversify a retirement portfolio, plus they’re tax efficient, which also makes them a good fit for a taxable brokerage account."

Kenneth French, Distinguished Professor of Finance: "The market is smarter than we are and no matter how smart we get, the market will always be smarter than we are."

Alan Greenspan, former Chairman of the Federal Reserve: "Prices in the marketplace are by definition the right price."

Daniel Kahneman, Nobel Laureate: "Investors shouldn't delude themselves about beating the market. They're just not going to do it. It's just not going to happen."
Best wishes.
Taylor
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steadyosmosis
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Re: If you started investing today, would you tilt?

Post by steadyosmosis »

No.
When I changed my goal from trying to have a 'best' portfolio, to simply having a 'satisfactory' outcome, I stopped tilting.
My portfolio is now much simpler and I worry about it far less.
As one person said, 'There is always going to be somebody faster than you.'
Apathizer
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Re: If you started investing today, would you tilt?

Post by Apathizer »

Taylor Larimore wrote: Sat Jan 14, 2023 10:44 am In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
While that's your opinion there's significant evidence otherwise. It's been discussed many times.

Taking snippet quotes and saying look at what all these smart people say can often be misleading and is among the weakest forms of evidence. Many of those quotes predate the availability of low cost factor slanted funds.

It's also misleading to say factor slants are attempting to outsmart the market or however you want to phrase it. With Factor slants we're just diversifying into different risks and return potential. Slanting to small cap value increases risk, but also return potential and diversification.

Science progresses based on new information and testing. Many of your quotes are dated, incomplete and misleading. Now with more products available it's easy to structure a factor slanted portfolio with only one or two equity funds. They only need to be rebalanced at most a couple times annually, so it's really not that complicated.
Last edited by Apathizer on Sat Jan 14, 2023 11:40 am, edited 1 time in total.
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Nathan Drake
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Re: If you started investing today, would you tilt?

Post by Nathan Drake »

Apathizer wrote: Sat Jan 14, 2023 11:19 am
Taylor Larimore wrote: Sat Jan 14, 2023 10:44 am In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
While that's your opinion there's significant evidence otherwise. It's been discussed many times.

Taking snippet quotes and saying look at what all these smart people say can often be misleading and is among the weakest forms of evidence. Many of those quotes predate the availability of low cost factor slanted funds.

Science progresses based on new information and testing. Many of your quotes are dated, incomplete and misleading. Now with more products available it's easy to structure a factor slanted portfolio with only one or two equity funds. They only need to be rebalanced at most a couple times annually, so it's really not that complicated.
Exactly.

It's like saying "the investor that is 100% stocks is more likely to underperform a Target Date Fund".

If that investor is less likely to stay the course with 100% stocks vs. a Target Date Fund this is true, but empirically we know that this should be false over the long term. The 100% stock investor is bearing more risk with more potential for return. This is the same exact scenario as a tilted portfolio investor.

And I should add, one DOES NOT need to bear more risk if they decide to tilt - they can increase bonds to compensate for taking on more risk in the equity allocation. The "larry portfolio" is merely designed to have more diversifiable risk premia.
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Re: If you started investing today, would you tilt?

Post by secondopinion »

Apathizer wrote: Sat Jan 14, 2023 11:19 am
Taylor Larimore wrote: Sat Jan 14, 2023 10:44 am In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
But maybe your opinion but there's significant evidence otherwise. It's been discussed many times.

Taking snippet quotes and saying look at what all these smart people say can often be misleading and is among the weakest forms of evidence. Many of those quotes predate the availability of low cost factor slanted funds.

Science progresses based on new information and testing. Many of your quotes are dated, incomplete and misleading. Now with more products available it's easy to structure a factor slanted portfolio with only one or two equity funds. They only need to be rebalanced at most a couple times annually, so it's really not that complicated.
A little bit blunt, but true. But I agree that the best minds in the market compositely priced the stocks. The best minds in the market hold each stock for a different composite reason, however; tilts merely cluster those stocks according to those reasons. If one has the same reasons as the best minds to hold a particular stock, they should hold it. Proper tilts are not a market-beating strategy; it is the realization of matching stocks to one’s objectives.
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Re: If you started investing today, would you tilt?

