Avantis Funds: what's so special about them?

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comeinvest
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Nathan Drake wrote: Mon Sep 12, 2022 3:37 pm
comeinvest wrote: Mon Sep 12, 2022 2:48 pm
typical.investor wrote: Mon Sep 12, 2022 2:28 pm
comeinvest wrote: Mon Sep 12, 2022 1:23 pm
I don't understand everything that you said, but your post and other controversial posts in this forum tell me that it's not black or white, and the value of factor investing in portfolio applications is far from obvious. I'm getting more and more confused, the deeper I try to understand factor investing and whether or not it improves my portfolio. New factors emerge, old factors are dismissed or "modified" to fit evolving data sets, and then when you put everything together in real life portfolios, some of the "evidence" is turned upside down, and results vary heavily with backtesting parameters, and then in finance even when historical evidence seems consistent, when things change it's always a gamble if mean reversion will happen or a regime change occurred.
Well, I'd say the best evidence for factor benefit we have are the actual DFA funds with a long history. Even though their methodology has been improved to incorporate profitability screens, value exposure was still useful.

As for the claims that diversified factor investing is going to smooth your ride, all I can conclude is that it might but knowing what we do about how factors actually perform - nobody should be surprised if it doesn't.
Exactly. I am most interested in seeing factual evidence of *risk-adjusted* outperformance or benefits of factor tilts within a (for example) equities/treasuries portfolio, and I think most other retail investors should be most interested in that question. And with a definition of "risk" that is not volatility or something similarly irrelevant, but with an actual meaningful personal utility based risk definition, for example maximum expected drawdown over a life cycle (still not perfect, but better). (We all know at this point that factor correlations with each other and with equities seem to often increase during crises.)
There were posts in this forum (don't have the link right now) showing that the DFA funds had no *risk-adjusted* outperformance or benefits in a typical portfolio, compared to index funds. (And also no outperformance compared to Vanguard value funds, but that's an entirely different topic.)
Nobody is claiming higher risk adjusted long term returns

You don’t need higher risk adjusted returns for higher overall returns and additional diversification
Depends on each individual situation. I agree with you that for a non-leveraged investor who also doesn't mind sitting out drawdowns, the probabilistic distribution of terminal investment outcomes is what matters. On the other hand, an investor who is not leverage-constrained i.e. who has access to broker margin or other methods of leverage (futures, options), can leverage any asset class to the same level of risk. In this case, the risk-adjusted return is what matters. For example, in another thread in this forum (don't have the link right now), somebody demonstrated that almost the same risk and return characteristics of a value tilted portfolio can be had with a 120% equities portfolio, based on historical backtesting.

The diversification benefit (or lack of it) is an important question. I have not found conclusive evidence. I know sometimes factors zig when the equities market zags (e.g. in 2000-2002); but other times the drawdowns amplify. Some real world portfolio-level simulations show that factors (and most everything else) tend to me more correlated with each other and with equities during times of stress, i.e. diversification disappears when it would matter most. Let me know if you have conclusive evidence, like a comprehensive study on a portfolio level risk and returns basis.
comeinvest
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

km91 wrote: Mon Sep 12, 2022 3:35 pm
comeinvest wrote: Mon Sep 12, 2022 2:30 pm I'm happy to stand corrected, but I think there has been no moment in the history of mankind when the a priori equity risk premium was negative, i.e. when the expectation was that you will get back less than the capital you put into something.
Not sure if this statement can be true. Everyone who sells during a market crash would seem to be worried that they will get back less than they put in
Yeah but I think you have it backwards. At every moment in time during the crash, the market already adjusted to keep the expected premium positive given available information and expectations at that moment. (If not, the crash would have been even deeper to accomplish just that.) That's exactly the point of and the motivation for the crash, so to speak. I see your last sentence more like "if the market had not crashed/adjusted, the equity risk premium would have become negative because of the newly emerged information or expectations. But the market did crash, to prevent just that (logical impossibility) from happening."
Last edited by comeinvest on Mon Sep 12, 2022 4:43 pm, edited 7 times in total.
Nathan Drake
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

comeinvest wrote: Mon Sep 12, 2022 4:34 pm
Nathan Drake wrote: Mon Sep 12, 2022 3:37 pm
comeinvest wrote: Mon Sep 12, 2022 2:48 pm
typical.investor wrote: Mon Sep 12, 2022 2:28 pm
comeinvest wrote: Mon Sep 12, 2022 1:23 pm

I don't understand everything that you said, but your post and other controversial posts in this forum tell me that it's not black or white, and the value of factor investing in portfolio applications is far from obvious. I'm getting more and more confused, the deeper I try to understand factor investing and whether or not it improves my portfolio. New factors emerge, old factors are dismissed or "modified" to fit evolving data sets, and then when you put everything together in real life portfolios, some of the "evidence" is turned upside down, and results vary heavily with backtesting parameters, and then in finance even when historical evidence seems consistent, when things change it's always a gamble if mean reversion will happen or a regime change occurred.
Well, I'd say the best evidence for factor benefit we have are the actual DFA funds with a long history. Even though their methodology has been improved to incorporate profitability screens, value exposure was still useful.

As for the claims that diversified factor investing is going to smooth your ride, all I can conclude is that it might but knowing what we do about how factors actually perform - nobody should be surprised if it doesn't.
Exactly. I am most interested in seeing factual evidence of *risk-adjusted* outperformance or benefits of factor tilts within a (for example) equities/treasuries portfolio, and I think most other retail investors should be most interested in that question. And with a definition of "risk" that is not volatility or something similarly irrelevant, but with an actual meaningful personal utility based risk definition, for example maximum expected drawdown over a life cycle (still not perfect, but better). (We all know at this point that factor correlations with each other and with equities seem to often increase during crises.)
There were posts in this forum (don't have the link right now) showing that the DFA funds had no *risk-adjusted* outperformance or benefits in a typical portfolio, compared to index funds. (And also no outperformance compared to Vanguard value funds, but that's an entirely different topic.)
Nobody is claiming higher risk adjusted long term returns

You don’t need higher risk adjusted returns for higher overall returns and additional diversification
Depends on each individual situation. I agree with you that for a non-leveraged investor who also doesn't mind sitting out drawdowns, the probabilistic distribution of terminal investment outcomes is what matters. On the other hand, an investor who is not leverage-constrained i.e. who has access to broker margin or other methods of leverage (futures, options), can leverage any asset class to the same level of risk. In this case, the risk-adjusted return is what matters. For example, in another thread in this forum (don't have the link right now), somebody demonstrated that almost the same risk and return characteristics of a value tilted portfolio can be had with a 120% equities portfolio, based on historical backtesting.

