New Avantis worldwide ETF with value tilt

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

guppyguy wrote: Wed Nov 09, 2022 5:07 pm
vineviz wrote: Wed Nov 09, 2022 3:58 pm
guppyguy wrote: Wed Nov 09, 2022 3:43 pm I just thought Avantis/DFA would have a better empirical explanation for the home country tilt, other than it reflecting customer preference. Feels more like product positioning rather than analytical rigor.
When a fund company offers one fund-of-funds, you can be sure they will design it to attract the maximum amount of assets they can.

Inflexible optimizers will likely NEVER be happy with a pre-set asset allocation, so it makes little sense to try to accommodate them. Products like this have a market segment in mind, and that's folks for whom "close enough" is acceptable.
Makes sense.

Is the US/Intl allocation of AVGE static at 70/30 or does it float either way depending on market cap like VT? That, to me, makes a difference.
It's dynamic which, in a FoF makes sense. I checked yesterday and it's 73/27 which is a shift from 72/28 so we're seeing the sliders in the funds shift. Of course, I would expect this with their funds since it's actively managed.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
guppyguy
Posts: 337
Joined: Tue Jan 30, 2018 4:24 pm

Re: New Avantis worldwide ETF with value tilt

Post by guppyguy »

drumboy256 wrote: Wed Nov 09, 2022 5:31 pm
guppyguy wrote: Wed Nov 09, 2022 5:07 pm
vineviz wrote: Wed Nov 09, 2022 3:58 pm
guppyguy wrote: Wed Nov 09, 2022 3:43 pm I just thought Avantis/DFA would have a better empirical explanation for the home country tilt, other than it reflecting customer preference. Feels more like product positioning rather than analytical rigor.
When a fund company offers one fund-of-funds, you can be sure they will design it to attract the maximum amount of assets they can.

Inflexible optimizers will likely NEVER be happy with a pre-set asset allocation, so it makes little sense to try to accommodate them. Products like this have a market segment in mind, and that's folks for whom "close enough" is acceptable.
Makes sense.

Is the US/Intl allocation of AVGE static at 70/30 or does it float either way depending on market cap like VT? That, to me, makes a difference.
It's dynamic which, in a FoF makes sense. I checked yesterday and it's 73/27 which is a shift from 72/28 so we're seeing the sliders in the funds shift. Of course, I would expect this with their funds since it's actively managed.
Ahh, thanks...any idea what their methodology is? Is global market cap a consideration? Thanks...
User avatar
vineviz
Posts: 14454
Joined: Tue May 15, 2018 1:55 pm
Location: Baltimore, MD

Re: New Avantis worldwide ETF with value tilt

Post by vineviz »

guppyguy wrote: Wed Nov 09, 2022 5:07 pm Is the US/Intl allocation of AVGE static at 70/30 or does it float either way depending on market cap like VT? That, to me, makes a difference.
The prospectus stipulates a fairly tight range for US exposure (63% to 77%).

That's basically equivalent to a 10% "rebalancing band", which indicates to me that Avantis don't intend to TACTICALLY adjust the amount of home bias but that they are prepared to let it drift a bit up and down if that minimizes transaction and/or tax costs.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
comeinvest
Posts: 1657
Joined: Mon Mar 12, 2012 6:57 pm

Re: New Avantis worldwide ETF with value tilt

Post by comeinvest »

vineviz wrote: Wed Nov 09, 2022 6:27 pm
guppyguy wrote: Wed Nov 09, 2022 5:07 pm Is the US/Intl allocation of AVGE static at 70/30 or does it float either way depending on market cap like VT? That, to me, makes a difference.
The prospectus stipulates a fairly tight range for US exposure (63% to 77%).

That's basically equivalent to a 10% "rebalancing band", which indicates to me that Avantis don't intend to TACTICALLY adjust the amount of home bias but that they are prepared to let it drift a bit up and down if that minimizes transaction and/or tax costs.
Rebalancing - whatever band or rebalancing period - would slightly increase returns, if history is any precedent.
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

Portfolio visualizer now has a month of AVGE data. I know such short-term data doesn't mean much, but I still think comparing asset allocation is somewhat informative. I compared VT, AVGE, and DFAC/DFAX. AVGE and DFAC/DFAX seem to have a about the same average market cap while AVGE has more value slant and has performed a little better. At the risk of performance chasing, I must say AVGE allocation looks really nice. :D
https://www.portfoliovisualizer.com/bac ... tion4_3=30
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
Nathan Drake
Posts: 3965
Joined: Mon Apr 11, 2011 12:28 am

Re: New Avantis worldwide ETF with value tilt

Post by Nathan Drake »

drumboy256 wrote: Wed Nov 09, 2022 12:21 am
Phyneas wrote: Tue Nov 08, 2022 11:24 pm
Apathizer wrote: Tue Nov 08, 2022 8:53 pm
I'm a little puzzled why Eduardo Repetto would say the AVGE allocation is a reflection of what investors want rather than what is optimal. I mean wouldn't most investors want an optimal allocation? And so far it seems pretty optimal to me. I wouldn't mind a little more ex-US allocation, but it still seems fine.
I think part of the problem is that there may not be an optimal amount, or optimal may be more conditional upon the investor's goals. A previous BH discussion on it can be found here.

If I remember correctly, the tilt that Ben Felix applies is based on having enough SCV to increase risk-adjusted returns (at least based on historical returns) without too much tracking error regret (potentially leading to behavioral errors from investors). You can see a rough comparison of Ben Felix vs AVGE style boxes here, although AVGE's numbers seem to have changed somewhat since then. Also, it could make sense to use the average of what their investors choose for themselves as a sort of pseudo-market cap weighting of the concept, especially in the absence of an empirical answer - though if one exists, I'd certainly like to know it too!
What's interesting is that Felix touts the SCV but in the AVGE model, if you're not in another fund within Avantis or DFA to capture that risk premium, you're not going to get the full benefit with just the AVGE fund.