Post by Apathizer »

Nathan Drake wrote: Sat Jan 14, 2023 11:27 am And I should add, one DOES NOT need to bear more risk if they decide to tilt - they can increase bonds to compensate for taking on more risk in the equity allocation. The "larry portfolio" is merely designed to have more diversifiable risk premia.
Yes as you probably know I've made the same argument. I'm at the point where I'm more interested in consistency than maximizing long-term return. The best way to maximize consistency is to be well diversified, which includes equity diversity and bonds.

While a factor slanted is more risky on its own, when paired with bonds it seems likely to be less risky. For instance a slanted 50/50 portfolio will probably be less volatile than and have similar returns to a market cap weight 60/40 portfolio.
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Re: If you started investing today, would you tilt?

Post by secondopinion »

Nathan Drake wrote: Sat Jan 14, 2023 11:27 am
Apathizer wrote: Sat Jan 14, 2023 11:19 am
Taylor Larimore wrote: Sat Jan 14, 2023 10:44 am In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
While that's your opinion there's significant evidence otherwise. It's been discussed many times.

Taking snippet quotes and saying look at what all these smart people say can often be misleading and is among the weakest forms of evidence. Many of those quotes predate the availability of low cost factor slanted funds.

Science progresses based on new information and testing. Many of your quotes are dated, incomplete and misleading. Now with more products available it's easy to structure a factor slanted portfolio with only one or two equity funds. They only need to be rebalanced at most a couple times annually, so it's really not that complicated.
Exactly.

It's like saying "the investor that is 100% stocks is more likely to underperform a Target Date Fund".

If that investor is less likely to stay the course with 100% stocks vs. a Target Date Fund this is true, but empirically we know that this should be false over the long term. The 100% stock investor is bearing more risk with more potential for return. This is the same exact scenario as a tilted portfolio investor.

And I should add, one DOES NOT need to bear more risk if they decide to tilt - they can increase bonds to compensate for taking on more risk in the equity allocation. The "larry portfolio" is merely designed to have more diversifiable risk premia.
When one can use cheap leverage to buy treasuries, it even makes the discussion more interesting. Given some stocks are less volatile than the market, maybe leverage them up?

The options are endless; the question is what works best for the investor?
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Re: If you started investing today, would you tilt?

Post by Mike Scott »

I have advised my young adult children into Vanguard Life Strategy or Target Date funds for a variety of reasons but ultimately _simplicity_ because they are less interested in the nuts and bolts of investing and it gives them a single thing to "buy and hold". They really do not need to think about it other than setting up the autoinvest. Savings rate is vastly more important. My core holdings are also balanced funds (Vanguard Life Strategy and Wellington) but my International is about 15% of total so I guess there are tilts of sorts if you want. The context for tilting is also complicated by all of the potential investments that are not accessible. There are many investments not included in indices so almost everyone is investing in a restricted space because of convenience and accessibility. The arguments for more specific fund tilting have not been persuasive to me but that does not mean they are wrong either.
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Re: If you started investing today, would you tilt?

Post by Apathizer »

secondopinion wrote: Sat Jan 14, 2023 11:41 am A little bit blunt, but true. But I agree that the best minds in the market compositely priced the stocks. The best minds in the market hold each stock for a different composite reason, however; tilts merely cluster those stocks according to those reasons. If one has the same reasons as the best minds to hold a particular stock, they should hold it. Proper tilts are not a market-beating strategy; it is the realization of matching stocks to one’s objectives.
It's not just the best minds who compositely determine share price, it's the composite of everyone, and not everyone is brilliant. While I think it's reasonable to think most investors are rational and well informed, not all are. I think groupthink can lead many stocks to be potentially overpriced, and I think we've seen that with some growth stocks like Tesla.

That's really the only flaw I see with market cap weight investing. A market cap weight index must hold all stocks in equal weight, even stocks unlikely to perform well like small growth. Factor slants to me aren't so much about stock picking but eliminating or reducing weight in such stocks. I think an argument can be made there's no reason to hold low profit or unprofitable expensive growth stocks, at least not in market cap weights.
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Re: If you started investing today, would you tilt?