The diversification benefit (or lack of it) is an important question. I have not found conclusive evidence. I know sometimes factors zig when the equities market zags (e.g. in 2000-2002); but other times the drawdowns amplify. Some real world portfolio-level simulations show that factors (and most everything else) tend to me more correlated with each other and with equities during times of stress, i.e. diversification disappears when it would matter most. Let me know if you have conclusive evidence, like a comprehensive study on a portfolio level risk and returns basis.
Leverage has downsides such as significant increases in cost and you are not getting a diversification benefit as you are simply increasing exposures to what you already own.

I’d much rather invest in factors to increase both return and diversification while reducing costs before moving in to leverage.

Factors can correlate strongly to the market during a liquidity crisis, but protect against bubble risk (see: tech bubble or Japanese bubble)
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
comeinvest
Posts: 1633
Joined: Mon Mar 12, 2012 6:57 pm

Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Nathan Drake wrote: Mon Sep 12, 2022 4:39 pm
comeinvest wrote: Mon Sep 12, 2022 4:34 pm
Nathan Drake wrote: Mon Sep 12, 2022 3:37 pm
comeinvest wrote: Mon Sep 12, 2022 2:48 pm
typical.investor wrote: Mon Sep 12, 2022 2:28 pm

Well, I'd say the best evidence for factor benefit we have are the actual DFA funds with a long history. Even though their methodology has been improved to incorporate profitability screens, value exposure was still useful.

As for the claims that diversified factor investing is going to smooth your ride, all I can conclude is that it might but knowing what we do about how factors actually perform - nobody should be surprised if it doesn't.
Exactly. I am most interested in seeing factual evidence of *risk-adjusted* outperformance or benefits of factor tilts within a (for example) equities/treasuries portfolio, and I think most other retail investors should be most interested in that question. And with a definition of "risk" that is not volatility or something similarly irrelevant, but with an actual meaningful personal utility based risk definition, for example maximum expected drawdown over a life cycle (still not perfect, but better). (We all know at this point that factor correlations with each other and with equities seem to often increase during crises.)
There were posts in this forum (don't have the link right now) showing that the DFA funds had no *risk-adjusted* outperformance or benefits in a typical portfolio, compared to index funds. (And also no outperformance compared to Vanguard value funds, but that's an entirely different topic.)
Nobody is claiming higher risk adjusted long term returns

You don’t need higher risk adjusted returns for higher overall returns and additional diversification
Depends on each individual situation. I agree with you that for a non-leveraged investor who also doesn't mind sitting out drawdowns, the probabilistic distribution of terminal investment outcomes is what matters. On the other hand, an investor who is not leverage-constrained i.e. who has access to broker margin or other methods of leverage (futures, options), can leverage any asset class to the same level of risk. In this case, the risk-adjusted return is what matters. For example, in another thread in this forum (don't have the link right now), somebody demonstrated that almost the same risk and return characteristics of a value tilted portfolio can be had with a 120% equities portfolio, based on historical backtesting.

The diversification benefit (or lack of it) is an important question. I have not found conclusive evidence. I know sometimes factors zig when the equities market zags (e.g. in 2000-2002); but other times the drawdowns amplify. Some real world portfolio-level simulations show that factors (and most everything else) tend to me more correlated with each other and with equities during times of stress, i.e. diversification disappears when it would matter most. Let me know if you have conclusive evidence, like a comprehensive study on a portfolio level risk and returns basis.
Leverage has downsides such as significant increases in cost and you are not getting a diversification benefit as you are simply increasing exposures to what you already own.

I’d much rather invest in factors to increase both return and diversification while reducing costs before moving in to leverage.

Factors can correlate strongly to the market during a liquidity crisis, but protect against bubble risk (see: tech bubble or Japanese bubble)
I understood your thoughts regarding the objective, and I think we agree on those. I am looking for conclusive evidence that factor tilting is actually beneficial on a total portfolio risk/return basis with appropriate utility function (or if you will, on a simulated total portfolio terminal outcome over long time horizons basis), including the diversification benefit and correlation behavior during good and bad times. In other words, I hope to see studies that validate your thesis. I have only seen rather conflicting information and not so comprehensive studies so far. Like I said, in another thread someone showed that a slightly leveraged index portfolio behaved very similar to a factor tilted portfolio (*including* the alleged diversification benefit of course). At the end of the day, real world total portfolio simulations matter, not conjectures or partial information regarding diversification and correlations that also vary over time and drawing ad-hoc conclusions from them.

The comment from typical.investor made me think: viewtopic.php?p=6867576#p6867576 . Once you have a deeper look, you often realize that things are more complicated.
Apathizer
Posts: 1618
Joined: Sun Sep 26, 2021 2:56 pm

Re: Avantis Funds: what's so special about them?

Post by Apathizer »

comeinvest wrote: Mon Sep 12, 2022 4:51 pm
Nathan Drake wrote: Mon Sep 12, 2022 4:39 pm
comeinvest wrote: Mon Sep 12, 2022 4:34 pm
Nathan Drake wrote: Mon Sep 12, 2022 3:37 pm
comeinvest wrote: Mon Sep 12, 2022 2:48 pm

Exactly. I am most interested in seeing factual evidence of *risk-adjusted* outperformance or benefits of factor tilts within a (for example) equities/treasuries portfolio, and I think most other retail investors should be most interested in that question. And with a definition of "risk" that is not volatility or something similarly irrelevant, but with an actual meaningful personal utility based risk definition, for example maximum expected drawdown over a life cycle (still not perfect, but better). (We all know at this point that factor correlations with each other and with equities seem to often increase during crises.)
There were posts in this forum (don't have the link right now) showing that the DFA funds had no *risk-adjusted* outperformance or benefits in a typical portfolio, compared to index funds. (And also no outperformance compared to Vanguard value funds, but that's an entirely different topic.)
Nobody is claiming higher risk adjusted long term returns

You don’t need higher risk adjusted returns for higher overall returns and additional diversification
Depends on each individual situation. I agree with you that for a non-leveraged investor who also doesn't mind sitting out drawdowns, the probabilistic distribution of terminal investment outcomes is what matters. On the other hand, an investor who is not leverage-constrained i.e. who has access to broker margin or other methods of leverage (futures, options), can leverage any asset class to the same level of risk. In this case, the risk-adjusted return is what matters. For example, in another thread in this forum (don't have the link right now), somebody demonstrated that almost the same risk and return characteristics of a value tilted portfolio can be had with a 120% equities portfolio, based on historical backtesting.

The diversification benefit (or lack of it) is an important question. I have not found conclusive evidence. I know sometimes factors zig when the equities market zags (e.g. in 2000-2002); but other times the drawdowns amplify. Some real world portfolio-level simulations show that factors (and most everything else) tend to me more correlated with each other and with equities during times of stress, i.e. diversification disappears when it would matter most. Let me know if you have conclusive evidence, like a comprehensive study on a portfolio level risk and returns basis.
Leverage has downsides such as significant increases in cost and you are not getting a diversification benefit as you are simply increasing exposures to what you already own.