I looked at the Morningstar mapping and looked at mine, and this is what mine came out:

Code: Select all

Value Blend Growth
 7      19      5
 4       6      2
 32     21      5
Behavior wise, I was able to get into the AVUVX fund (AVUV Mutual Fund) without needing $5M, so that was a plus, I'll probably not sell out of that fund until I absolutely need to. I recently sold out of my AVDV (Intl. Small Cap Value) into AVGE as I had noticed that AVDV was creeping into Mid-cap Value (which isn't bad) but for what it's worth from my point of view, not small cap in nature. Although, a warm Boglehead shout out to Mel's unloved Mid-caps, playing the SCV long game is a long (and at times) lonely road. Anyone starting out, I would still advocate that AVGE is composed fairly well with the factors for small value accounted for, just not as heavily leaning as my portfolio.
AVDV is highly dissimilar to AVGE, I don’t understand why you would choose to make that substitution
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

Nathan Drake wrote: Thu Nov 10, 2022 2:50 pm
drumboy256 wrote: Wed Nov 09, 2022 12:21 am
Phyneas wrote: Tue Nov 08, 2022 11:24 pm
Apathizer wrote: Tue Nov 08, 2022 8:53 pm
I'm a little puzzled why Eduardo Repetto would say the AVGE allocation is a reflection of what investors want rather than what is optimal. I mean wouldn't most investors want an optimal allocation? And so far it seems pretty optimal to me. I wouldn't mind a little more ex-US allocation, but it still seems fine.
I think part of the problem is that there may not be an optimal amount, or optimal may be more conditional upon the investor's goals. A previous BH discussion on it can be found here.

If I remember correctly, the tilt that Ben Felix applies is based on having enough SCV to increase risk-adjusted returns (at least based on historical returns) without too much tracking error regret (potentially leading to behavioral errors from investors). You can see a rough comparison of Ben Felix vs AVGE style boxes here, although AVGE's numbers seem to have changed somewhat since then. Also, it could make sense to use the average of what their investors choose for themselves as a sort of pseudo-market cap weighting of the concept, especially in the absence of an empirical answer - though if one exists, I'd certainly like to know it too!
What's interesting is that Felix touts the SCV but in the AVGE model, if you're not in another fund within Avantis or DFA to capture that risk premium, you're not going to get the full benefit with just the AVGE fund.

I looked at the Morningstar mapping and looked at mine, and this is what mine came out:

Code: Select all

Value Blend Growth
 7      19      5
 4       6      2
 32     21      5
Behavior wise, I was able to get into the AVUVX fund (AVUV Mutual Fund) without needing $5M, so that was a plus, I'll probably not sell out of that fund until I absolutely need to. I recently sold out of my AVDV (Intl. Small Cap Value) into AVGE as I had noticed that AVDV was creeping into Mid-cap Value (which isn't bad) but for what it's worth from my point of view, not small cap in nature. Although, a warm Boglehead shout out to Mel's unloved Mid-caps, playing the SCV long game is a long (and at times) lonely road. Anyone starting out, I would still advocate that AVGE is composed fairly well with the factors for small value accounted for, just not as heavily leaning as my portfolio.
AVDV is highly dissimilar to AVGE, I don’t understand why you would choose to make that substitution
The point was I wanted the other Avantis funds of EM including the other International factors (LV) without dealing with various funds across accounts. Right now, with my old 401k, DW's accounts, my new workplace accounts, HSA + my Roth running mHFEA, taxable (that's 7 accounts) I figured it was the lesser evil simplifying to capture some of the other Avantis funds. As noted above, my heavy SCV tilt is in play of which I don't see reducing or selling out of that position just because.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
rando80
Posts: 1
Joined: Wed Oct 26, 2022 3:57 pm

Re: New Avantis worldwide ETF with value tilt

Post by rando80 »

I'm really liking the simplicity of AVGE for the equities portion of a portfolio vs. a small group of funds with the temptation to watch and tinker when rebalancing.

But are there any notable concerns with making such a new fund from a relatively new company effort a significant % of long-term taxable account assets? For example, the tax efficiency seems like an unknown, and I can imagine there is a risk of shifts in the fund's management direction down the line that could impact the value of the higher expense ratio long after one is locked in from a tax perspective with significant capital gains. Is that as silly concern?
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

rando80 wrote: Sat Nov 12, 2022 3:19 am I'm really liking the simplicity of AVGE for the equities portion of a portfolio vs. a small group of funds with the temptation to watch and tinker when rebalancing.

But are there any notable concerns with making such a new fund from a relatively new company effort a significant % of long-term taxable account assets? For example, the tax efficiency seems like an unknown, and I can imagine there is a risk of shifts in the fund's management direction down the line that could impact the value of the higher expense ratio long after one is locked in from a tax perspective with significant capital gains. Is that as silly concern?
For new taxable deployments of capital, AVGE fits the bill. The FoF that I reference is the iShares AOX funds which have benefited from doing most of the tax work within the fund and not affecting the investor. I'd imagine Avantis will be doing the same thing to reduce dividends and/or capital gains.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
LeoB
Posts: 59
Joined: Mon Feb 17, 2020 10:42 pm

Re: New Avantis worldwide ETF with value tilt

Post by LeoB »

drumboy256 wrote: Sat Nov 12, 2022 1:09 pm
rando80 wrote: Sat Nov 12, 2022 3:19 am I'm really liking the simplicity of AVGE for the equities portion of a portfolio vs. a small group of funds with the temptation to watch and tinker when rebalancing.

But are there any notable concerns with making such a new fund from a relatively new company effort a significant % of long-term taxable account assets? For example, the tax efficiency seems like an unknown, and I can imagine there is a risk of shifts in the fund's management direction down the line that could impact the value of the higher expense ratio long after one is locked in from a tax perspective with significant capital gains. Is that as silly concern?
For new taxable deployments of capital, AVGE fits the bill. The FoF that I reference is the iShares AOX funds which have benefited from doing most of the tax work within the fund and not affecting the investor. I'd imagine Avantis will be doing the same thing to reduce dividends and/or capital gains.
Regarding AVGE for a significant % of a taxable account, I would be more concerned with the future direction of Avantis than the fund of funds’ tax efficiency. Sure, Avantis seems well-run now.

This is speculation, but what will happen after Eduardo Repetto (CIO of Avantis) leaves? He’s in his fifties now and left DFA before. Will Avantis then continue to attract DFA-type employees and maintain its culture? Will Avantis funds be merged with other American Century (its parent company) strategies? Are you comfortable with those other American Century value funds?

Of course, these are all unknowable questions. But I wouldn’t bet the entirety of my taxable accounts on the answers.
guppyguy
Posts: 337
Joined: Tue Jan 30, 2018 4:24 pm

Re: New Avantis worldwide ETF with value tilt

Post by guppyguy »

I'd still rather wait for DFA's Global Equity DGEIX, or roughly constructed in pieces (as I currently do DFAC/DFAX), than dip my toes into AVGE.