Post by Apathizer »

Mike Scott wrote: Sat Jan 14, 2023 11:53 am I have advised my young adult children into Vanguard Life Strategy or Target Date funds for a variety of reasons but ultimately _simplicity_ because they are less interested in the nuts and bolts of investing and it gives them a single thing to "buy and hold". They really do not need to think about it other than setting up the autoinvest. Savings rate is vastly more important. My core holdings are also balanced funds (Vanguard Life Strategy and Wellington) but my International is about 15% of total so I guess there are tilts of sorts if you want. The context for tilting is also complicated by all of the potential investments that are not accessible. There are many investments not included in indices so almost everyone is investing in a restricted space because of convenience and accessibility. The arguments for more specific fund tilting have not been persuasive to me but that does not mean they are wrong either.
Yes I think that is a great argument for simple auto rebalancing funds. Especially if someone wants to maintain a consistent allocation let's say 60/40 all they need to do is select the appropriate fund and contribute and withdraw as needed or wanted. That kind of simplicity is really appealing and enables one to enjoy life and not think much about money.
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Re: If you started investing today, would you tilt?

Post by whodidntante »

Most portfolios tilt fairly heavily in one way or another, including those that sharply limit international. There's no benefit to thinking in black and white.
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Re: If you started investing today, would you tilt?

Post by dcabler »

Yes and more than I did when I started out.

Cheers.
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Re: If you started investing today, would you tilt?

Post by nedsaid »

Hard to say what I would do. I came to adulthood in the late seventies and early eighties and it was a different world back then. Different influential voices back then, for example Wall $treet Week and Nightly Business Report were about the only television programs devoted to investing back then. Today, you have entire channels devoted to financial news.

Given that the influences are different today than they were then, it is impossible to say what I would do today. Not only that, but certain things I just fell into over the years. For example, many people today are not aware of the existence of this forum. I took an odd route to getting here: Wall $treet Week-->Nightly Business Report-->Bob Brinker-->Money Magazine-->John Bogle interviewed on Wall $treet Week-->Jason Zweig's article on the Bogleheads-->Morningstar--->Bogleheads. I was also influenced by a friend who went into the Brokerage business. Today, such programs like Wall Street Week and Nightly Business Report are off the air; Bob Brinker is retired and his MoneyTalk program is discontinued; Money Magazine is out of Print; I have been out of touch with the friend for a decade; and John Bogle is deceased. Hard to say what I would fall into and discover today were I in my twenties.

I had influences earlier on that got me started on Value investing, got me interested in Mid/Small-Caps and acquired a taste for aggressive Growth funds. I also got interested in individual stocks early on.

If I had to guess, I would probably be mostly invested in ETFs, my money would be at a discount brokerage, and I would probably mostly use my smart phone to access my accounts. Perhaps I would be very interested in the High Tech sector of the market.

Hard to say, where I in my early twenties now what I would be watching, the people that I would come across, and the companies I would be dealing with. Pretty sure I would know about indexing and ETFs.
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Re: If you started investing today, would you tilt?

Post by secondopinion »

Apathizer wrote: Sat Jan 14, 2023 11:56 am
secondopinion wrote: Sat Jan 14, 2023 11:41 am A little bit blunt, but true. But I agree that the best minds in the market compositely priced the stocks. The best minds in the market hold each stock for a different composite reason, however; tilts merely cluster those stocks according to those reasons. If one has the same reasons as the best minds to hold a particular stock, they should hold it. Proper tilts are not a market-beating strategy; it is the realization of matching stocks to one’s objectives.
It's not just the best minds who compositely determine share price, it's the composite of everyone, and not everyone is brilliant. While I think it's reasonable to think most investors are rational and well informed, not all are. I think groupthink can lead many stocks to be potentially overpriced, and I think we've seen that with some growth stocks like Tesla.

That's really the only flaw I see with market cap weight investing. A market cap weight index must hold all stocks in equal weight, even stocks unlikely to perform well like small growth. Factor slants to me aren't so much about stock picking but eliminating or reducing weight in such stocks. I think an argument can be made there's no reason to hold low profit or unprofitable expensive growth stocks, at least not in market cap weights.
I made a bit of money in 2020 from holding small cap growth for a year; the intended holding period of such stocks might be shorter than decades. After all, the companies that comes by this means sometimes have already gone through private investment rounds already; so, one might need to treat them accordingly.
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Re: If you started investing today, would you tilt?