I’d much rather invest in factors to increase both return and diversification while reducing costs before moving in to leverage.

Factors can correlate strongly to the market during a liquidity crisis, but protect against bubble risk (see: tech bubble or Japanese bubble)
I understood your thoughts regarding the objective, and I think we agree on those. I am looking for conclusive evidence that factor tilting is actually beneficial on a total portfolio risk/return basis with appropriate utility function (or if you will, on a simulated total portfolio terminal outcome over long time horizons basis), including the diversification benefit and correlation behavior during good and bad times. In other words, I hope to see studies that validate your thesis. I have only seen rather conflicting information and not so comprehensive studies so far. Like I said, in another thread someone showed that a slightly leveraged index portfolio behaved very similar to a factor tilted portfolio (*including* the alleged diversification benefit of course). At the end of the day, real world total portfolio simulations matter, not conjectures or partial information regarding diversification and correlations that also vary over time and drawing ad-hoc conclusions from them.

The comment from typical.investor made me think: viewtopic.php?p=6867576#p6867576 . Once you have a deeper look, you often realize that things are more complicated.
We've cited this evidence many times. Check the Ben Felix link discussing five Factor investing. He explains the evidence thoroughly and it seems fairly definitive.

Of course understanding complex economies is uncertain. All we can do is try to understand the evidence as best we can. To me that evidence shows factors are likely to provide diversification benefits. You seem overly concerned that there isn't unanimous consensus on factors. But on any complex topic there is almost never unanimous consensus. To me there's enough plurality consensus that factors seem worthwhile.
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comeinvest
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

grabiner wrote: Sun Sep 11, 2022 9:03 am
comeinvest wrote: Sun Sep 11, 2022 3:02 am
grabiner wrote: Sat Jul 02, 2022 5:04 pm
DanFFA wrote: Fri Jul 01, 2022 11:06 pm The differentiator in my mind between the factor portfolios of Vanguard and Avantis & Alpha Architect, DFA, etc. is that Vanguard is following indexes that largely track funds composed by committees. While this is largely passive, there is some active bent inherent to that committee (minor but it exists, think of how Tesla wasn't allowed in the S&P 500 for a long time and sometimes unprofitable companies take a long time to leave the S&P 500 for better or worse). On the other hand, the quant funds, while 'active' by legal classification for tax purposes, are grounded in systematic, rules-based trading methodologies with robust academic backing while also considering practical trading costs.
Vanguard has some of its own factor funds. You can get US value factor exposure at a slightly lower cost with VFVA (0.13% expenses) rather than a 50-50 split of AVLV/AVUV (0.15% and 0.25%). This is my choice for US stock. I use Avantis for foreign stock because Vanguard doesn't have a value ETF option there at all.
Quick question: You are saving 0.07% with Vanguard, assuming a 50/50 split between small and large. But if there is even a relatively small chance that the more sophisticated screens of Avantis, and/or the fact that they don't have to religiously follow a 3rd party index, results in a relatively small outperformance, then your 0.07% will be dwarfed, or not? What I'm saying, isn't the likely risk/return better with Avantis than with Vanguard? The max you lose is 0.07% (unless you expect the additional screens to have negative impact in the long run).
Not to mention the stronger tilt of Avantis, that may result in more efficient portfolio allocation.
VFVA doesn't religiously follow a third-party index (as, say, VBR, Vanguard Small-Cap Value ETF, does). From its prospectus:
"The advisor uses a quantitative model to evaluate all of the securities in an investment universe comprised of U.S. large-, mid-, and small-capitalization stocks and to construct a U.S. equity portfolio that seeks to achieve exposure to securities with lower prices relative to fundamental measures of value subject to a rules-based screen designed to promote diversification and to mitigate exposure to certain less liquid stocks. Securities with lower prices relative to fundamental value may be identified by measures such as book to price and earnings to price ratios."

I don't know whether Avantis will be superior in managing the funds. However, it does appear that Avantis doesn't have a stronger value tilt; the P/E and P/B of VFVA are lower than that of the AVLV/AVUV combination, and the reported value exposure for VFVA is stronger (according to Morningstar's analysis; on ETF.com, AVLV is too new to have factor data, but VFVA has almost as strong a value factor exposure as AVUV).
The language in the VFVA prospectus does of course not give much insight. Might it have "quality" screens similar to Avantis? And regardless of whether it has, does it really matter?
Then there is also VFMF.
So we have VFMF, VFVA, VTV, VBR, AVLV, AVUV, and that's just Vanguard and Avantis.
And I guess the factor loads and the entire strategy of the actively managed ETFs might change over time.
Yes VBR is small/mid, but I'm not sure if "smaller" is necessary "better": Vanguard mid cap index crushed both large and small since inception: https://www.portfoliovisualizer.com/bac ... ion3_3=100

I'm still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Apathizer
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

comeinvest wrote: Mon Sep 12, 2022 11:52 pm I'm m still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Last edited by Apathizer on Tue Sep 13, 2022 1:02 am, edited 1 time in total.
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typical.investor
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Re: Avantis Funds: what's so special about them?

Post by typical.investor »

comeinvest wrote: Mon Sep 12, 2022 11:52 pm
grabiner wrote: Sun Sep 11, 2022 9:03 am
comeinvest wrote: Sun Sep 11, 2022 3:02 am
grabiner wrote: Sat Jul 02, 2022 5:04 pm
DanFFA wrote: Fri Jul 01, 2022 11:06 pm The differentiator in my mind between the factor portfolios of Vanguard and Avantis & Alpha Architect, DFA, etc. is that Vanguard is following indexes that largely track funds composed by committees. While this is largely passive, there is some active bent inherent to that committee (minor but it exists, think of how Tesla wasn't allowed in the S&P 500 for a long time and sometimes unprofitable companies take a long time to leave the S&P 500 for better or worse). On the other hand, the quant funds, while 'active' by legal classification for tax purposes, are grounded in systematic, rules-based trading methodologies with robust academic backing while also considering practical trading costs.
Vanguard has some of its own factor funds. You can get US value factor exposure at a slightly lower cost with VFVA (0.13% expenses) rather than a 50-50 split of AVLV/AVUV (0.15% and 0.25%). This is my choice for US stock. I use Avantis for foreign stock because Vanguard doesn't have a value ETF option there at all.
Quick question: You are saving 0.07% with Vanguard, assuming a 50/50 split between small and large. But if there is even a relatively small chance that the more sophisticated screens of Avantis, and/or the fact that they don't have to religiously follow a 3rd party index, results in a relatively small outperformance, then your 0.07% will be dwarfed, or not? What I'm saying, isn't the likely risk/return better with Avantis than with Vanguard? The max you lose is 0.07% (unless you expect the additional screens to have negative impact in the long run).
Not to mention the stronger tilt of Avantis, that may result in more efficient portfolio allocation.
VFVA doesn't religiously follow a third-party index (as, say, VBR, Vanguard Small-Cap Value ETF, does). From its prospectus:
"The advisor uses a quantitative model to evaluate all of the securities in an investment universe comprised of U.S. large-, mid-, and small-capitalization stocks and to construct a U.S. equity portfolio that seeks to achieve exposure to securities with lower prices relative to fundamental measures of value subject to a rules-based screen designed to promote diversification and to mitigate exposure to certain less liquid stocks. Securities with lower prices relative to fundamental value may be identified by measures such as book to price and earnings to price ratios."

