Small Cap Value heads Rejoice !!!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
hdas
Posts: 1327
Joined: Thu Jun 11, 2015 8:24 am

Small Cap Value heads Rejoice !!!

Post by hdas »

IJS / QQQ

Image
Last edited by hdas on Tue Sep 01, 2020 2:46 pm, edited 8 times in total.
....
User avatar
whodidntante
Posts: 9119
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: Small Cap Value heads Rejoice !!!

Post by whodidntante »

LOL. Alrighty then.
livesoft
Posts: 73344
Joined: Thu Mar 01, 2007 8:00 pm

Re: Small Cap Value heads Rejoice !!!

Post by livesoft »

Yes, but it now kinda makes sense to sell small-cap value and buy total US stock market today because this one-day thing ain't gonna last, right?
Wiki This signature message sponsored by sscritic: Learn to fish.
quantAndHold
Posts: 5028
Joined: Thu Sep 17, 2015 10:39 pm

Re: Small Cap Value heads Rejoice !!!

Post by quantAndHold »

I think you are right. I’ve been holding VBR for the past 10 years. I finally capitulated, changed my IPS to not tilt to SCV, and sold it last Friday.
Yes, I’m really that pedantic.
User avatar
nisiprius
Advisory Board
Posts: 41993
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Small Cap Value heads Rejoice !!!

Post by nisiprius »

Just to be clear... you're saying small-cap value has crashed and therefore must be "cheap," "on sale," "less risky than before," "higher expected return than before." Is that right?
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

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

* Full disclosure: I'm long VFVA
User avatar
steve roy
Posts: 1778
Joined: Thu May 13, 2010 5:16 pm

Re: Small Cap Value heads Rejoice !!!

Post by steve roy »

Sarcasm never goes out of style ...
Random Walker
Posts: 4611
Joined: Fri Feb 23, 2007 8:21 pm

Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

Emerging Markets had a good day as well :-)

Dave
Topic Author
hdas
Posts: 1327
Joined: Thu Jun 11, 2015 8:24 am

[Deleted]

Post by hdas »

[Deleted]
Last edited by hdas on Wed Jan 29, 2020 8:07 pm, edited 1 time in total.
....
User avatar
Sandtrap
Posts: 11754
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Small Cap Value heads Rejoice !!!

Post by Sandtrap »

FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image
Wiki Bogleheads Wiki: Everything You Need to Know
sf_tech_saver
Posts: 282
Joined: Sat Sep 08, 2018 9:03 pm

Re: Small Cap Value heads Rejoice !!!

Post by sf_tech_saver »

Every day is a great day to buy VTI :)
VTI is a modern marvel
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Small Cap Value heads Rejoice !!!

Post by rascott »

Sandtrap wrote: Mon Jun 03, 2019 8:21 pm FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image




What are we supposed to learn from a 1 year chart?
sf_tech_saver
Posts: 282
Joined: Sat Sep 08, 2018 9:03 pm

Re: Small Cap Value heads Rejoice !!!

Post by sf_tech_saver »

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

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

Just buy more VTI and your gains will likely increase :)

It seems a shame to take a beautiful thing like VTI and complicate it.
VTI is a modern marvel
User avatar
Dialectical Investor
Posts: 527
Joined: Mon Dec 03, 2018 11:41 pm

Re: Small Cap Value heads Rejoice !!!

Post by Dialectical Investor »

sf_tech_saver wrote: Mon Jun 03, 2019 9:31 pm Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.
There's usually more money in selling tools, ideas, etc. for other people to use than to use them yourself, except for the most capable or lucky users.
User avatar
Sandtrap
Posts: 11754
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii No Ka Oi , N. Arizona

Re: Small Cap Value heads Rejoice !!!

Post by Sandtrap »

rascott wrote: Mon Jun 03, 2019 9:01 pm
Sandtrap wrote: Mon Jun 03, 2019 8:21 pm FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image




What are we supposed to learn from a 1 year chart?
Vanguard Total Stock
Vanguard Small Cap Value
Image
Wiki Bogleheads Wiki: Everything You Need to Know
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Small Cap Value heads Rejoice !!!

