AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

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whodidntante
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Re: AVUV - PE ratio single digits

Post by whodidntante »

I hold a scandalous amount of money in it. I forgot to ask the bogleheads what they think of it. Oops.
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

Nathan Drake wrote: Because it's at the highest levels of concentration the market has seen in history?
The market surely had more concentration risk in, say 1890.
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Re: AVUV - PE ratio single digits

Post by SB1234 »

whodidntante wrote: Sun Feb 11, 2024 12:27 pm I hold a scandalous amount of money in it. I forgot to ask the bogleheads what they think of it. Oops.
What convinced you to buy it? Just the valuations? Something you read in the prospectus? E.g some avantis secret sauce.
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Re: AVUV - PE ratio single digits

Post by whodidntante »

Northern Flicker wrote: Sun Feb 11, 2024 12:31 pm
Nathan Drake wrote: Because it's at the highest levels of concentration the market has seen in history?
The market surely had more concentration risk in, say 1890.
The United States was an emerging market then, with significant corruption, concentration of power, unstable banking system, lack of investor protections, and fraud. I don't know that we completely solved any of those problems, but we managed to fix up the place enough to attract more investment.

I don't think the comparison to EM USA is all that useful, though.
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Re: AVUV - PE ratio single digits

Post by whodidntante »

SB1234 wrote: Sun Feb 11, 2024 12:35 pm
whodidntante wrote: Sun Feb 11, 2024 12:27 pm I hold a scandalous amount of money in it. I forgot to ask the bogleheads what they think of it. Oops.
What convinced you to buy it? Just the valuations? Something you read in the prospectus? E.g some avantis secret sauce.
Like all bogleheads, I think costs are important. But I find MCW to be problematic, especially for me because my human capital is tied to tech.

The reason I own AVUV is that DFA sat on their laurels too long, and Avantis launched some good products. It's not that I was attracted to the PE ratio on any given Sunday.
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Re: AVUV - PE ratio single digits

Post by SB1234 »

whodidntante wrote: Sun Feb 11, 2024 12:46 pm
SB1234 wrote: Sun Feb 11, 2024 12:35 pm
whodidntante wrote: Sun Feb 11, 2024 12:27 pm I hold a scandalous amount of money in it. I forgot to ask the bogleheads what they think of it. Oops.
What convinced you to buy it? Just the valuations? Something you read in the prospectus? E.g some avantis secret sauce.
Like all bogleheads, I think costs are important. But I find MCW to be problematic, especially for me because my human capital is tied to tech.

The reason I own AVUV is that DFA sat on their laurels too long, and Avantis launched some good products. It's not that I was attracted to the PE ratio on any given Sunday.
Thanks 🙏
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

Triple digit golfer wrote: Sun Feb 11, 2024 12:25 pm
Nathan Drake wrote: Sun Feb 11, 2024 12:19 pm
Triple digit golfer wrote: Sun Feb 11, 2024 6:34 am
Nathan Drake wrote: Sat Feb 10, 2024 10:10 pm
Triple digit golfer wrote: Sat Feb 10, 2024 7:18 pm

I know exactly what it means. It's a relative term.

Both are top heavy. One is more top heavy.

So, how top heavy is too top heavy to you?
That's like saying "everything is relative".

Relative to The S&P 500? The top 7 stocks are nearly 30% of the index.

AVUV? The top 7 stocks are 6.4% of the entire portfolio.

So no, relative to the US TSM, AVUV is not top heavy
You said the S&P 500 is top heavy. Why do you feel that way and what is your threshold for top heavy? Top X stocks make top Y% of the index. What is your X and Y?
Because it's at the highest levels of concentration the market has seen in history?
Define concentration.

Top 5? 7? 10? 20?

How do you measure how X% concentration at one point in time compares to another point in time? As we've been through in the Schiller PE thread, there are many other variables involved. Company A and Company B are not equal. One could be far more diversified than the other. Company A could be more diversified than it was at another point in time.

So, again, what is your threshold for top heavy? How do you define concentration? How do you account for different variables and how they constantly change over time and then, how do you compare different time periods?
Top heavy means you are concentrating large wealth in a few individual stocks. Having 7 stocks represent 30% of your portfolio is top heavy, it's in fact a historical anomaly. This is at record highs relative to the market. The Mag 7 are also fairly distinct in their core businesses. They are not diversified to the extent you are assuming they are. Apple does not drill for oil. Meta does not manufacture airplanes.