I don't know whether Avantis will be superior in managing the funds. However, it does appear that Avantis doesn't have a stronger value tilt; the P/E and P/B of VFVA are lower than that of the AVLV/AVUV combination, and the reported value exposure for VFVA is stronger (according to Morningstar's analysis; on ETF.com, AVLV is too new to have factor data, but VFVA has almost as strong a value factor exposure as AVUV).
The language in the VFVA prospectus does of course not give much insight. Might it have "quality" screens similar to Avantis? And regardless of whether it has, does it really matter?
Then there is also VFMF.
So we have VFMF, VFVA, VTV, VBR, AVLV, AVUV, and that's just Vanguard and Avantis.
And I guess the factor loads and the entire strategy of the actively managed ETFs might change over time.
Yes VBR is small/mid, but I'm not sure if "smaller" is necessary "better": Vanguard mid cap index crushed both large and small since inception: https://www.portfoliovisualizer.com/bac ... ion3_3=100

I'm still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.


VFVA does look to have profitability screens. They say:

Value factor is measured by book value/price, forward earnings/price, operating cash flows/price (for non-financials only).
comeinvest
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

typical.investor wrote: Tue Sep 13, 2022 12:40 am
comeinvest wrote: Mon Sep 12, 2022 11:52 pm
grabiner wrote: Sun Sep 11, 2022 9:03 am
comeinvest wrote: Sun Sep 11, 2022 3:02 am
grabiner wrote: Sat Jul 02, 2022 5:04 pm

Vanguard has some of its own factor funds. You can get US value factor exposure at a slightly lower cost with VFVA (0.13% expenses) rather than a 50-50 split of AVLV/AVUV (0.15% and 0.25%). This is my choice for US stock. I use Avantis for foreign stock because Vanguard doesn't have a value ETF option there at all.
Quick question: You are saving 0.07% with Vanguard, assuming a 50/50 split between small and large. But if there is even a relatively small chance that the more sophisticated screens of Avantis, and/or the fact that they don't have to religiously follow a 3rd party index, results in a relatively small outperformance, then your 0.07% will be dwarfed, or not? What I'm saying, isn't the likely risk/return better with Avantis than with Vanguard? The max you lose is 0.07% (unless you expect the additional screens to have negative impact in the long run).
Not to mention the stronger tilt of Avantis, that may result in more efficient portfolio allocation.
VFVA doesn't religiously follow a third-party index (as, say, VBR, Vanguard Small-Cap Value ETF, does). From its prospectus:
"The advisor uses a quantitative model to evaluate all of the securities in an investment universe comprised of U.S. large-, mid-, and small-capitalization stocks and to construct a U.S. equity portfolio that seeks to achieve exposure to securities with lower prices relative to fundamental measures of value subject to a rules-based screen designed to promote diversification and to mitigate exposure to certain less liquid stocks. Securities with lower prices relative to fundamental value may be identified by measures such as book to price and earnings to price ratios."

I don't know whether Avantis will be superior in managing the funds. However, it does appear that Avantis doesn't have a stronger value tilt; the P/E and P/B of VFVA are lower than that of the AVLV/AVUV combination, and the reported value exposure for VFVA is stronger (according to Morningstar's analysis; on ETF.com, AVLV is too new to have factor data, but VFVA has almost as strong a value factor exposure as AVUV).
The language in the VFVA prospectus does of course not give much insight. Might it have "quality" screens similar to Avantis? And regardless of whether it has, does it really matter?
Then there is also VFMF.
So we have VFMF, VFVA, VTV, VBR, AVLV, AVUV, and that's just Vanguard and Avantis.
And I guess the factor loads and the entire strategy of the actively managed ETFs might change over time.
Yes VBR is small/mid, but I'm not sure if "smaller" is necessary "better": Vanguard mid cap index crushed both large and small since inception: https://www.portfoliovisualizer.com/bac ... ion3_3=100

I'm still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.


VFVA does look to have profitability screens. They say:

Value factor is measured by book value/price, forward earnings/price, operating cash flows/price (for non-financials only).
Which of those would indicate "profitability" (often used as synonym for "quality")? (I think cash flow. But see below how Vanguard identifies "value" and "quality".) If I remember right, all 3 used to be considered measures of "value".

Then if I remember right, with VFMF you would get some additional factors "for free" i.e. with the same expense ratio as an overlay sort of.

From the VFMF web site:
After applying an initial screen to remove the most volatile stocks in the universe, stocks are then selected according to their equally weighted ranking across three targeted factors; momentum- stocks that exhibit strong recent performance, quality- stocks that exhibit strong fundamentals, and value- stocks with low prices relative to fundamentals.
...
Portfolio includes a diverse mix of stocks representing many different market capitalizations (large, mid, and small), market sectors, and industry groups, and holds hundreds of names to diversify idiosyncratic stock risk.
...
Note: The Value factor is measured by book value/price, forward earnings/price, operating cash flows/price (for non-financials only).
For financials, the Quality factor is measured by return on equity and share issuance. For non-financials the Quality factor is measured by return on equity, gross profitability, change in net operating assets, and leverage.
Even though strictly rules based and not very "active" the way I read it, it sounds very appealing as a one-stop shop, doesn't it? And only 0.18% ER. Can we say that basically VFMF = AVLV+AVUV+momentum ? (Avantis has only a momentum "compensation" to compensate for negative momemtum from value.)
comeinvest
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Apathizer wrote: Tue Sep 13, 2022 12:33 am
comeinvest wrote: Mon Sep 12, 2022 11:52 pm I'm m still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Thanks. As you are combining developed and emerging in one fund, you might be interest in this thread: viewtopic.php?t=372156
If I remember right, the poster showed that decent rebalancing benefits could be obtained historically by splitting "small value" 3-ways (U.S., developed, EM).
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Re: Avantis Funds: what's so special about them?