I think AVGE and Avantis are just still too new to trust 100% of my equity with permanently.
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

I think what's funny is people thinking about Avantis just being "good" because of a single person is a little odd. Although, precedent are the Buffet followers... thinking that Berkshire is just as good as Warren's picks. I suppose the "risk" by selecting the AVGE fund would be that the out performance dwindles and then people shift into another fund because it's not performing as well. Time will tell I suppose.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
User avatar
steve r
Posts: 1109
Joined: Mon Feb 13, 2012 8:34 pm
Location: Connecticut

Re: New Avantis worldwide ETF with value tilt

Post by steve r »

guppyguy wrote: Sat Nov 12, 2022 2:00 pm I'd still rather wait for DFA's Global Equity DGEIX, or ...
Why wait? Just curious. Perhaps I am missing something.
"Never underrate either the majesty of simplicity or its proven effectiveness." Jack Bogle| Global Stocks w/ modest tilts (AVGE, QCSTPX & VT), debt free, just enough cash & chill
LeoB
Posts: 59
Joined: Mon Feb 17, 2020 10:42 pm

Re: New Avantis worldwide ETF with value tilt

Post by LeoB »

drumboy256 wrote: Sat Nov 12, 2022 6:45 pm I think what's funny is people thinking about Avantis just being "good" because of a single person is a little odd. Although, precedent are the Buffet followers... thinking that Berkshire is just as good as Warren's picks. I suppose the "risk" by selecting the AVGE fund would be that the out performance dwindles and then people shift into another fund because it's not performing as well. Time will tell I suppose.
I believe manager risk is prudent to think about, especially when considering an actively managed fund for a large position in a taxable account. Perhaps some would say factor funds like AVGE are not actively managed? I'm not so convinced. Whether the active ETF is from Avantis, DFA, Alpha Architect, or another company, there are differences in implementation which affect fund performance.

In contrast, index funds like Vanguard Total US Stock Market (VTI) and iShares Total US Stock Market (ITOT) are basically commodities, with nearly identical implementation and performance regardless of personnel changes.
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

LeoB wrote: Sat Nov 12, 2022 10:18 pm
drumboy256 wrote: Sat Nov 12, 2022 6:45 pm I think what's funny is people thinking about Avantis just being "good" because of a single person is a little odd. Although, precedent are the Buffet followers... thinking that Berkshire is just as good as Warren's picks. I suppose the "risk" by selecting the AVGE fund would be that the out performance dwindles and then people shift into another fund because it's not performing as well. Time will tell I suppose.
I believe manager risk is prudent to think about, especially when considering an actively managed fund for a large position in a taxable account. Perhaps some would say factor funds like AVGE are not actively managed? I'm not so convinced. Whether the active ETF is from Avantis, DFA, Alpha Architect, or another company, there are differences in implementation which affect fund performance.

In contrast, index funds like Vanguard Total US Stock Market (VTI) and iShares Total US Stock Market (ITOT) are basically commodities, with nearly identical implementation and performance regardless of personnel changes.
I would agree if AVGE wasn’t 45% AVUS. With half the fund being VTI/ITOT equiv, I don’t think there’s a lot wrong with it, conceptually. I still think buying and holding has more behavioral pit falls than the fund itself. It’s the old adage of SCV underperformance pushes you to move back to market cap weight, then factors are not for that particular investor.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
guppyguy
Posts: 337
Joined: Tue Jan 30, 2018 4:24 pm

Re: New Avantis worldwide ETF with value tilt

Post by guppyguy »

steve r wrote: Sat Nov 12, 2022 7:01 pm
guppyguy wrote: Sat Nov 12, 2022 2:00 pm I'd still rather wait for DFA's Global Equity DGEIX, or ...
Why wait? Just curious. Perhaps I am missing something.
I should have clarified....ETF version of DGEIX. No access otherwise, unless I wanted to hire an advisor.
User avatar
steve r
Posts: 1109
Joined: Mon Feb 13, 2012 8:34 pm
Location: Connecticut

Re: New Avantis worldwide ETF with value tilt

Post by steve r »

drumboy256 wrote: Sat Nov 12, 2022 10:53 pm
LeoB wrote: Sat Nov 12, 2022 10:18 pm
drumboy256 wrote: Sat Nov 12, 2022 6:45 pm I think what's funny is people thinking about Avantis just being "good" because of a single person is a little odd. Although, precedent are the Buffet followers... thinking that Berkshire is just as good as Warren's picks. I suppose the "risk" by selecting the AVGE fund would be that the out performance dwindles and then people shift into another fund because it's not performing as well. Time will tell I suppose.
I believe manager risk is prudent to think about, especially when considering an actively managed fund for a large position in a taxable account. Perhaps some would say factor funds like AVGE are not actively managed? I'm not so convinced. Whether the active ETF is from Avantis, DFA, Alpha Architect, or another company, there are differences in implementation which affect fund performance.

In contrast, index funds like Vanguard Total US Stock Market (VTI) and iShares Total US Stock Market (ITOT) are basically commodities, with nearly identical implementation and performance regardless of personnel changes.
I would agree if AVGE wasn’t 45% AVUS. With half the fund being VTI/ITOT equiv, I don’t think there’s a lot wrong with it, conceptually. I still think buying and holding has more behavioral pit falls than the fund itself. It’s the old adage of SCV underperformance pushes you to move back to market cap weight, then factors are not for that particular investor.
I like this aspect of the discussion. I suspect it is fair to say AVGE is more mechanical / less actively manged than an ARK fund or Magellan.

I would add that these drift/shift issues is part of the nature of tilting, is it not? Different indexes and fund companies have different, sometimes changing ways of determing what counts as value, what counts as small, what counts as SCV, etc. Pick a SCV index fund or manged fund, and that fund may outperform or underperform others in the SCV M* style box.

For me, I personally had no clue who Repetto was. So his departure (if it happens) is unlikely to impact me. Did it impact DFA?