Post by rascott »

Sandtrap wrote: Mon Jun 03, 2019 9:57 pm
rascott wrote: Mon Jun 03, 2019 9:01 pm
Sandtrap wrote: Mon Jun 03, 2019 8:21 pm FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image




What are we supposed to learn from a 1 year chart?
Vanguard Total Stock
Vanguard Small Cap Value
Image
The small cap there starts in 2011, vs 2009 for TMI.

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

Then try 20 years. Value has underperformed growth this bull market, no question. But that's one cycle.
heyyou
Posts: 3797
Joined: Tue Feb 20, 2007 4:58 pm

Re: Small Cap Value heads Rejoice !!!

Post by heyyou »

With equal slices of both funds, and several others, I don't know which one was best today, nor do I care.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

sf_tech_saver wrote: Mon Jun 03, 2019 9:31 pm Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

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

Just buy more VTI and your gains will likely increase :)

It seems a shame to take a beautiful thing like VTI and complicate it.
Yes, they actually can (earn more) unless nobody really knows nothing.

Can you imagine that - nobody really knows nothing? That'd mean all those experts, panelists, charters, researchers, that appear on CNBC, write articles and books, are all fooling themselves. Maybe that is true. But I'd find it far more strange if the reality is nobody knows nothing, and can never change that.
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Small Cap Value heads Rejoice !!!

Post by rascott »

sf_tech_saver wrote: Mon Jun 03, 2019 9:31 pm Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

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

Just buy more VTI and your gains will likely increase :)

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

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

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

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

If there is no small/value premium....I'll end up in the same place. If there is, like history has shown, I'll do better over next 30+ years. It's worth it to me to take a few hours/yr to take the shot.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

rascott wrote: Tue Jun 04, 2019 9:00 am
sf_tech_saver wrote: Mon Jun 03, 2019 9:31 pm Honest question: can one earn more from trying these tilt strategies or just finding real work that pays them for the research.

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

Just buy more VTI and your gains will likely increase :)

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

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

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

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

If there is no small/value premium....I'll end up in the same place. If there is, like history has shown, I'll do better over next 30+ years. It's worth it to me to take a few hours/yr to take the shot.
Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).
caklim00
Posts: 2271
Joined: Mon May 26, 2008 10:09 am

Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

azanon wrote: Tue Jun 04, 2019 9:29 amYeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).
I'm the worst at timing my purchases in the short term so take this with a grain of salt... I believe Larry recently published a study showing that factor momentum was even stronger then individual stock momentum. So, maybe there is something to it. I'm not going to be changing anything with my strategy as I can't time it anyway. And if I could, I've be using a leveraged strategy.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

caklim00 wrote: Tue Jun 04, 2019 9:51 am
azanon wrote: Tue Jun 04, 2019 9:29 amYeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).
I'm the worst at timing my purchases in the short term so take this with a grain of salt... I believe Larry recently published a study showing that factor momentum was even stronger then individual stock momentum. So, maybe there is something to it. I'm not going to be changing anything with my strategy as I can't time it anyway. And if I could, I've be using a leveraged strategy.
Well, I would say more important than anything I just said there, is to pick something you can stick with and believe in. I can't really ever believe in a market-cap weighted strategy for reasons already stated, so it wouldn't be right for me personally.
Topic Author
hdas
Posts: 1327
Joined: Thu Jun 11, 2015 8:24 am

[Deleted]

Post by hdas »

[Deleted]
Last edited by hdas on Wed Jan 29, 2020 8:07 pm, edited 1 time in total.
....
Jags4186
Posts: 5125
Joined: Wed Jun 18, 2014 7:12 pm

Re: Small Cap Value heads Rejoice !!!

Post by Jags4186 »

Sandtrap wrote: Mon Jun 03, 2019 9:57 pm
rascott wrote: Mon Jun 03, 2019 9:01 pm
Sandtrap wrote: Mon Jun 03, 2019 8:21 pm FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image




What are we supposed to learn from a 1 year chart?
Vanguard Total Stock
Vanguard Small Cap Value
Image
Image
Image
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

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


* I did subtract the industry standard 1% advisory fee as an approximate fee for DFA access. Your actual fee may vary and all other disclaimers.....
klaus14
Posts: 491
Joined: Sun Nov 25, 2018 7:43 pm

Re: Small Cap Value heads Rejoice !!!