Post by typical.investor »

comeinvest wrote: Tue Sep 13, 2022 1:26 am
typical.investor wrote: Tue Sep 13, 2022 12:40 am
VFVA does look to have profitability screens. They say:

Value factor is measured by book value/price, forward earnings/price, operating cash flows/price (for non-financials only).
Which of those would indicate "profitability" (often used as synonym for "quality")? (I think cash flow. But see below how Vanguard identifies "value" and "quality".) If I remember right, all 3 used to be considered measures of "value".
Well, I was comparing it to something like VTWV Vanguard Russell 2000 Value which I believe only uses book-to-market which after all is how Fama French define value. I'd want to avoid only using this.

But yeah, earnings/price and operating cash flows/price are really just alternative value measures.

Forward earnings though ... maybe someone will correct me but I understood that projected future earnings is predictive of return-on-equity which is a quality measure.

Something like this:
Firms with higher forward P/E ratios achieve lower ROE in the subsequent years and the distribution of their realized ROE is more volatile and wide-spread than firms with lower forward P/E ratios
But as you point out, VFMF uses both forward p/e (for value) and return-on-equity (for the quality factor) so maybe I am not completely correct here.

However you want to define it, it's a far cry from simply using b/m.

https://www.researchgate.net/publicatio ... fitability
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Re: Avantis Funds: what's so special about them?

Post by lawyeredCLO »

A lot of discussion in this thread regarding growth vs value and growth's outperformance over the last 15 years, but the simplest explanation is interest rates. The last 15 years have seen incredibly low interest rates on a historical basis. Growth stocks have benefited from those incredibly low interest rates. We may never see a period like that again. If we hover around more historically average interest rates, say 4.5% or so, I am confident value will outperform. If we see rates sub 2% for a decade, I would take growth.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

comeinvest wrote: Tue Sep 13, 2022 1:46 am
Apathizer wrote: Tue Sep 13, 2022 12:33 am
comeinvest wrote: Mon Sep 12, 2022 11:52 pm I'm m still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Thanks. As you are combining developed and emerging in one fund, you might be interest in this thread: viewtopic.php?t=372156
If I remember right, the poster showed that decent rebalancing benefits could be obtained historically by splitting "small value" 3-ways (U.S., developed, EM).
Yeah, I was originally using AVDE and AVEM, but another poster pointed out DFAX is very similar and combines developed and emerging markets in market cap weights. 3 funds is simpler than 4.
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
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Re: Avantis Funds: what's so special about them?

Post by JohnFromPNW »

Apathizer wrote: Tue Sep 13, 2022 10:29 am
comeinvest wrote: Tue Sep 13, 2022 1:46 am
Apathizer wrote: Tue Sep 13, 2022 12:33 am
comeinvest wrote: Mon Sep 12, 2022 11:52 pm I'm m still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Thanks. As you are combining developed and emerging in one fund, you might be interest in this thread: viewtopic.php?t=372156
If I remember right, the poster showed that decent rebalancing benefits could be obtained historically by splitting "small value" 3-ways (U.S., developed, EM).
Yeah, I was originally using AVDE and AVEM, but another poster pointed out DFAX is very similar and combines developed and emerging markets in market cap weights. 3 funds is simpler than 4.
I found out about DFAX in your signature; I really like your portfolio!
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JohnFromPNW wrote: Tue Sep 13, 2022 12:12 pm
Apathizer wrote: Tue Sep 13, 2022 10:29 am
comeinvest wrote: Tue Sep 13, 2022 1:46 am
Apathizer wrote: Tue Sep 13, 2022 12:33 am
comeinvest wrote: Mon Sep 12, 2022 11:52 pm I'm m still at a loss which one or which combo to chose for my U.S. value tilt. Many split across all five, lol, one for each account.
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Thanks. As you are combining developed and emerging in one fund, you might be interest in this thread: viewtopic.php?t=372156
If I remember right, the poster showed that decent rebalancing benefits could be obtained historically by splitting "small value" 3-ways (U.S., developed, EM).
Yeah, I was originally using AVDE and AVEM, but another poster pointed out DFAX is very similar and combines developed and emerging markets in market cap weights. 3 funds is simpler than 4.
I found out about DFAX in your signature; I really like your portfolio!
This forum really is great. If someone else hadn't mentioned DFAX to me I probably wouldn't have even thought of it. Now I just need to step back, relax and stop thinking about investing so much. :shock:
Last edited by Apathizer on Wed Sep 14, 2022 3:10 pm, edited 1 time in total.
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Re: Avantis Funds: what's so special about them?

Post by JohnFromPNW »

Apathizer wrote: Tue Sep 13, 2022 1:06 pm
JohnFromPNW wrote: Tue Sep 13, 2022 12:12 pm
Apathizer wrote: Tue Sep 13, 2022 10:29 am
comeinvest wrote: Tue Sep 13, 2022 1:46 am
Apathizer wrote: Tue Sep 13, 2022 12:33 am
Check the Ben Felix link discussing five factors that's been posted at least once maybe twice. He presents a portfolio designed to approximate the characteristics of DFA globally diversified factors slanted equity funds. Basically he suggests starting with a total market fund like VTI or VT and supplementing it with Avantis small cap value funds like AVUV, AVDV, and AVES. This allows you to figure out the degree of factor slant you're comfortable with.

I combined AVUS and DFAX. These seem to provide light to moderate slants across all five factors, and having three funds makes rebalancing fairly simple. For some the factor slants are not strong enough, but to me they seem adequate and again I prefer to keep things fairly simple so I don't want more than about three funds. It doesn't have to be so complicated.
Thanks. As you are combining developed and emerging in one fund, you might be interest in this thread: viewtopic.php?t=372156
If I remember right, the poster showed that decent rebalancing benefits could be obtained historically by splitting "small value" 3-ways (U.S., developed, EM).
Yeah, I was originally using AVDE and AVEM, but another poster pointed out DFAX is very similar and combines developed and emerging markets in market cap weights. 3 funds is simpler than 4.
I found out about DFAX in your signature; I really like your portfolio!
This forum really is great. If someone else mentioned DFAX to me I probably wouldn't have even thought of it. Now I just need to step back, relax and stop thinking about investing so much. :shock:
Out of curiosity, did you choose AVUS over DFAC due to expense ratio, or something else?
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JohnFromPNW wrote: Tue Sep 13, 2022 2:33 pm Out of curiosity, did you choose AVUS over DFAC due to expense ratio, or something else?
When I first constructed my portfolio DFAC didn't exist yet, so I used AVUS. They're very similar so I'm not compelled to change. DFAC has slightly more size slant while AVUS has more value and profitability slant. So far AVUS has performed better, but it's only been 2.5 years. Below I used the mutual fund version of DFAC for a longer-term comparison.
https://www.portfoliovisualizer.com/bac ... ion2_2=100

It's interest DFAX has slightly out-performed AVDE/AVEM. DFAX has more size weighting and a little less value slant, but has slightly out-performed AVDE/AVEM.
https://www.portfoliovisualizer.com/bac ... ion3_2=100
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

Does anyone know when the Rational Reminder episode with Eduardo Repetto, CIO of Avantis will be published? I'm really interested. I've listened to a few other interviews with him and he seems pretty impressive.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

Apathizer wrote: Wed Oct 12, 2022 10:09 pm Does anyone know when the Rational Reminder episode with Eduardo Repetto, CIO of Avantis will be published? I'm really interested. I've listened to a few other interviews with him and he seems pretty impressive.