That said, I (and I suspect others) am not immune to underperformance of AVGE versus say VT. For me peronally, any underpeformance or outperformance will be somewhat offset because my largest holding is a "rough" but expense equivalent of VT (work retirment account).
"Never underrate either the majesty of simplicity or its proven effectiveness." Jack Bogle| Global Stocks w/ modest tilts (AVGE, QCSTPX & VT), debt free, just enough cash & chill
LeoB
Posts: 59
Joined: Mon Feb 17, 2020 10:42 pm

Re: New Avantis worldwide ETF with value tilt

Post by LeoB »

steve r wrote: Sun Nov 13, 2022 9:10 am
For me, I personally had no clue who Repetto was. So his departure (if it happens) is unlikely to impact me. Did it impact DFA?
I think it’s hard to say. I read that Repetto brought 3-4 former DFA portfolio managers with him. With that small of a team, how much of an impact will personnel turnover have? I don’t know. I would think that a lot depends on the company’s succession plans. For what it’s worth, I read an article that says Repetto and his team do not have any ownership stake in Avantis or American Century Investments. https://riabiz.com/a/2019/6/26/former-d ... year-round

When Repetto and others left DFA, I believe two other executives, Gerard O’Reilly and David Butler, were promoted internally to fill his position. Even with DFA, I think there are questions about what happens if David Booth, it’s founder, decides to cash out. He’s in his late seventies. Right now DFA is privately owned, but will it go public or be bought substantially by a big bank?

I’m not sure to what extent these potential changes may or may not affect the direction of Avantis or DFA investment products.
YRT70
Posts: 1279
Joined: Sat Apr 27, 2019 8:51 am

Re: New Avantis worldwide ETF with value tilt

Post by YRT70 »

LeoB wrote: Sun Nov 13, 2022 11:26 am For what it’s worth, I read an article that says Repetto and his team do not have any ownership stake in Avantis or American Century Investments. https://riabiz.com/a/2019/6/26/former-d ... year-round
Interesting. IIRC he's got like a million in every Avantis ETF. Not sure about the exact number.
YRT70
Posts: 1279
Joined: Sat Apr 27, 2019 8:51 am

Re: New Avantis worldwide ETF with value tilt

Post by YRT70 »

steve r wrote: Sun Nov 13, 2022 9:10 am I like this aspect of the discussion. I suspect it is fair to say AVGE is more mechanical / less actively manged than an ARK fund or Magellan.
Chris Pedersen who works with Paul Merriman once mentioned in the podcast about Avantis that he asked Avantis. They said about 99% of the trades is rules based. About 1% involves human judgement.
User avatar
steve r
Posts: 1109
Joined: Mon Feb 13, 2012 8:34 pm
Location: Connecticut

Re: New Avantis worldwide ETF with value tilt

Post by steve r »

Update on AVGE as of 11/14 (for future comps if nothing else)

Total Assets: $41,660,281
Shares: 730,000

Growing but still small.
"Never underrate either the majesty of simplicity or its proven effectiveness." Jack Bogle| Global Stocks w/ modest tilts (AVGE, QCSTPX & VT), debt free, just enough cash & chill
superjames1992
Posts: 60
Joined: Wed Mar 02, 2022 1:50 pm

Re: New Avantis worldwide ETF with value tilt

Post by superjames1992 »

Does anyone have a sense on what the dividend yield is expected to be for this fund?
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

superjames1992 wrote: Tue Nov 15, 2022 1:54 pm Does anyone have a sense on what the dividend yield is expected to be for this fund?
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

Apathizer wrote: Tue Nov 15, 2022 2:11 pm
superjames1992 wrote: Tue Nov 15, 2022 1:54 pm Does anyone have a sense on what the dividend yield is expected to be for this fund?
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
Correct, their dividend yield per the Portfolio tab on Morningstar is 3.10%. This is presumably the weighted average dividend yield of the underlying funds, which one could also lookup and weight as AVGE does. Agreed relative to the yield; my guess is it's a product of tilting to Value, not a concerted effort to target dividend stocks.
Intrepyd
Posts: 121
Joined: Thu Sep 25, 2014 6:34 pm

Re: New Avantis worldwide ETF with value tilt

Post by Intrepyd »

JohnFromPNW wrote: Tue Nov 15, 2022 3:31 pm
Apathizer wrote: Tue Nov 15, 2022 2:11 pm
superjames1992 wrote: Tue Nov 15, 2022 1:54 pm Does anyone have a sense on what the dividend yield is expected to be for this fund?
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
Correct, their dividend yield per the Portfolio tab on Morningstar is 3.10%. This is presumably the weighted average dividend yield of the underlying funds, which one could also lookup and weight as AVGE does. Agreed relative to the yield; my guess is it's a product of tilting to Value, not a concerted effort to target dividend stocks.
The dividend yield might also reflect the US/international split. International equity indices yield around twice as much as US equity indices.
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

Intrepyd wrote: Tue Nov 15, 2022 3:46 pm
JohnFromPNW wrote: Tue Nov 15, 2022 3:31 pm
Apathizer wrote: Tue Nov 15, 2022 2:11 pm
superjames1992 wrote: Tue Nov 15, 2022 1:54 pm Does anyone have a sense on what the dividend yield is expected to be for this fund?
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
Correct, their dividend yield per the Portfolio tab on Morningstar is 3.10%. This is presumably the weighted average dividend yield of the underlying funds, which one could also lookup and weight as AVGE does. Agreed relative to the yield; my guess is it's a product of tilting to Value, not a concerted effort to target dividend stocks.
The dividend yield might also reflect the US/international split. International equity indices yield around twice as much as US equity indices.
Good point, that too! But it is still higher than VT (2.74% per Morningstar) so must also have to do with the something else, which must be the value tilt I'd guess.
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

JohnFromPNW wrote: Tue Nov 15, 2022 4:11 pm
Intrepyd wrote: Tue Nov 15, 2022 3:46 pm
JohnFromPNW wrote: Tue Nov 15, 2022 3:31 pm
Apathizer wrote: Tue Nov 15, 2022 2:11 pm
superjames1992 wrote: Tue Nov 15, 2022 1:54 pm Does anyone have a sense on what the dividend yield is expected to be for this fund?
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
Correct, their dividend yield per the Portfolio tab on Morningstar is 3.10%. This is presumably the weighted average dividend yield of the underlying funds, which one could also lookup and weight as AVGE does. Agreed relative to the yield; my guess is it's a product of tilting to Value, not a concerted effort to target dividend stocks.
The dividend yield might also reflect the US/international split. International equity indices yield around twice as much as US equity indices.
Good point, that too! But it is still higher than VT (2.74% per Morningstar) so must also have to do with the something else, which must be the value tilt I'd guess.
AVGE yield is about 3.1%, so it's not that much higher, and is very likely an incidental consequence of the slants.
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