Having a significant portion of your wealth tied up in the most expensive stocks has historically shown to lower long term returns.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: AVUV - PE ratio single digits

Post by Triple digit golfer »

Nathan Drake wrote: Sun Feb 11, 2024 1:09 pm
Triple digit golfer wrote: Sun Feb 11, 2024 12:25 pm
Nathan Drake wrote: Sun Feb 11, 2024 12:19 pm
Triple digit golfer wrote: Sun Feb 11, 2024 6:34 am
Nathan Drake wrote: Sat Feb 10, 2024 10:10 pm

That's like saying "everything is relative".

Relative to The S&P 500? The top 7 stocks are nearly 30% of the index.

AVUV? The top 7 stocks are 6.4% of the entire portfolio.

So no, relative to the US TSM, AVUV is not top heavy
You said the S&P 500 is top heavy. Why do you feel that way and what is your threshold for top heavy? Top X stocks make top Y% of the index. What is your X and Y?
Because it's at the highest levels of concentration the market has seen in history?
Define concentration.

Top 5? 7? 10? 20?

How do you measure how X% concentration at one point in time compares to another point in time? As we've been through in the Schiller PE thread, there are many other variables involved. Company A and Company B are not equal. One could be far more diversified than the other. Company A could be more diversified than it was at another point in time.

So, again, what is your threshold for top heavy? How do you define concentration? How do you account for different variables and how they constantly change over time and then, how do you compare different time periods?
Top heavy means you are concentrating large wealth in a few individual stocks. Having 7 stocks represent 30% of your portfolio is top heavy, it's in fact a historical anomaly. This is at record highs relative to the market. The Mag 7 are also fairly distinct in their core businesses. They are not diversified to the extent you are assuming they are. Apple does not drill for oil. Meta does not manufacture airplanes.

Having a significant portion of your wealth tied up in the most expensive stocks has historically shown to lower long term returns.
So you can't answer the questions.

I don't need the top 30% of one index to be any more diversified than they are.

The U.S. stock market represents 49% of my portfolio. That means stocks of these 7 companies represent less than 15% of my portfolio. Why is this a problem?

How do you define and quantify diversification? How little is too little?
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

Triple digit golfer wrote: Sun Feb 11, 2024 1:57 pm
Nathan Drake wrote: Sun Feb 11, 2024 1:09 pm
Triple digit golfer wrote: Sun Feb 11, 2024 12:25 pm
Nathan Drake wrote: Sun Feb 11, 2024 12:19 pm
Triple digit golfer wrote: Sun Feb 11, 2024 6:34 am

You said the S&P 500 is top heavy. Why do you feel that way and what is your threshold for top heavy? Top X stocks make top Y% of the index. What is your X and Y?
Because it's at the highest levels of concentration the market has seen in history?
Define concentration.

Top 5? 7? 10? 20?

How do you measure how X% concentration at one point in time compares to another point in time? As we've been through in the Schiller PE thread, there are many other variables involved. Company A and Company B are not equal. One could be far more diversified than the other. Company A could be more diversified than it was at another point in time.

So, again, what is your threshold for top heavy? How do you define concentration? How do you account for different variables and how they constantly change over time and then, how do you compare different time periods?
Top heavy means you are concentrating large wealth in a few individual stocks. Having 7 stocks represent 30% of your portfolio is top heavy, it's in fact a historical anomaly. This is at record highs relative to the market. The Mag 7 are also fairly distinct in their core businesses. They are not diversified to the extent you are assuming they are. Apple does not drill for oil. Meta does not manufacture airplanes.

Having a significant portion of your wealth tied up in the most expensive stocks has historically shown to lower long term returns.
So you can't answer the questions.

I don't need the top 30% of one index to be any more diversified than they are.

The U.S. stock market represents 49% of my portfolio. That means stocks of these 7 companies represent less than 15% of my portfolio. Why is this a problem?

How do you define and quantify diversification? How little is too little?
I am not arguing about your portfolio.

If you are 100% S&P 500, you should be more concerned because you are not diversified enough due to the top heavy nature of the S&P
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: AVUV - PE ratio single digits

Post by exodusNH »

Nathan Drake wrote: Sun Feb 11, 2024 3:14 pm
Triple digit golfer wrote: Sun Feb 11, 2024 1:57 pm
Nathan Drake wrote: Sun Feb 11, 2024 1:09 pm
Triple digit golfer wrote: Sun Feb 11, 2024 12:25 pm
Nathan Drake wrote: Sun Feb 11, 2024 12:19 pm

Because it's at the highest levels of concentration the market has seen in history?
Define concentration.