Post by Fallible »

new2bogle2 wrote: Fri Jan 13, 2023 8:57 pm ...
So, for this theoretical question let’s assume the person is 30 years old with $200k saved in retirement accounts and they will be working 30-40 more years. Knowing what you’ve been through and knowing they are setting fresh today, what’s your recommendation on tilting and if your pro tilting, in what way should they tilt?
It's not possible to answer this question in a meaningful way based on the information provided. Tilting adds risk and knowing only your hypothetical person's age, savings, and time/work horizon doesn't provide enough information on their emotional risk tolerance or their need to take on additional risk, or their understanding of risk.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: If you started investing today, would you tilt?

Post by JasonHutt »

Apathizer wrote: Sat Jan 14, 2023 11:19 am
Taylor Larimore wrote: Sat Jan 14, 2023 10:44 am In my opinion investors who try to "beat the market" by tilting, in addition to adding taxes and complexity, are more likely to underperform a total stock market index fund. These experts agree:
While that's your opinion there's significant evidence otherwise. It's been discussed many times.

Taking snippet quotes and saying look at what all these smart people say can often be misleading and is among the weakest forms of evidence. Many of those quotes predate the availability of low cost factor slanted funds.

It's also misleading to say factor slants are attempting to outsmart the market or however you want to phrase it. With Factor slants we're just diversifying into different risks and return potential. Slanting to small cap value increases risk, but also return potential and diversification.

Science progresses based on new information and testing. Many of your quotes are dated, incomplete and misleading. Now with more products available it's easy to structure a factor slanted portfolio with only one or two equity funds. They only need to be rebalanced at most a couple times annually, so it's really not that complicated.
I would add that some of the references (e.g. Bernstein) absolutely do recommend tilting. B's model portfolio includes large market, large value, small market, small value, and REITs on the US side. I don't recall him doing anything particularly interesting with international, except maybe Emerging Markets.

I'm not the investor being pointed to here, but I'll say that Hell yes I tilt! And I consider it by far preferable to holding market cap. I use large market, large value, mid market, mid value, small value, REITs, total international, and mid value/small value developed markets. Because my employer forces different accounts for my contributions and their matches, and because I need to use BrokerageLink to buy some of the funds I need (no ETFs), the annual rebalancing is a real pain. This year it took a good 5 hours total with a spreadsheet, including all of the buying and selling to reach my target allocation. In a typical IRA, things would be much, much easier. There must be a program that can handle this.

The rationale for this tilt is straightforward. First, I do believe in value and small premia (with the exception of small cap growth). Second, different years favor growth vs value vs REITs and, US vs. Ex-US. This means that even when correlations are fairly high, the actual performance difference is substantial by year. This decreases the volatility of the portfolio as a whole. Rebalancing will favor this partitioning of the portfolio, even if there were no value and small premia. I don't know how others would respond to market fluctuations, but I really like the idea that last year was Value's turn, with Large Value ruling the roost. I was nice to have a bright spot when Treasuries thanked me by tanking the same year as the S&P 500.
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Re: If you started investing today, would you tilt?

Post by Mel Lindauer »

zero_coupon wrote: Sat Jan 14, 2023 2:29 am
Mel Lindauer wrote: Sat Jan 14, 2023 12:31 am No, I wouldn't do it and I wouldn't recommend that my family or friends do it.
I was under the impression that you believe in the "Mel's Unloved Midcaps" strategy. I even considered using midcap growth as part of a dividend reduction strategy, as discussed in the following thread:

viewtopic.php?t=380774

No more midcaps?
I guess, as others have stated, that you need to first define "tilting". For me, this all started 20+ years ago in a discussion/debate with Larry Swedroe on the old Morningstar Vanguard Diehards forum. At that time, tilting for both Larry and me was his "Slice and Dice", meaning large caps and small caps. Over the years, I've continued with that definition whenever talking about tilting.

So my love for (and writing about) midcaps was because I considered that to be "a better mousetrap/alternate" to tilting, Swedroe style.

However, if you define "tilting" as anything except Total Market, then I plead guilty.
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