Apathizer wrote: Tue Nov 15, 2022 9:51 pm
JohnFromPNW wrote: Tue Nov 15, 2022 4:11 pm
Intrepyd wrote: Tue Nov 15, 2022 3:46 pm
JohnFromPNW wrote: Tue Nov 15, 2022 3:31 pm
Apathizer wrote: Tue Nov 15, 2022 2:11 pm
Morning Star should have this information. Last time I checked the yield was higher than average, but this is almost certainly coincidence since dividends are irrelevant to Total return I doubt Avantis would deliberately favor them.
Correct, their dividend yield per the Portfolio tab on Morningstar is 3.10%. This is presumably the weighted average dividend yield of the underlying funds, which one could also lookup and weight as AVGE does. Agreed relative to the yield; my guess is it's a product of tilting to Value, not a concerted effort to target dividend stocks.
The dividend yield might also reflect the US/international split. International equity indices yield around twice as much as US equity indices.
Good point, that too! But it is still higher than VT (2.74% per Morningstar) so must also have to do with the something else, which must be the value tilt I'd guess.
AVGE yield is about 3.1%, so it's not that much higher, and is very likely an incidental consequence of the slants.
Yes this is what I said earlier. We are in agreement.
pascalwager
Posts: 2183
Joined: Mon Oct 31, 2011 8:36 pm

Re: New Avantis worldwide ETF with value tilt

Post by pascalwager »

steve r wrote: Sun Oct 30, 2022 9:25 am
pascalwager wrote: Fri Oct 28, 2022 1:13 am I could see AVGE working well enough for a retiree. The fund-of-funds construction helps to avoid investor discipline exhaustion and makes it easy to take redemptions, and it has a healthy dose of US large cap (including large value). I consider the diversification to be modest--I think it's more about improving expected returns; but the retiree would probably also hold bonds.
...
Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.

Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

pascalwager wrote: Sat Nov 19, 2022 7:01 pm
steve r wrote: Sun Oct 30, 2022 9:25 am
pascalwager wrote: Fri Oct 28, 2022 1:13 am I could see AVGE working well enough for a retiree. The fund-of-funds construction helps to avoid investor discipline exhaustion and makes it easy to take redemptions, and it has a healthy dose of US large cap (including large value). I consider the diversification to be modest--I think it's more about improving expected returns; but the retiree would probably also hold bonds.
...
Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.

Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

Apathizer wrote: Sat Nov 19, 2022 7:22 pm
pascalwager wrote: Sat Nov 19, 2022 7:01 pm
steve r wrote: Sun Oct 30, 2022 9:25 am
pascalwager wrote: Fri Oct 28, 2022 1:13 am I could see AVGE working well enough for a retiree. The fund-of-funds construction helps to avoid investor discipline exhaustion and makes it easy to take redemptions, and it has a healthy dose of US large cap (including large value). I consider the diversification to be modest--I think it's more about improving expected returns; but the retiree would probably also hold bonds.
...
Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.

Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
What is the underlying data Portfolio Visualizer uses for those generic Asset Allocation backtests (ie “US Large Cap Growth”, “US Small Cap Value”, etc.). Thank you
the_wiki
Posts: 728
Joined: Thu Jul 28, 2022 11:14 am

Re: New Avantis worldwide ETF with value tilt

Post by the_wiki »

JohnFromPNW wrote: Sat Nov 19, 2022 8:25 pm

What is the underlying data Portfolio Visualizer uses for those generic Asset Allocation backtests (ie “US Large Cap Growth”, “US Small Cap Value”, etc.). Thank you
It's in their FAQ under Data Sources...

Mostly it is from Kenneth French published research and the cheapest Vanguard or iShares index funds.
pascalwager
Posts: 2183
Joined: Mon Oct 31, 2011 8:36 pm

Re: New Avantis worldwide ETF with value tilt

Post by pascalwager »

Apathizer wrote: Sat Nov 19, 2022 7:22 pm
pascalwager wrote: Sat Nov 19, 2022 7:01 pm
steve r wrote: Sun Oct 30, 2022 9:25 am
pascalwager wrote: Fri Oct 28, 2022 1:13 am I could see AVGE working well enough for a retiree. The fund-of-funds construction helps to avoid investor discipline exhaustion and makes it easy to take redemptions, and it has a healthy dose of US large cap (including large value). I consider the diversification to be modest--I think it's more about improving expected returns; but the retiree would probably also hold bonds.
...
Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.
Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Contrarian? Yes, certainly contrarian to investment industry marketing.

But, I'm not dismissing the Avantis fund, just evaluating it from a different perspective. You've seemed to not consider there being any rationale for selecting stock assets to accept lower portfolio expected returns along with lower volatility.

My personal portfolio has Vanguard total market funds (80/20 US/non-US) and also DFA large and small US value funds, and as a retiree I personally don't mind considering the value funds (originally selected by an advisor) to only be diversifiers and not expected return boosters. And if I were still working, I might want to hold VT and a US growth fund.
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

the_wiki wrote: Sat Nov 19, 2022 8:41 pm
JohnFromPNW wrote: Sat Nov 19, 2022 8:25 pm

What is the underlying data Portfolio Visualizer uses for those generic Asset Allocation backtests (ie “US Large Cap Growth”, “US Small Cap Value”, etc.). Thank you
It's in their FAQ under Data Sources...

Mostly it is from Kenneth French published research and the cheapest Vanguard or iShares index funds.
Thank you
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

pascalwager wrote: Sat Nov 19, 2022 11:48 pm
Apathizer wrote: Sat Nov 19, 2022 7:22 pm
pascalwager wrote: Sat Nov 19, 2022 7:01 pm
steve r wrote: Sun Oct 30, 2022 9:25 am
pascalwager wrote: Fri Oct 28, 2022 1:13 am I could see AVGE working well enough for a retiree. The fund-of-funds construction helps to avoid investor discipline exhaustion and makes it easy to take redemptions, and it has a healthy dose of US large cap (including large value). I consider the diversification to be modest--I think it's more about improving expected returns; but the retiree would probably also hold bonds.
...
Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.
Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Contrarian? Yes, certainly contrarian to investment industry marketing.

But, I'm not dismissing the Avantis fund, just evaluating it from a different perspective. You've seemed to not consider there being any rationale for selecting stock assets to accept lower portfolio expected returns along with lower volatility.