Top 5? 7? 10? 20?

How do you measure how X% concentration at one point in time compares to another point in time? As we've been through in the Schiller PE thread, there are many other variables involved. Company A and Company B are not equal. One could be far more diversified than the other. Company A could be more diversified than it was at another point in time.

So, again, what is your threshold for top heavy? How do you define concentration? How do you account for different variables and how they constantly change over time and then, how do you compare different time periods?
Top heavy means you are concentrating large wealth in a few individual stocks. Having 7 stocks represent 30% of your portfolio is top heavy, it's in fact a historical anomaly. This is at record highs relative to the market. The Mag 7 are also fairly distinct in their core businesses. They are not diversified to the extent you are assuming they are. Apple does not drill for oil. Meta does not manufacture airplanes.

Having a significant portion of your wealth tied up in the most expensive stocks has historically shown to lower long term returns.
So you can't answer the questions.

I don't need the top 30% of one index to be any more diversified than they are.

The U.S. stock market represents 49% of my portfolio. That means stocks of these 7 companies represent less than 15% of my portfolio. Why is this a problem?

How do you define and quantify diversification? How little is too little?
I am not arguing about your portfolio.

If you are 100% S&P 500, you should be more concerned because you are not diversified enough due to the top heavy nature of the S&P
Eh. It's always top heavy: https://youtu.be/kfMFDcuDKYA?si=5FhfoqA_y65WQME8

With VTI being ±85% VOO, there's really no escaping it unless you tilt pretty strongly away from the market.
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

exodusNH wrote: Sun Feb 11, 2024 3:22 pm
Nathan Drake wrote: Sun Feb 11, 2024 3:14 pm
Triple digit golfer wrote: Sun Feb 11, 2024 1:57 pm
Nathan Drake wrote: Sun Feb 11, 2024 1:09 pm
Triple digit golfer wrote: Sun Feb 11, 2024 12:25 pm

Define concentration.

Top 5? 7? 10? 20?

How do you measure how X% concentration at one point in time compares to another point in time? As we've been through in the Schiller PE thread, there are many other variables involved. Company A and Company B are not equal. One could be far more diversified than the other. Company A could be more diversified than it was at another point in time.

So, again, what is your threshold for top heavy? How do you define concentration? How do you account for different variables and how they constantly change over time and then, how do you compare different time periods?
Top heavy means you are concentrating large wealth in a few individual stocks. Having 7 stocks represent 30% of your portfolio is top heavy, it's in fact a historical anomaly. This is at record highs relative to the market. The Mag 7 are also fairly distinct in their core businesses. They are not diversified to the extent you are assuming they are. Apple does not drill for oil. Meta does not manufacture airplanes.

Having a significant portion of your wealth tied up in the most expensive stocks has historically shown to lower long term returns.
So you can't answer the questions.

I don't need the top 30% of one index to be any more diversified than they are.

The U.S. stock market represents 49% of my portfolio. That means stocks of these 7 companies represent less than 15% of my portfolio. Why is this a problem?

How do you define and quantify diversification? How little is too little?
I am not arguing about your portfolio.

If you are 100% S&P 500, you should be more concerned because you are not diversified enough due to the top heavy nature of the S&P
Eh. It's always top heavy: https://youtu.be/kfMFDcuDKYA?si=5FhfoqA_y65WQME8

With VTI being ±85% VOO, there's really no escaping it unless you tilt pretty strongly away from the market.
It’s not always as top heavy as it is today

The “escaping it” is obviously to not just invest in US market cap weights
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Re: AVUV - PE ratio single digits

Post by TimeIsYourFriend »

Nathan Drake wrote: Sun Feb 11, 2024 12:20 pm
TimeIsYourFriend wrote: Sun Feb 11, 2024 7:37 am I wouldn’t do a small value allocation unless you can commit to it for the rest of your life. Getting in and out of it based on the concentration of the market will likely be loser’s gamble: exceptionally difficult to do. Small value also has long periods of terrible performance (think two decades) where you are wondering about the cost of your “concentration insurance”.
Post some examples of two decades of "terrible performance" for small value.