Ben Felix recorded it today.
Just finished recording with Eduardo. Great conversation. I think you will all love it. It is scheduled for November 24 but we will release some clips between now and then.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

Nathan Drake wrote: Fri Oct 14, 2022 12:29 pm
Apathizer wrote: Wed Oct 12, 2022 10:09 pm Does anyone know when the Rational Reminder episode with Eduardo Repetto, CIO of Avantis will be published? I'm really interested. I've listened to a few other interviews with him and he seems pretty impressive.

Ben Felix recorded it today.
Just finished recording with Eduardo. Great conversation. I think you will all love it. It is scheduled for November 24 but we will release some clips between now and then.
Thanks :D
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Re: Avantis Funds: what's so special about them?

Post by bogswenbern »

Is Vanguard ever going to come out with an Intl Small Cap Value ETF? Don't understand why they have 38 domestic SCV, and no Intl. Don't want to pay Avantis expense ratio. Does anybody here know anybody at Vanguard that can ask? Isn't Vanguard aware of Fama/French?
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

bogswenbern wrote: Thu Oct 20, 2022 12:31 pm Is Vanguard ever going to come out with an Intl Small Cap Value ETF? Don't understand why they have 38 domestic SCV, and no Intl. Don't want to pay Avantis expense ratio. Does anybody here know anybody at Vanguard that can ask? Isn't Vanguard aware of Fama/French?
For what Avantis does I think their ERs are very reasonable. I doubt effective factor screens can be implemented for much less. ERs are so low now at some point you're just splitting hairs.
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

I keep seeing the words "academic" and "research" being used to describe Avantis (& DFA). What I want to understand is: is it possible for these guys to know something that the rest of the market doesn't? What research do they have access to that other fund managers don't?
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Re: Avantis Funds: what's so special about them?

Post by JohnFromPNW »

JSPECO9 wrote: Thu Nov 17, 2022 10:32 am I keep seeing the words "academic" and "research" being used to describe Avantis (& DFA). What I want to understand is: is it possible for these guys to know something that the rest of the market doesn't? What research do they have access to that other fund managers don't?
Not likely, and I don't think they necessarily claim to. I also don't think it matters. My general opinion is that to the extent factors continue to present unique returns and risks, they will provide (a) at the very least greater diversity, i.e. dispersion of outcomes, and, (b) if factors do ultimately deliver higher absolute returns, it will be at the expense of greater volatility. I am primarily (95%+) investing a portion of our portfolio in factor-titled funds for reason (a).

Many will perhaps disagree, but bottom line for me, with a fund like AVUS, the top 10 holdings represent 16% of the fund, whereas the top 10 in VOO are 26%. It 'feels' more diverse to me which I prefer.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JohnFromPNW wrote: Thu Nov 17, 2022 12:01 pm
JSPECO9 wrote: Thu Nov 17, 2022 10:32 am I keep seeing the words "academic" and "research" being used to describe Avantis (& DFA). What I want to understand is: is it possible for these guys to know something that the rest of the market doesn't? What research do they have access to that other fund managers don't?
Not likely, and I don't think they necessarily claim to. I also don't think it matters. My general opinion is that to the extent factors continue to present unique returns and risks, they will provide (a) at the very least greater diversity, i.e. dispersion of outcomes, and, (b) if factors do ultimately deliver higher absolute returns, it will be at the expense of greater volatility. I am primarily (95%+) investing a portion of our portfolio in factor-titled funds for reason (a).

Many will perhaps disagree, but bottom line for me, with a fund like AVUS, the top 10 holdings represent 16% of the fund, whereas the top 10 in VOO are 26%. It 'feels' more diverse to me which I prefer.
That's very much my view. Even VTI performance hinges mainly on large caps. A factor-tilted portfolio has more exposure to different market segments. These segments are riskier, but imperfectly correlated with the market, so seem likely to provide more consistent returns.
Last edited by Apathizer on Thu Nov 17, 2022 7:42 pm, edited 1 time in total.
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Re: Avantis Funds: what's so special about them?

Post by steve r »

Apathizer wrote: Thu Nov 17, 2022 12:24 pm
JohnFromPNW wrote: Thu Nov 17, 2022 12:01 pm
JSPECO9 wrote: Thu Nov 17, 2022 10:32 am I keep seeing the words "academic" and "research" being used to describe Avantis (& DFA). What I want to understand is: is it possible for these guys to know something that the rest of the market doesn't? What research do they have access to that other fund managers don't?
Not likely, and I don't think they necessarily claim to. I also don't think it matters. My general opinion is that to the extent factors continue to present unique returns and risks, they will provide (a) at the very least greater diversity, i.e. dispersion of outcomes, and, (b) if factors do ultimately deliver higher absolute returns, it will be at the expense of greater volatility. I am primarily (95%+) investing a portion of our portfolio in factor-titled funds for reason (a).

Many will perhaps disagree, but bottom line for me, with a fund like AVUS, the top 10 holdings represent 16% of the fund, whereas the top 10 in VOO are 26%. It 'feels' more diverse to me which I prefer.
That's very much my view. Even VTI performance hinges mainly on large caps. A factor-tilted portfolio has more exposure to different market segments. This segments are riskier, but imperfectly correlated with the market, so seem likely to provide more consistent returns.
+1
same
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

Apathizer wrote: Thu Nov 24, 2022 5:50 am I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
This was a great listen. Avantis definitely looks good.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JSPECO9 wrote: Fri Nov 25, 2022 1:51 pm
Apathizer wrote: Thu Nov 24, 2022 5:50 am I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
This was a great listen. Avantis definitely looks good.
I agree it was very detailed. Obviously he's promoting Avantis, but their approach seems sensible.

I was also pleasantly surprised would their discussion about AVGE. Some people have said that it was structured more for what people want than what might be ideal. But if I remember correctly the way he described it, it seems pretty close to ideal. It structured for a balance of consistency and tax efficiency which is pretty much what I think most of us want isn't it?
ROTH: 70% AVGE, 30% BNDW. Taxable: 50% BNDW, 50% AVGE.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

Apathizer wrote: Fri Nov 25, 2022 2:36 pm
JSPECO9 wrote: Fri Nov 25, 2022 1:51 pm
Apathizer wrote: Thu Nov 24, 2022 5:50 am I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
This was a great listen. Avantis definitely looks good.
I agree it was very detailed. Obviously he's promoting Avantis, but their approach seems sensible.