My personal portfolio has Vanguard total market funds (80/20 US/non-US) and also DFA large and small US value funds, and as a retiree I personally don't mind considering the value funds (originally selected by an advisor) to only be diversifiers and not expected return boosters. And if I were still working, I might want to hold VT and a US growth fund.
Why would you expect growth to have higher returns when it hasn't in the past? It might, but that seems contrary to how market seem to work. The price paid for a stock defines it's likely expected return. It's not that growth companies probably aren't better companies overall; the share-price is high because they're expect future returns are safer and lower than value companies. I also view small value as a beneficial diversifier since it's imperfectly correlated with the total market.

If you were still working why would you want a US growth fund in addition to VT? VT seems very reasonable on it's own and contains a significant amount of US growth anyway.
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
pascalwager
Posts: 2183
Joined: Mon Oct 31, 2011 8:36 pm

Re: New Avantis worldwide ETF with value tilt

Post by pascalwager »

Apathizer wrote: Sun Nov 20, 2022 12:54 am
pascalwager wrote: Sat Nov 19, 2022 11:48 pm
Apathizer wrote: Sat Nov 19, 2022 7:22 pm
pascalwager wrote: Sat Nov 19, 2022 7:01 pm
steve r wrote: Sun Oct 30, 2022 9:25 am

Thanks for this comment. I learned a lot from you on your posts on Sharpe's portfolio.

The one question I have (for everyone) is is this fund "riskier?" than a 70/30 U.S. / International portfolio or VT?

Clearly, some components are higher risk, but is the entire basket riskier? My ad hoc backtested similution above (from 1976), found a lower standard deviation and this would "suggest" otherwise. Such a finding would seemingly counter the common theory -- higher returns are a product of higher risk and Sharpe's theory that risk adjusted returns are optimized by owning everything at market proportions.

Like everything else, it probably depends on how you measure risk / which risk. :?:
(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.
Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Contrarian? Yes, certainly contrarian to investment industry marketing.

But, I'm not dismissing the Avantis fund, just evaluating it from a different perspective. You've seemed to not consider there being any rationale for selecting stock assets to accept lower portfolio expected returns along with lower volatility.

My personal portfolio has Vanguard total market funds (80/20 US/non-US) and also DFA large and small US value funds, and as a retiree I personally don't mind considering the value funds (originally selected by an advisor) to only be diversifiers and not expected return boosters. And if I were still working, I might want to hold VT and a US growth fund.
Why would you expect growth to have higher returns when it hasn't in the past? It might, but that seems contrary to how market seem to work. The price paid for a stock defines it's likely expected return. It's not that growth companies probably aren't better companies overall; the share-price is high because they're expect future returns are safer and lower than value companies. I also view small value as a beneficial diversifier since it's imperfectly correlated with the total market.

If you were still working why would you want a US growth fund in addition to VT? VT seems very reasonable on it's own and contains a significant amount of US growth anyway.
Only if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."

Anyway, I certainly don't have the typical BH expectations when I view a fund like AVGE because of a different understanding about value and emerging markets (which has the lowest correlations to the global market and hence, for Jones, the lowest expected returns). So, for me, AVGE is about improving diversification and not increasing returns.
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

pascalwager wrote: Sun Nov 20, 2022 12:24 pmOnly if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."
But you still haven't explained why you're giving Jones so much credence since his statements are historically counterfactual. Higher volatility doesn't necessitate higher returns. Small cap growth stocks have comparatively lower returns and higher volatility than the overall market. You seem to be treating Jones like an omniscient sage when he's just a counterfactual contrarian assuming you're accurately representing his perspectives.

So again I ask, why would we expect growth to out-perform value when the inverse has been true 80% of the time?
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

pascalwager wrote: Sun Nov 20, 2022 12:24 pm
Apathizer wrote: Sun Nov 20, 2022 12:54 am
pascalwager wrote: Sat Nov 19, 2022 11:48 pm
Apathizer wrote: Sat Nov 19, 2022 7:22 pm
pascalwager wrote: Sat Nov 19, 2022 7:01 pm

(Been off-grid for a few weeks.)

According to Christopher Jones (former Financial Engines CEO for William Sharpe) in The Intelligent Portfolio, value funds have lower risk (volatility) than growth funds and also lower expected returns. International funds have higher risk than U.S., but also lower expected returns, with Emerging Markets having the lowest expected returns--lower than both Europe and Pacific Rim. In general, lower correlation with the global market produces lower expected returns.

So, I'd have to say that AVGE has lower expected returns and maybe lower risk than VT, based on Jones's rationale. This reminds me of John Bogle's suggestion that a (U.S.) growth fund tilt might be more suitable for many workers and a value fund tilt more suitable for retirees.
Note: Jones does not recognize a value premium and thinks the small company premium is minimal.
So, does that mean you're dismissing this fund due to the outlying opinion of one person? If you're representing his perspectives accurately, he is a contrarian outlier. While there certainly isn't overwhelming consensus, the plurality perspectives seem to be that value has both higher potential return and more risk than growth, a global diversified portfolio is slightly less volatile than US only, and emerging markets have both more return potential and more risk than developed markets.

While we can't predict the future, Jones' dismissing the value/size premium is counterfactual to historical returns.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
Contrarian? Yes, certainly contrarian to investment industry marketing.

But, I'm not dismissing the Avantis fund, just evaluating it from a different perspective. You've seemed to not consider there being any rationale for selecting stock assets to accept lower portfolio expected returns along with lower volatility.

My personal portfolio has Vanguard total market funds (80/20 US/non-US) and also DFA large and small US value funds, and as a retiree I personally don't mind considering the value funds (originally selected by an advisor) to only be diversifiers and not expected return boosters. And if I were still working, I might want to hold VT and a US growth fund.
Why would you expect growth to have higher returns when it hasn't in the past? It might, but that seems contrary to how market seem to work. The price paid for a stock defines it's likely expected return. It's not that growth companies probably aren't better companies overall; the share-price is high because they're expect future returns are safer and lower than value companies. I also view small value as a beneficial diversifier since it's imperfectly correlated with the total market.

If you were still working why would you want a US growth fund in addition to VT? VT seems very reasonable on it's own and contains a significant amount of US growth anyway.
Only if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."

Anyway, I certainly don't have the typical BH expectations when I view a fund like AVGE because of a different understanding about value and emerging markets (which has the lowest correlations to the global market and hence, for Jones, the lowest expected returns). So, for me, AVGE is about improving diversification and not increasing returns.
I would argue that a fund like AVGE is about increasing diversification AND increasing returns based on the factoring to small value. I rarely state this as a factor nut, but by taking risk premium, you may get premium risk reward. For me, this isn't a likely point of contention in terms of EMH discussions or typical market cap weight holdings simply because you're accepting market risk as a single factor.