Post by klaus14 »

azanon wrote: Tue Jun 04, 2019 9:29 am
Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).
What is wrong with what's popular? is it overvalued? if it was overvalued, some finance PHD would have picked it.
35% US, 20 ExUS Dev, 10% EM, 10% EM Bonds, 10% Gold, 10% EDV, 5% I/EE Bonds. 50% value tilt in stocks.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

klaus14 wrote: Tue Jun 04, 2019 12:24 pm
azanon wrote: Tue Jun 04, 2019 9:29 am
Yeah I'd agree with that, and add (my biggest hangup) is that you're basically buying proportionally more of what did well yesterday. On the surface, that strikes me as exactly the opposite of what you should do. When I started investing, the first thing i heard over and over was buy low and sell high, which sounded to me like a reasonable quip and suggestion. Market-cap indexing is a strategy that automatically does exactly the opposite, so I know I don't want that!

Now don't get me wrong, i want low cost investing, and I'm not necessarily pushing active investing per se. But at least buy some index that does something different than market cap. Maybe a large-cap Value index for example VVIAX. It's NOT doing that, and if anything, is automatically doing something hard (buying what's not popular).
What is wrong with what's popular? is it overvalued? if it was overvalued, some finance PHD would have picked it.
I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
klaus14
Posts: 491
Joined: Sun Nov 25, 2018 7:43 pm

Re: Small Cap Value heads Rejoice !!!

Post by klaus14 »

azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

for similar reasons, i overweight international stocks. But i don't argue that international stocks are mispriced.
35% US, 20 ExUS Dev, 10% EM, 10% EM Bonds, 10% Gold, 10% EDV, 5% I/EE Bonds. 50% value tilt in stocks.
User avatar
Taylor Larimore
Advisory Board
Posts: 29966
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

Owning the largest and most successful companies in the USA.

Post by Taylor Larimore »

rascott wrote: My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.
VTI (Vanguard Total Stock Market ETF) is what it is: The capitalization weighted total U.S. stock market.

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

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

klaus14 wrote: Tue Jun 04, 2019 12:49 pm
azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

for similar reasons, i overweight international stocks. But i don't argue, international stocks are mispriced.
Yes, for a pure EMH proponent/believer, none of my critiques of market-cap weighted index investing would apply. It would by definition, be a fair price. So to just go on the record, I'm not a pure EMH proponent.

So I guess i invest in a factor fund (VFVA in my case) for presumably the more typical reason people are doing it; because I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Owning the largest and most successful companies in the USA.

Post by rascott »

Taylor Larimore wrote: Tue Jun 04, 2019 12:59 pm
rascott wrote: My issue with a portfolio of only VTI is that it's so heavily based upon the performance of a relatively small number of mega-cap companies.
VTI (Vanguard Total Stock Market ETF) is what it is: The capitalization weighted total U.S. stock market.

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

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

Cheers.
Random Walker
Posts: 4611
Joined: Fri Feb 23, 2007 8:21 pm

Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

azanon wrote: Tue Jun 04, 2019 1:00 pm
klaus14 wrote: Tue Jun 04, 2019 12:49 pmbecause I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.
Don’t know if you’ve seen this yet, but it should be right up your alley! I’ve read about 20% of it so far.

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

Dave
Last edited by Random Walker on Tue Jun 04, 2019 1:10 pm, edited 1 time in total.
aristotelian
Posts: 8072
Joined: Wed Jan 11, 2017 8:05 pm

Re: Small Cap Value heads Rejoice !!!

Post by aristotelian »

My 2% SLYV tilt is rocking this week!
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Small Cap Value heads Rejoice !!!

Post by rascott »

Jags4186 wrote: Tue Jun 04, 2019 11:38 am
Sandtrap wrote: Mon Jun 03, 2019 9:57 pm
rascott wrote: Mon Jun 03, 2019 9:01 pm
Sandtrap wrote: Mon Jun 03, 2019 8:21 pm FYI:

Vanguard Small Cap Value Index (dark blue)

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

Compared to Small Value (orange)

Image




What are we supposed to learn from a 1 year chart?
Vanguard Total Stock
Vanguard Small Cap Value
Image
Image
Image


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


I own them all in fairly equal proportion...so I'm fine with whatever.
azanon
Posts: 2947
Joined: Mon Nov 07, 2011 10:34 am

Re: Small Cap Value heads Rejoice !!!