I was also pleasantly surprised would their discussion about AVGE. Some people have said that it was structured more for what people want than what might be ideal. But if I remember correctly the way he described it, it seems pretty close to ideal. It structured for a balance of consistency and tax efficiency which is pretty much what I think most of us want isn't it?
Depends on taste really, it’s not optimized for the highest expected returns so if you have an appetite for greater risk you’ll need to manually allocate to their funds
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Apathizer
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

Nathan Drake wrote: Fri Nov 25, 2022 7:40 pm
Apathizer wrote: Fri Nov 25, 2022 2:36 pm
JSPECO9 wrote: Fri Nov 25, 2022 1:51 pm
Apathizer wrote: Thu Nov 24, 2022 5:50 am I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
This was a great listen. Avantis definitely looks good.
I agree it was very detailed. Obviously he's promoting Avantis, but their approach seems sensible.

I was also pleasantly surprised would their discussion about AVGE. Some people have said that it was structured more for what people want than what might be ideal. But if I remember correctly the way he described it, it seems pretty close to ideal. It structured for a balance of consistency and tax efficiency which is pretty much what I think most of us want isn't it?
Depends on taste really, it’s not optimized for the highest expected returns so if you have an appetite for greater risk you’ll need to manually allocate to their funds
While the ex-us is a little under global market cap weights, I'm pretty happy with the factor weights. With some xus markets, specifically emerging markets, there is significant risk. While that might lead to significantly higher returns, that's certainly not guaranteed and it could continue to lag significantly, so I think the AVGE allocation is reasonable.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

Apathizer wrote: Fri Nov 25, 2022 8:41 pm
Nathan Drake wrote: Fri Nov 25, 2022 7:40 pm
Apathizer wrote: Fri Nov 25, 2022 2:36 pm
JSPECO9 wrote: Fri Nov 25, 2022 1:51 pm
Apathizer wrote: Thu Nov 24, 2022 5:50 am I'll start a new thread, but also want to post the Rational Reminder podcast with Avantis CIO Eduardo Repetto here.
https://rationalreminder.ca/podcast/228
This was a great listen. Avantis definitely looks good.
I agree it was very detailed. Obviously he's promoting Avantis, but their approach seems sensible.

I was also pleasantly surprised would their discussion about AVGE. Some people have said that it was structured more for what people want than what might be ideal. But if I remember correctly the way he described it, it seems pretty close to ideal. It structured for a balance of consistency and tax efficiency which is pretty much what I think most of us want isn't it?
Depends on taste really, it’s not optimized for the highest expected returns so if you have an appetite for greater risk you’ll need to manually allocate to their funds
While the ex-us is a little under global market cap weights, I'm pretty happy with the factor weights. With some xus markets, specifically emerging markets, there is significant risk. While that might lead to significantly higher returns, that's certainly not guaranteed and it could continue to lag significantly, so I think the AVGE allocation is reasonable.
Not claiming AVGE is unreasonable but if you’re a big factor advocate it may be pretty light for some people’s taste, both in terms of exUS and value

AVGE is designed for a US investor to get modest factor loadings and a slight home bias without deviating too much from the market to cause potential tracking error behavioral issues
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?

Maybe I could also re-phrase my question: What is the point of AVUS (except for higher cost) when there is AVLV, AVUV, and index funds?

Image

Image

Image

Image
Nathan Drake
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?

Maybe I could also re-phrase my question: What is the point of AVUS (except for higher cost) when there is AVLV, AVUV, and index funds?

Image

Image

Image

Image
AVUS is more of a factor slanted VTI. Very mild tilts, thousands of holdings, closer to market cap weight, top holdings look similar to S&P500 but weights are a bit different. Apple is the top holding.

AVLV is specifically targeting large cap companies with higher value loadings. A little over 200 holdings vs thousands in AVUS. Top holdings markedly different from S&P500. Exxon is the top holding.

Whether one is better depends on your taste. If you want higher value loadings there are many ways to arrive at a similar portfolio construction, so all else being equal if you want higher value for cheaper cost it can make sense to go with VTI + AVLV and AVUV and exclude AVUS entirely
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Avantis Funds: what's so special about them?

Post by the_wiki »

comeinvest wrote: Sat Nov 26, 2022 2:34 am

Maybe I could also re-phrase my question: What is the point of AVUS (except for higher cost) when there is AVLV, AVUV, and index funds?

A single fund replacement for VTI if you just want some light value exposure.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Avantis Funds: what's so special about them?

Post by Phyneas »

Nathan Drake wrote: Sat Nov 26, 2022 3:12 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
Are you sure about this? In the other Avantis thread the consensus was that since it is a F-o-F structure, and the underlying (Ex-US) funds are eligible for it, that it would be passed through overall.
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Apathizer wrote: Sat Nov 26, 2022 3:03 am It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
Why do you prefer VTV vs. AVLV ? Lower expense ratio and doubt about the benefit of the index-less approach and profitability tilt of Avantis, or other reasons?

Looks like both have negative momentum compensation if I read it right.

Image

Image
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
Not to be picky, but you would then have 3 funds, when VTI + VTV + AVUV would also be 3 funds, but at lower average expense ratio.

I kind of get it that AVUS is designed for folks who don't want to tilt too much and who want to have a one position solution; but the expense ratio doesn't reflect that. For example, folks used to pay higher ER for DFA funds than for Vanguard, or for example higher ER for AVUV than for VBR, mostly to get the higher factor tilts.

Or let me speculate. Might the non-indexed approach be worth the extra expense ratio? Or perhaps some filters that eliminate "garbage" companies like some speculative time bombs? I can't imagine because the S&P 500 is large caps and pretty efficient I would suppose, and VTI is mostly large cap and has minimal turnover and as a result minimal index drag doesn't it. By "index drag" I mean the drag of the index in comparison to non-indexed strategies.
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Re: Avantis Funds: what's so special about them?

Post by vineviz »

Nathan Drake wrote: Sat Nov 26, 2022 3:12 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

vineviz wrote: Sat Nov 26, 2022 9:42 am
Nathan Drake wrote: Sat Nov 26, 2022 3:12 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
That’s good news if true, I read this from Rick Ferri so he may have not been up to speed on that
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

comeinvest wrote: Sat Nov 26, 2022 4:43 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
Why do you prefer VTV vs. AVLV ? Lower expense ratio and doubt about the benefit of the index-less approach and profitability tilt of Avantis, or other reasons?
VTV has more holdings (about 350 v 200 for AVLV) and is more large cap, so I think would provide better diversification in combination with AVUV. While there's only about a year of data, so far VTV has out-performed AVLV and they've been closely correlated. While I'm fine with AVLV as part of AVGE, if I were custom building my own portfolio I'd probably go with VTV.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
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Re: Avantis Funds: what's so special about them?