Simply put, growth, as stated can or could be factors in higher than expected returns but not the only reason for.
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
pascalwager
Posts: 2183
Joined: Mon Oct 31, 2011 8:36 pm

Re: New Avantis worldwide ETF with value tilt

Post by pascalwager »

Apathizer wrote: Sun Nov 20, 2022 1:36 pm
pascalwager wrote: Sun Nov 20, 2022 12:24 pmOnly if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."
But you still haven't explained why you're giving Jones so much credence since his statements are historically counterfactual. Higher volatility doesn't necessitate higher returns. Small cap growth stocks have comparatively lower returns and higher volatility than the overall market. You seem to be treating Jones like an omniscient sage when he's just a counterfactual contrarian assuming you're accurately representing his perspectives.

So again I ask, why would we expect growth to out-perform value when the inverse has been true 80% of the time?
William F. Sharpe asked Jones to write the book and wrote the preface. The book was about what they were doing together at Financial Engines. So, when Jones calls what I described above basic economics, I see Sharpe nodding in agreement. As a passive investor, I'm more interested in a basic economics approach then one based on back testing.
comeinvest
Posts: 1657
Joined: Mon Mar 12, 2012 6:57 pm

Re: New Avantis worldwide ETF with value tilt

Post by comeinvest »

pascalwager wrote: Sun Nov 20, 2022 10:44 pm
Apathizer wrote: Sun Nov 20, 2022 1:36 pm
pascalwager wrote: Sun Nov 20, 2022 12:24 pmOnly if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."
But you still haven't explained why you're giving Jones so much credence since his statements are historically counterfactual. Higher volatility doesn't necessitate higher returns. Small cap growth stocks have comparatively lower returns and higher volatility than the overall market. You seem to be treating Jones like an omniscient sage when he's just a counterfactual contrarian assuming you're accurately representing his perspectives.

So again I ask, why would we expect growth to out-perform value when the inverse has been true 80% of the time?
William F. Sharpe asked Jones to write the book and wrote the preface. The book was about what they were doing together at Financial Engines. So, when Jones calls what I described above basic economics, I see Sharpe nodding in agreement. As a passive investor, I'm more interested in a basic economics approach then one based on back testing.
Why are you all speculating and arguing about citations of historical figures, instead of looking at the charts yourself?
SCV was a helpful diversifier that softened the large cap drawdown in 2000-2002. In 2007-2009 and March 2020, it amplified the drawdown. Volatility and overall returns of SCV were slightly higher historically. Some folks on this forum (I don't have the link to the thread handy) showed that SCV is equivalent to about 120% leverage S&P500 in terms of risk and return, so your could arguable achieve the same effect with 120% index, except that SCV + index might have "independent sources of return" (which is a bit of a vague concept considering that the continued outperformance of factors itself is all but clear [although some in this forum think it's clear]), which may or may not be relevant in overall portfolio construction. Of course the numbers vary greatly depending on the timeframe contemplated, and the different regimes can be very long (like decades) for factor performance. But there is some consistency across international markets.
I think I just recapped what filled 1000's of threads and heated discussions in this forum.
latetodinner
Posts: 37
Joined: Fri Mar 26, 2021 5:37 am

Re: New Avantis worldwide ETF with value tilt

Post by latetodinner »

Apathizer wrote: Tue Nov 15, 2022 9:51 pm AVGE yield is about 3.1%, so it's not that much higher, and is very likely an incidental consequence of the slants.
That's really high for me. I pay 25% tax on dividends distributed, but only 15% in UCITS (Ireland-domiciled) accumulating ETFs.

That would mean losing ~0.3% of the returns?

I'm leaning towards replicating AVGE's tilt using a small portion of my portfolio. That probably means dropping the AVUS (and other large holdings).

Actually, I could hold it in taxable where it replaces VT. Still, it's higher dividend yield and some hesitations about replacing the entire VT allocation with an active fund
My tax situation is pretty weird
Apathizer
Posts: 1633
Joined: Sun Sep 26, 2021 2:56 pm

Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

comeinvest wrote: Mon Nov 21, 2022 3:00 am
pascalwager wrote: Sun Nov 20, 2022 10:44 pm
Apathizer wrote: Sun Nov 20, 2022 1:36 pm
pascalwager wrote: Sun Nov 20, 2022 12:24 pmOnly if, in Jones words, "higher expected returns are your goal". But actually, I should be adding it to the world bonds/stocks portfolio comprised of both global stocks and bonds, and not simply VT. "Growth stocks have higher correlations with the overall market, higher volatilities, and hence higher expected returns."
But you still haven't explained why you're giving Jones so much credence since his statements are historically counterfactual. Higher volatility doesn't necessitate higher returns. Small cap growth stocks have comparatively lower returns and higher volatility than the overall market. You seem to be treating Jones like an omniscient sage when he's just a counterfactual contrarian assuming you're accurately representing his perspectives.

So again I ask, why would we expect growth to out-perform value when the inverse has been true 80% of the time?
William F. Sharpe asked Jones to write the book and wrote the preface. The book was about what they were doing together at Financial Engines. So, when Jones calls what I described above basic economics, I see Sharpe nodding in agreement. As a passive investor, I'm more interested in a basic economics approach then one based on back testing.
Why are you all speculating and arguing about citations of historical figures, instead of looking at the charts yourself?
SCV was a helpful diversifier that softened the large cap drawdown in 2000-2002. In 2007-2009 and March 2020, it amplified the drawdown. Volatility and overall returns of SCV were slightly higher historically. Some folks on this forum (I don't have the link to the thread handy) showed that SCV is equivalent to about 120% leverage S&P500 in terms of risk and return, so your could arguable achieve the same effect with 120% index, except that SCV + index might have "independent sources of return" (which is a bit of a vague concept considering that the continued outperformance of factors itself is all but clear [although some in this forum think it's clear]), which may or may not be relevant in overall portfolio construction. Of course the numbers vary greatly depending on the timeframe contemplated, and the different regimes can be very long (like decades) for factor performance. But there is some consistency across international markets.
I think I just recapped what filled 1000's of threads and heated discussions in this forum.
During steep draw-downs will sometimes drop more, but not always. This year we've seen the opposite. That's exactly the point. SV is imperfectly correlated with the MCW TSM, which is exactly why it's a beneficial diversifier. I do take your point it's probably not essential and the simplicity of MCW is certainly appealing.
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
brama
Posts: 32
Joined: Mon Feb 19, 2007 11:03 pm
Location: Virginia, USA