At worst, it matches the market, as there's been not been many periods (if any) of this duration where it has significantly underperformed.
Yes, at the 20 year mark, it matches or exceeds the market, but that means not batting an eye at the massive swings relative to the market you had to endure over that 18-ish years. Anyone can say a 20 year period doesn’t matter looking at a chart because eventually small value outperformed, but they didn’t live through it.
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

whodidntante wrote: Sun Feb 11, 2024 12:39 pm
Northern Flicker wrote: Sun Feb 11, 2024 12:31 pm
Nathan Drake wrote: Because it's at the highest levels of concentration the market has seen in history?
The market surely had more concentration risk in, say 1890.
The United States was an emerging market then, with significant corruption, concentration of power, unstable banking system, lack of investor protections, and fraud. I don't know that we completely solved any of those problems, but we managed to fix up the place enough to attract more investment.

I don't think the comparison to EM USA is all that useful, though.
My point was to demonstrate a counterexample. But it was a comment about concentration risk, which is a separate matter from shareholder protections and political risk etc. There was a time when sector concentration risk was not diversifiable in the US market.

All markets would meet the definition of emerging markets before investor protections were implemented (in many countries).
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

Northern Flicker wrote: Sun Feb 11, 2024 4:52 pm
whodidntante wrote: Sun Feb 11, 2024 12:39 pm
Northern Flicker wrote: Sun Feb 11, 2024 12:31 pm
Nathan Drake wrote: Because it's at the highest levels of concentration the market has seen in history?
The market surely had more concentration risk in, say 1890.
The United States was an emerging market then, with significant corruption, concentration of power, unstable banking system, lack of investor protections, and fraud. I don't know that we completely solved any of those problems, but we managed to fix up the place enough to attract more investment.

I don't think the comparison to EM USA is all that useful, though.
My point was to demonstrate a counterexample. But it was a comment about concentration risk, which is a separate matter from shareholder protections and political risk etc. There was a time when sector concentration risk was not diversifiable in the US market.

All markets would meet the definition of emerging markets before investor protections were implemented (in many countries).
This is another argument for being a global investor.

Certain countries have presumably higher concentration risk than even the US right now.

Saudi Arabia or Taiwan as examples
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Re: AVUV - PE ratio single digits

Post by HomerJ »

Nathan Drake wrote: Sun Feb 11, 2024 3:56 pm It’s not always as top heavy as it is today
Pretty close. There's always a top 10 that make up a huge chunk of the SP500.

Nice thing is we also own #483, and if it somedays moves up to #4, we'll get all those gains too.

And with Total Stock Market, we own #1874 too...
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

HomerJ wrote: Sun Feb 11, 2024 4:58 pm
Nathan Drake wrote: Sun Feb 11, 2024 3:56 pm It’s not always as top heavy as it is today
Pretty close. There's always a top 10 that make up a huge chunk of the SP500.

Nice thing is we also own #483, and if it somedays moves up to #4, we'll get all those gains too.

And with Total Stock Market, we own #1874 too...
Doesn’t really matter much. S&P500 right now essentially lives or dies by the top 10 or so stocks.

So if they falter, you are looking at a very long period of poor performance until this correction can get worked off
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Northern Flicker
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

Nathan Drake wrote: Sun Feb 11, 2024 4:58 pm
Northern Flicker wrote: Sun Feb 11, 2024 4:52 pm
whodidntante wrote: Sun Feb 11, 2024 12:39 pm
Northern Flicker wrote: Sun Feb 11, 2024 12:31 pm
Nathan Drake wrote: Because it's at the highest levels of concentration the market has seen in history?
The market surely had more concentration risk in, say 1890.
The United States was an emerging market then, with significant corruption, concentration of power, unstable banking system, lack of investor protections, and fraud. I don't know that we completely solved any of those problems, but we managed to fix up the place enough to attract more investment.

I don't think the comparison to EM USA is all that useful, though.
My point was to demonstrate a counterexample. But it was a comment about concentration risk, which is a separate matter from shareholder protections and political risk etc. There was a time when sector concentration risk was not diversifiable in the US market.

All markets would meet the definition of emerging markets before investor protections were implemented (in many countries).
This is another argument for being a global investor.

Certain countries have presumably higher concentration risk than even the US right now.