Post by azanon »

Random Walker wrote: Tue Jun 04, 2019 1:10 pm
azanon wrote: Tue Jun 04, 2019 1:00 pm
klaus14 wrote: Tue Jun 04, 2019 12:49 pmbecause I do believe in some degree of market mispricings, so there is potential "value" to harvest with those mispricings. As a specific anecdotal example, I believe people on average prefer, say, Tesla and Google stock over Ford and, as a result, will pay more for it (I picked Ford, cause it's VFVA's top holding). It's an intuitive conclusion that i'm coming to, and maybe that's wrong. I think people have a tendency to overpay for what's popular. I could be completely wrong about that, but in my personal opinion, I don't think that I am.
Don’t know if you’ve seen this yet, but it should be right up your alley! I’ve read about 20% of it so far.

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

Dave
Wow thanks Dave! That was my favorite price of all (free). I one-clicked purchased it and will read the first chance I get on my ipad.
stocknoob4111
Posts: 1511
Joined: Sun Jan 07, 2018 12:52 pm

Re: Small Cap Value heads Rejoice !!!

Post by stocknoob4111 »

still waiting to see when the SP600 will reclaim it's all time high of 1100, it's still 17% below those all time highs last year!!
MathIsMyWayr
Posts: 2282
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Small Cap Value heads Rejoice !!!

Post by MathIsMyWayr »

I do not have to spend a lot of time comparing SCV vs. others. The two ETFs, VTI (Vanguard Total Stock Market Index) and IJS (iShares S&P Small-Cap 600 Value), happen to have their prices close to each other, currently around $143. It is like watching a foot race.
rascott
Posts: 2348
Joined: Wed Apr 15, 2015 10:53 am

Re: Small Cap Value heads Rejoice !!!

Post by rascott »

:dollar
klaus14 wrote: Tue Jun 04, 2019 12:49 pm
azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

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


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

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

That certainly isn't happening in the large/mega cap space where pricing is very efficient.
Random Walker
Posts: 4611
Joined: Fri Feb 23, 2007 8:21 pm

Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

rascott wrote: Tue Jun 04, 2019 1:50 pm I think there is something to the fact that prices are more efficient for large caps.
I do too! In fact, I believe all the other factors (value, momentum, trend, profitability) are more significant premia in the small cap realm.

Dave
klaus14
Posts: 491
Joined: Sun Nov 25, 2018 7:43 pm

Re: Small Cap Value heads Rejoice !!!

Post by klaus14 »

rascott wrote: Tue Jun 04, 2019 1:50 pm I think there is something to the fact that prices are more efficient for large caps.

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

That certainly isn't happening in the large/mega cap space where pricing is very efficient.
this makes sense.
however, pricing argument still applies to small caps as a group. Maybe analysts don't have time to individually price them, but they don't need to. Some people say shipping sector is underpriced today. they can just buy SEA ETF.
So individual stocks less efficiently priced doesn't imply whole group is underpriced.
35% US, 20 ExUS Dev, 10% EM, 10% EM Bonds, 10% Gold, 10% EDV, 5% I/EE Bonds. 50% value tilt in stocks.
sf_tech_saver
Posts: 282
Joined: Sat Sep 08, 2018 9:03 pm

Re: Small Cap Value heads Rejoice !!!

Post by sf_tech_saver »

The replies are interesting here!

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

Bogle investing seems rooted in the bedrock of economic growth vs. asset pricing arbitrage. Once you stray into thinking you have a consensus-beating read on asset pricing why not do far more than just SCV tilting....
VTI is a modern marvel
caklim00
Posts: 2271
Joined: Mon May 26, 2008 10:09 am

Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

hdas wrote: Mon Jun 03, 2019 1:52 pm Today is day one, of the resurrection **. Make sure to be fully loaded :twisted:

Image


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

Update June 4: Just a better chart (data from Tiingo) for ppl to appreciate the opportunity set.
Can someone explain this chart to me? I'm not sure what all the lines indicate.
User avatar
2pedals
Posts: 1231
Joined: Wed Dec 31, 2014 12:31 pm

Re: Small Cap Value heads Rejoice !!!