Re: New Avantis worldwide ETF with value tilt

Post by brama »

Boilermaker82 wrote: Wed Oct 26, 2022 6:36 pm
the_wiki wrote: Wed Oct 26, 2022 5:46 pm
nervouscorps wrote: Wed Oct 26, 2022 3:19 pm I've been asking M1 Finance to add AVGE but they haven't (yet). I want it for my IRAs.
The whole point of m1 is to make your own “pies”. Not a lot of reason to worry about all in one funds with a portfolio held there. You could whip this fund up with an m1 pie in about 90 seconds and it would probably have slightly lower fees. Just look at the fact sheet and match the investments.
They’re still missing some of their funds - I think AVRE, AVLV, and AVSC. You could of course substitute with something from Vanguard to get close enough.

One positive if M1 carried AVGE though is the auto-invest aspect of it, even if it’s all that’s in the “pie”.
AVGE and AVLV are now available on M1. I don't see AVRE or AVSC though.
guppyguy
Posts: 337
Joined: Tue Jan 30, 2018 4:24 pm

Re: New Avantis worldwide ETF with value tilt

Post by guppyguy »

CletusCaddy wrote: Tue Sep 20, 2022 11:17 pm
tj wrote: Tue Sep 20, 2022 10:56 pm
asset_chaos wrote: Tue Sep 20, 2022 9:58 pm
tj wrote: Tue Sep 20, 2022 8:21 pm Unless things have changed recently, DFA mutual funds aren't available to retail investors. I used to have DGEIX in a 401k.
DFA has 24 ETFs, all of which should be available to anyone, but none of them are a global stock fund.
Sure, but the comment i quoted was clearly about the Global Equity mutual fund.
You can recreate DGEIX, is the point.
Has anybody actually recreated DGEIX in DFA ETF form? DGEIX is not available to me and AVGE is still a bit new for my taste. Just curious.
CletusCaddy
Posts: 1270
Joined: Sun Sep 12, 2021 4:23 am

Re: New Avantis worldwide ETF with value tilt

Post by CletusCaddy »

guppyguy wrote: Mon Nov 28, 2022 3:34 pm
CletusCaddy wrote: Tue Sep 20, 2022 11:17 pm
tj wrote: Tue Sep 20, 2022 10:56 pm
asset_chaos wrote: Tue Sep 20, 2022 9:58 pm
tj wrote: Tue Sep 20, 2022 8:21 pm Unless things have changed recently, DFA mutual funds aren't available to retail investors. I used to have DGEIX in a 401k.
DFA has 24 ETFs, all of which should be available to anyone, but none of them are a global stock fund.
Sure, but the comment i quoted was clearly about the Global Equity mutual fund.
You can recreate DGEIX, is the point.
Has anybody actually recreated DGEIX in DFA ETF form? DGEIX is not available to me and AVGE is still a bit new for my taste. Just curious.
Here are DGEIX’s holdings:

Image

The only fund that does not exist in ETF form is the international real estate fund, but that’s <1% of the portfolio.
brad.clarkston
Posts: 1469
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: New Avantis worldwide ETF with value tilt

Post by brad.clarkston »

CletusCaddy wrote: Mon Nov 28, 2022 3:54 pm The only fund that does not exist in ETF form is the international real estate fund, but that’s <1% of the portfolio.
You could always throw in the Avantis AVRE ETF for the real estate portion, just for the fun of it.
-- Only a Sith deals in absolutes --
guppyguy
Posts: 337
Joined: Tue Jan 30, 2018 4:24 pm

Re: New Avantis worldwide ETF with value tilt

Post by guppyguy »

CletusCaddy wrote: Mon Nov 28, 2022 3:54 pm
guppyguy wrote: Mon Nov 28, 2022 3:34 pm
CletusCaddy wrote: Tue Sep 20, 2022 11:17 pm
tj wrote: Tue Sep 20, 2022 10:56 pm
asset_chaos wrote: Tue Sep 20, 2022 9:58 pm

DFA has 24 ETFs, all of which should be available to anyone, but none of them are a global stock fund.
Sure, but the comment i quoted was clearly about the Global Equity mutual fund.
You can recreate DGEIX, is the point.
Has anybody actually recreated DGEIX in DFA ETF form? DGEIX is not available to me and AVGE is still a bit new for my taste. Just curious.
Here are DGEIX’s holdings:

Image

The only fund that does not exist in ETF form is the international real estate fund, but that’s <1% of the portfolio.
Thanks, I saw that, just still on the fence with AVGE. Perhaps I will go DGEIX (ala DFA ETFs) for tax-deferred and all AVGE in Roths. That is about 75/25% of my portfolio. Just really tired of dorking around with individual funds...ready for a single thing to look at:)
JohnFromPNW
Posts: 158
Joined: Tue Apr 26, 2022 11:58 pm

Re: New Avantis worldwide ETF with value tilt

Post by JohnFromPNW »

guppyguy wrote: Mon Nov 28, 2022 4:15 pm Thanks, I saw that, just still on the fence with AVGE. Perhaps I will go DGEIX (ala DFA ETFs) for tax-deferred and all AVGE in Roths. That is about 75/25% of my portfolio. Just really tired of dorking around with individual funds...ready for a single thing to look at:)
Looking at a single fund is a thing of beauty.
User avatar
drumboy256
Posts: 518
Joined: Sat Jun 06, 2020 2:21 pm

Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

Honestly, just buy AVGE--- I can't imagine juggling all of those DFA ETFs when AVGE does about 96% of what you want. Just sayin. :sharebeer
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | // Merri-Bogle WW SCV + Chill
brad.clarkston
Posts: 1469
Joined: Fri Jan 03, 2014 8:31 pm
Location: Kansas City, MO

Re: New Avantis worldwide ETF with value tilt

Post by brad.clarkston »

drumboy256 wrote: Mon Nov 28, 2022 4:24 pm Honestly, just buy AVGE--- I can't imagine juggling all of those DFA ETFs when AVGE does about 96% of what you want. Just sayin. :sharebeer
Or option #2 - move all of your money to a DFA brokerage and use there one fund 8-)
-- Only a Sith deals in absolutes --
Post Reply