Saudi Arabia or Taiwan as examples
Since WW2, the US market often has been the only market diversified enough for idiosyncratic risk to be diversifiable. The big question is if still can satisfy that objective.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Dmevsjd »

AVUV is interesting but historically small cap mutual funds undoing has been when they get too big and can’t invest in the stuff that made big money when they were smaller. Some have had relative success by shutting the door on new money. ETFs can’t do this. That seems to be a problem.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Northern Flicker »

That would be an argument for an integrated factor-tilted portfolio like AVUS rather than rolling your own with AVUV as a building block.
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Re: AVUV - PE ratio single digits

Post by rkhusky »

Nathan Drake wrote: Sun Feb 11, 2024 5:02 pm
HomerJ wrote: Sun Feb 11, 2024 4:58 pm
Nathan Drake wrote: Sun Feb 11, 2024 3:56 pm It’s not always as top heavy as it is today
Pretty close. There's always a top 10 that make up a huge chunk of the SP500.

Nice thing is we also own #483, and if it somedays moves up to #4, we'll get all those gains too.

And with Total Stock Market, we own #1874 too...
Doesn’t really matter much. S&P500 right now essentially lives or dies by the top 10 or so stocks.

So if they falter, you are looking at a very long period of poor performance until this correction can get worked off
If one falters something else will take its place. If they all falter, it’s likely the whole market is faltering.
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Re: AVUV - PE ratio single digits

Post by HomerJ »

Nathan Drake wrote: Sun Feb 11, 2024 5:02 pm
HomerJ wrote: Sun Feb 11, 2024 4:58 pm
Nathan Drake wrote: Sun Feb 11, 2024 3:56 pm It’s not always as top heavy as it is today
Pretty close. There's always a top 10 that make up a huge chunk of the SP500.

Nice thing is we also own #483, and if it somedays moves up to #4, we'll get all those gains too.

And with Total Stock Market, we own #1874 too...
Doesn’t really matter much. S&P500 right now essentially lives or dies by the top 10 or so stocks.

So if they falter, you are looking at a very long period of poor performance until this correction can get worked off
Of course, that's not true at all... Do I really need to show you the history? Or can you not look it up for yourself?
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Nathan Drake
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

HomerJ wrote: Sun Feb 11, 2024 10:21 pm
Nathan Drake wrote: Sun Feb 11, 2024 5:02 pm
HomerJ wrote: Sun Feb 11, 2024 4:58 pm
Nathan Drake wrote: Sun Feb 11, 2024 3:56 pm It’s not always as top heavy as it is today
Pretty close. There's always a top 10 that make up a huge chunk of the SP500.

Nice thing is we also own #483, and if it somedays moves up to #4, we'll get all those gains too.

And with Total Stock Market, we own #1874 too...
Doesn’t really matter much. S&P500 right now essentially lives or dies by the top 10 or so stocks.

So if they falter, you are looking at a very long period of poor performance until this correction can get worked off
Of course, that's not true at all... Do I really need to show you the history? Or can you not look it up for yourself?
Image

Our history is extremely limited, but while it's not guaranteed that high concentration leads to poor performance, there are many cases where it has.
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Northern Flicker
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

Nathan Drake wrote: Mon Feb 12, 2024 12:14 am
HomerJ wrote: Sun Feb 11, 2024 10:21 pm Of course, that's not true at all... Do I really need to show you the history? Or can you not look it up for yourself?
Image

Our history is extremely limited, but while it's not guaranteed that high concentration leads to poor performance, there are many cases where it has.
2023 and 2007 as examples? Seriously?

https://www.portfoliovisualizer.com/bac ... sJzOk6W0wU

https://www.portfoliovisualizer.com/bac ... ecfBacPy37
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by valueinvestor »

Assume top 10 stocks are overpriced by 100%. To get back to fair value, they would fall 50%.

So total stock market would need to fall by 15%. Two years of stagnant returns would do the trick. Is that really such a cause for concern?

If as some point out the rest of the market is even bit tiny bit undervalued, the impact would be even less.