Post by 2pedals »

rascott wrote: Tue Jun 04, 2019 1:50 pm :dollar
klaus14 wrote: Tue Jun 04, 2019 12:49 pm
azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

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


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

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

That certainly isn't happening in the large/mega cap space where pricing is very efficient.
For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

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

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

Where is the market gains that market discovery should produce?
Topic Author
hdas
Posts: 1327
Joined: Thu Jun 11, 2015 8:24 am

[Deleted]

Post by hdas »

[Deleted]
Last edited by hdas on Wed Jan 29, 2020 8:07 pm, edited 1 time in total.
....
fennewaldaj
Posts: 959
Joined: Sun Oct 22, 2017 11:30 pm

Re: Small Cap Value heads Rejoice !!!

Post by fennewaldaj »

2pedals wrote: Wed Jun 05, 2019 9:18 am
rascott wrote: Tue Jun 04, 2019 1:50 pm :dollar
klaus14 wrote: Tue Jun 04, 2019 12:49 pm
azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

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


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

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

That certainly isn't happening in the large/mega cap space where pricing is very efficient.
For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

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

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

Where is the market gains that market discovery should produce?
To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.
User avatar
2pedals
Posts: 1231
Joined: Wed Dec 31, 2014 12:31 pm

Re: Small Cap Value heads Rejoice !!!

Post by 2pedals »

fennewaldaj wrote: Wed Jun 05, 2019 12:35 pm
2pedals wrote: Wed Jun 05, 2019 9:18 am
rascott wrote: Tue Jun 04, 2019 1:50 pm :dollar
klaus14 wrote: Tue Jun 04, 2019 12:49 pm
azanon wrote: Tue Jun 04, 2019 12:33 pm I regret using the word "popular" there at the end - sorry. My issue with market-cap weighting though was clearly stated, and it has nothing to do with it being more popular. Again, sorry for the distraction.
no worries.
still, EMH applies. if a stock goes up it doesn't automatically mean it's now overvalued. if a stock goes down, it doesn't mean it's now undervalued.

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

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

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


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

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

That certainly isn't happening in the large/mega cap space where pricing is very efficient.
For the different active vs. passive funds fund categories you would think if the market is less efficient you would see more active funds in the small cap arena beating their bench marks but .....

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

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

Where is the market gains that market discovery should produce?
To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.
Ah, true but is a market inefficient in a meaningful way if the cost to harvest it's inefficiencies exceeds it's gains?
stocknoob4111
Posts: 1511
Joined: Sun Jan 07, 2018 12:52 pm

Re: Small Cap Value heads Rejoice !!!

Post by stocknoob4111 »

Down 1% again today... very close to bear market territory now.
Jags4186
Posts: 5125
Joined: Wed Jun 18, 2014 7:12 pm

Re: Small Cap Value heads Rejoice !!!

Post by Jags4186 »

fennewaldaj wrote: Wed Jun 05, 2019 12:35 pm To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.
The only number that matters is what you, the investor, receives. What if I had the secret to outperform the market by 20% year over year and I would be willing to let you in on that secret for a 21% annual fee?
fennewaldaj
Posts: 959
Joined: Sun Oct 22, 2017 11:30 pm

Re: Small Cap Value heads Rejoice !!!

Post by fennewaldaj »

Jags4186 wrote: Thu Jun 06, 2019 1:41 pm
fennewaldaj wrote: Wed Jun 05, 2019 12:35 pm To really compare you need to see there performance before fees though right? Actve small cap funds have higher expenses on average.
The only number that matters is what you, the investor, receives. What if I had the secret to outperform the market by 20% year over year and I would be willing to let you in on that secret for a 21% annual fee?
Right it doesn't help you. The point I was getting at is that it may be that more small cap managers are out performing before fees. This doesn't help the individual investor but it does indicate that there is more advantages to be exploited if it is the case.
User avatar
Taylor Larimore
Advisory Board
Posts: 29966
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

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

Post by Taylor Larimore »

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

Sorry, I don't understand your thinking. Investors receive investment returns minus the investment costs. This is a primary benefit of low-cost total market index funds which charge virtually nothing.
Jack Bogle: "You get to keep exactly what you don't pay for."
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Post Reply