Post by whodidntante »

Nathan Drake wrote: Sat Nov 26, 2022 12:52 pm
vineviz wrote: Sat Nov 26, 2022 9:42 am
Nathan Drake wrote: Sat Nov 26, 2022 3:12 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
That’s good news if true, I read this from Rick Ferri so he may have not been up to speed on that
A Ferri faux paus?
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Re: Avantis Funds: what's so special about them?

Post by stan1 »

Nathan Drake wrote: Sat Nov 26, 2022 12:52 pm
vineviz wrote: Sat Nov 26, 2022 9:42 am
Nathan Drake wrote: Sat Nov 26, 2022 3:12 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am
comeinvest wrote: Sat Nov 26, 2022 2:34 am Quick question to the Avantis and factor aficionados in this thread, a bit off-topic but related: AVUS and AVLV have the same expense ratio (0.15%), but AVLV has significantly more factor loading, or not? Usually the expense ratio is kind of proportional to the factor loading, isn't it? Or at least should be, because index ETFs are nearly zero cost.
So instead of x % AVUS, wouldn't I rather want to have x/2 % AVLV + x/2 % VOO (Vanguard S&P500 index ETF) and a bit of AVUV to get the same average size? (Replace the 50% ratio with the exact number for the same value load; here just as example.)
I know the style chart doesn't say everything; but what am I missing?
It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
That’s good news if true, I read this from Rick Ferri so he may have not been up to speed on that
I searched and didn't find the answer, but wasn't there a situation with Vanguard Total International when it was a fund of funds and it was not eligible for foreign tax credit? That was a long time ago, my memory ain't what it used to be and I'm not finding it by search, someone will remember I'm sure. I don't have Rick's books from early 2000s any more either to look it up that way.
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Re: Avantis Funds: what's so special about them?

Post by vineviz »

stan1 wrote: Sat Nov 26, 2022 4:49 pm I searched and didn't find the answer, but wasn't there a situation with Vanguard Total International when it was a fund of funds and it was not eligible for foreign tax credit? That was a long time ago, my memory ain't what it used to be and I'm not finding it by search, someone will remember I'm sure. I don't have Rick's books from early 2000s any more either to look it up that way.
All of Vanguard's fund-of-funds (e.g. STAR, LifeStrategy, Target Retirement) pass through the foreign tax eligibility, as do iShares Core Allocation ETF fund-of-funds.
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Re: Avantis Funds: what's so special about them?

Post by muffins14 »

Apathizer wrote: Sat Nov 26, 2022 4:14 pm
comeinvest wrote: Sat Nov 26, 2022 4:43 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
Why do you prefer VTV vs. AVLV ? Lower expense ratio and doubt about the benefit of the index-less approach and profitability tilt of Avantis, or other reasons?
VTV has more holdings (about 350 v 200 for AVLV) and is more large cap, so I think would provide better diversification in combination with AVUV. While there's only about a year of data, so far VTV has out-performed AVLV and they've been closely correlated. While I'm fine with AVLV as part of AVGE, if I were custom building my own portfolio I'd probably go with VTV.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
I also hold some VTI, I’m not 100% in Avantis. If you hold any VTI, I’d think you could get similar factor loads and exposures by just combining VTI and AVUV at a lower cost, no need for VTI+AVUS+AVLV.
35% VTI, 25% AVUV, 15% IXUS, 15% AVDV, 10% VWO
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Re: Avantis Funds: what's so special about them?

Post by grabiner »

stan1 wrote: Sat Nov 26, 2022 4:49 pm
Nathan Drake wrote: Sat Nov 26, 2022 12:52 pm
vineviz wrote: Sat Nov 26, 2022 9:42 am
Nathan Drake wrote: Sat Nov 26, 2022 3:12 am One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
That’s good news if true, I read this from Rick Ferri so he may have not been up to speed on that
I searched and didn't find the answer, but wasn't there a situation with Vanguard Total International when it was a fund of funds and it was not eligible for foreign tax credit? That was a long time ago, my memory ain't what it used to be and I'm not finding it by search, someone will remember I'm sure. I don't have Rick's books from early 2000s any more either to look it up that way.
The law changed several years ago, and funds-of-funds are now eligible.
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

Apathizer wrote: Sat Nov 26, 2022 4:14 pm
comeinvest wrote: Sat Nov 26, 2022 4:43 am
Apathizer wrote: Sat Nov 26, 2022 3:03 am It depends how complicated you want to make things. Sure you could tinker with various funds (since it covers the entire market VTI is better than VOO) to get the allocation you want, but that's way too much trouble IMO. That's why I just go with AVGE and call it good. If I wanted US only I'd probably just use AVUS and maybe a little AVUV and VTV for a little more size and value slant.
Why do you prefer VTV vs. AVLV ? Lower expense ratio and doubt about the benefit of the index-less approach and profitability tilt of Avantis, or other reasons?
VTV has more holdings (about 350 v 200 for AVLV) and is more large cap, so I think would provide better diversification in combination with AVUV. While there's only about a year of data, so far VTV has out-performed AVLV and they've been closely correlated. While I'm fine with AVLV as part of AVGE, if I were custom building my own portfolio I'd probably go with VTV.
https://www.portfoliovisualizer.com/bac ... ion2_2=100
additional # of holdings > 100 is no additional benefit, according to a Vanguard study.
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Re: Avantis Funds: what's so special about them?

Post by stan1 »

grabiner wrote: Sat Nov 26, 2022 7:57 pm
stan1 wrote: Sat Nov 26, 2022 4:49 pm
Nathan Drake wrote: Sat Nov 26, 2022 12:52 pm
vineviz wrote: Sat Nov 26, 2022 9:42 am
Nathan Drake wrote: Sat Nov 26, 2022 3:12 am One drawback of AVGE is no foreign tax credit, similar issue with VT which is why many people tend to allocate with multiple funds instead
I'm pretty sure this is not true.

AVGE is a fund-of-funds, which means it will "pass through" the FTC eligibility of the underlying funds. This is a different structure from VT.
That’s good news if true, I read this from Rick Ferri so he may have not been up to speed on that
I searched and didn't find the answer, but wasn't there a situation with Vanguard Total International when it was a fund of funds and it was not eligible for foreign tax credit? That was a long time ago, my memory ain't what it used to be and I'm not finding it by search, someone will remember I'm sure. I don't have Rick's books from early 2000s any more either to look it up that way.
The law changed several years ago, and funds-of-funds are now eligible.
Thanks, law change makes sense.
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