I would still invest in AVUV - why take the chance when the cost is unlikely to be much.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by broncocountry25 »

20% of our paper assets are in AVUV or VBR would like to get it up to 25% and hold steady there. If we sell a rental property I will make that allocation happen.
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

Northern Flicker wrote: Mon Feb 12, 2024 1:14 pm
Nathan Drake wrote: Mon Feb 12, 2024 12:14 am
HomerJ wrote: Sun Feb 11, 2024 10:21 pm Of course, that's not true at all... Do I really need to show you the history? Or can you not look it up for yourself?
Image

Our history is extremely limited, but while it's not guaranteed that high concentration leads to poor performance, there are many cases where it has.
2023 and 2007 as examples? Seriously?

https://www.portfoliovisualizer.com/bac ... sJzOk6W0wU

https://www.portfoliovisualizer.com/bac ... ecfBacPy37
Also, the S&P500 returned 5.47% in 2007, not 3.5%. I wonder if that table is showing price appreciation without dividends? That is a classic thing done by active managers to make index performance look worse.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Patzer »

1/5th of US stocks are in AVUV, rest in VTI.
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Re: AVUV - PE ratio single digits

Post by comeinvest »

ivgrivchuck wrote: Sat Feb 10, 2024 10:10 pm
Yesterdaysnews wrote: Sat Feb 10, 2024 3:47 pm Given the top heavy nature of VTI and current high multiple, why not put some into AVUV? Single digit multiple! Only issue is risk to small banks but JPow seemed to call it a manageable situation.
That is because AVUV intentionally picks stocks with low P/E ratios. Almost all of these companies are going through some kind of struggles. Many of them are going to go bankrupt. Some will get things right and will recover.

AVUV suffers from a negative skew (meaning that if the VTI tanks 50%, AVUV might tank 70%), because again these are distressed companies and most of them can't survive a serious depression. This is going to hurt you most when you can least afford it.

Because of these additional risk factors, the expected return of AVUV is higher than VTI. Otherwise nobody would be investing in these businesses.

Just understand what you are getting into, and that there is no free lunch.
Is that true? I thought AVUV has Value + Quality factor tilts (and some more). "Quality" means stuff like high profit margin, low leverage and such, and should prevent the fund from picking up only bottom feeder trash or not?
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Re: AVUV - PE ratio single digits

Post by hiddenpower »

comeinvest wrote: Tue Feb 13, 2024 1:46 pm
ivgrivchuck wrote: Sat Feb 10, 2024 10:10 pm
Yesterdaysnews wrote: Sat Feb 10, 2024 3:47 pm Given the top heavy nature of VTI and current high multiple, why not put some into AVUV? Single digit multiple! Only issue is risk to small banks but JPow seemed to call it a manageable situation.
That is because AVUV intentionally picks stocks with low P/E ratios. Almost all of these companies are going through some kind of struggles. Many of them are going to go bankrupt. Some will get things right and will recover.

AVUV suffers from a negative skew (meaning that if the VTI tanks 50%, AVUV might tank 70%), because again these are distressed companies and most of them can't survive a serious depression. This is going to hurt you most when you can least afford it.

Because of these additional risk factors, the expected return of AVUV is higher than VTI. Otherwise nobody would be investing in these businesses.

Just understand what you are getting into, and that there is no free lunch.
Is that true? I thought AVUV has Value + Quality factor tilts (and some more). "Quality" means stuff like high profit margin, low leverage and such, and should prevent the fund from picking up only bottom feeder trash or not?
profitability screen which kinda captures quality as a side-effect afaik
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Re: AVUV - PE ratio single digits

Post by Northern Flicker »

comeinvest wrote: Tue Feb 13, 2024 1:46 pm
ivgrivchuck wrote: Sat Feb 10, 2024 10:10 pm
Yesterdaysnews wrote: Sat Feb 10, 2024 3:47 pm Given the top heavy nature of VTI and current high multiple, why not put some into AVUV? Single digit multiple! Only issue is risk to small banks but JPow seemed to call it a manageable situation.
That is because AVUV intentionally picks stocks with low P/E ratios. Almost all of these companies are going through some kind of struggles. Many of them are going to go bankrupt. Some will get things right and will recover.

AVUV suffers from a negative skew (meaning that if the VTI tanks 50%, AVUV might tank 70%), because again these are distressed companies and most of them can't survive a serious depression. This is going to hurt you most when you can least afford it.

Because of these additional risk factors, the expected return of AVUV is higher than VTI. Otherwise nobody would be investing in these businesses.

