Small Cap Value heads Rejoice !!!

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willthrill81
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

wolf359 wrote: Wed Mar 31, 2021 8:56 pm SCV requires a long-term commitment. It may take 30 years to pay off, if it does at all.
I agree on the commitment, but that's true of any investment strategy or asset class.

Historically, SCV has outperformed large-caps in every 20 year period on record save one, so to the extent that that holds true going forward, those holding SCV over multi-decade periods are likely to be rewarded for their patience and commitment.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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vineviz
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Re: Small Cap Value heads Rejoice !!!

Post by vineviz »

james22 wrote: Tue Apr 06, 2021 10:16 am
vineviz wrote: Mon Apr 05, 2021 6:55 pm 1) That’s not a logical extension of the point I made.
Why not?
The point I made was that a rational investor who tilts toward SCV during accumulation (whatever strength that tilt may be) will not abandon that tilt in decumulation. In other words, whatever the starting tilt is (from 0% to 100%) it would be irrational to REDUCE that tilt during retirement.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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RovenSkyfall
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Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

thenextguy wrote: Mon Apr 05, 2021 7:33 pm There are many people that don't tilt toward factors because they're concerned about factor premiums not presenting itself over their investment horizon. Reducing their equities in favor of bonds does nothing to eliminate the risk of SCV underperforming. Their equity portion of their portfolio would still underperform the market if it's a bad timeline for the factor. It's completely rational for someone that is tilted toward a factor when they are younger to lower that exposure over time as their investment horizon shortens. The amount of bonds to hold is a completely different issue and unrelated to the risk of possible underperformance of a factor tilt.
We are discussing the rational behavior of an investor who believes in the premium of SCV. If you believe in the diversification benefit and premium of SCV then that belief should remain constant throughout your investing and you ought to plan to de-risk with your exposure to equities. One's change in risk tolerance does not change the validity of the facts about the benefits of diversifying or the mathematical evidence for a factor premium. This means those benefits persist and to keep those benefits (which the investor believes in), you ought to de-risk with adding treasuries.

One argument you might use would be Uncorrelated's MVO. This shows as ones CRRA utility function increases (risk tolerance decreases), one would hold less SCV. But keep in mind, this MVO doesnt suggest any TMS exposure. This means, if you were to make your argument based on Uncorrelated's MVO, the investor should hold US Value, SCV and if their CRRA utility function increases (risk tolerance decreases), they would drop the SCV in favor of ITT. The problem with this argument is that time horizon should not impact ones CRRA.....
I saved my money, but it can't save me | The Chariot
james22
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Re: Small Cap Value heads Rejoice !!!

Post by james22 »

vineviz wrote: Tue Apr 06, 2021 11:47 am
james22 wrote: Tue Apr 06, 2021 10:16 am
vineviz wrote: Mon Apr 05, 2021 6:55 pm 1) That’s not a logical extension of the point I made.
Why not?
The point I made was that a rational investor who tilts toward SCV during accumulation (whatever strength that tilt may be) will not abandon that tilt in decumulation. In other words, whatever the starting tilt is (from 0% to 100%) it would be irrational to REDUCE that tilt during retirement.
Gotcha.
MotoTrojan
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

james22 wrote: Tue Apr 06, 2021 10:19 am The Growth-Value Cycle

https://awealthofcommonsense.com/2021/0 ... lue-cycle/
Or maybe the Russell 1000 Value Index (or any of these closet-indexing ways to expose to value) is just a bad choice.

A totally naive P/E sort has smoked it, R1K, and R1K Growth.

https://alphaarchitect.com/2020/08/18/v ... est-firms/
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RovenSkyfall
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Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

MotoTrojan wrote: Tue Apr 06, 2021 5:20 pm Or maybe the Russell 1000 Value Index (or any of these closet-indexing ways to expose to value) is just a bad choice.

A totally naive P/E sort has smoked it, R1K, and R1K Growth.

https://alphaarchitect.com/2020/08/18/v ... est-firms/
Thanks for the article. Glad to be aware of what Russel does.
I saved my money, but it can't save me | The Chariot
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