Just understand what you are getting into, and that there is no free lunch.
Is that true? I thought AVUV has Value + Quality factor tilts (and some more). "Quality" means stuff like high profit margin, low leverage and such, and should prevent the fund from picking up only bottom feeder trash or not?
AVUV seems to be a well constructed fund, but there's no magic here. AVUV is significantly riskier than VTI. We've only had 1 bear market since AVUV was launched, and it was down about 42% compared to about 25% for the market:

https://www.portfoliovisualizer.com/bac ... o45HKpeSil
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Re: AVUV - PE ratio single digits

Post by livesoft »

Northern Flicker wrote: Tue Feb 13, 2024 2:36 pm AVUV seems to be a well constructed fund, but there's no magic here. AVUV is significantly riskier than VTI. We've only had 1 bear market since AVUV was launched, and it was down about 42% compared to about 25% for the market:
That's the beauty of AVUV: You get a very clear signal on when you should buy shares.
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Re: AVUV - PE ratio single digits

Post by Nathan Drake »

livesoft wrote: Tue Feb 13, 2024 2:58 pm
Northern Flicker wrote: Tue Feb 13, 2024 2:36 pm AVUV seems to be a well constructed fund, but there's no magic here. AVUV is significantly riskier than VTI. We've only had 1 bear market since AVUV was launched, and it was down about 42% compared to about 25% for the market:
That's the beauty of AVUV: You get a very clear signal on when you should buy shares.
Every two weeks?

:)
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Re: AVUV - PE ratio single digits

Post by slicendice »

livesoft wrote: Tue Feb 13, 2024 2:58 pm
Northern Flicker wrote: Tue Feb 13, 2024 2:36 pm AVUV seems to be a well constructed fund, but there's no magic here. AVUV is significantly riskier than VTI. We've only had 1 bear market since AVUV was launched, and it was down about 42% compared to about 25% for the market:
That's the beauty of AVUV: You get a very clear signal on when you should buy shares.
Also in 2022, the year "everything" went down 15+ percent, AVUV outperformed.
Also, another benefit of holding AVUV is that you won't find yourself complaining about the volatility of intermediate bond funds.
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Re: AVUV - PE ratio single digits

Post by ivgrivchuck »

comeinvest wrote: Tue Feb 13, 2024 1:46 pm
ivgrivchuck wrote: Sat Feb 10, 2024 10:10 pm
Yesterdaysnews wrote: Sat Feb 10, 2024 3:47 pm Given the top heavy nature of VTI and current high multiple, why not put some into AVUV? Single digit multiple! Only issue is risk to small banks but JPow seemed to call it a manageable situation.
That is because AVUV intentionally picks stocks with low P/E ratios. Almost all of these companies are going through some kind of struggles. Many of them are going to go bankrupt. Some will get things right and will recover.

AVUV suffers from a negative skew (meaning that if the VTI tanks 50%, AVUV might tank 70%), because again these are distressed companies and most of them can't survive a serious depression. This is going to hurt you most when you can least afford it.

Because of these additional risk factors, the expected return of AVUV is higher than VTI. Otherwise nobody would be investing in these businesses.

Just understand what you are getting into, and that there is no free lunch.
Is that true? I thought AVUV has Value + Quality factor tilts (and some more). "Quality" means stuff like high profit margin, low leverage and such, and should prevent the fund from picking up only bottom feeder trash or not?
You can't have everything. Everybody wants companies with high profit margins, low leverage and low P/E. They don't exist.

It's correct that they have a quality screen to filter out *absolute* trash. The companies are still a lot riskier than in VTI, and are much more likely to be in trouble in severe economic downturn (e.g. Regional Banks).
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by HomerJ »

AVUV went down 3.4% today.

It's obviously leveraged or highly concentrated in certain value stocks.

It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.

They may or may not be smarter than the average bear.

I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.

Gambling is fun...
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by livesoft »

HomerJ wrote: Tue Feb 13, 2024 7:57 pm AVUV went down 3.4% today.

It's obviously leveraged or highly concentrated in certain value stocks.

It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.

They may or may not be smarter than the average bear.

I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.

Gambling is fun...
IJS went down 3.96% today. Is IJS leveraged and an active fund? Anyways, maybe AVUV has that secret sauce which you are alluding to since it did not drop as much as IJS?

Full disclosure: I bought some IJS and AVUV today (they both had RBDs), but yesterday I had sold all the shares of IJS that I owned.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by folkher0 »

HomerJ wrote: Tue Feb 13, 2024 7:57 pm I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.
This is actually a well described phenomenon. Active funds tend to outperform in their early years, but over time that outperformance tends not to persist. Here’s a paper written by Pastor, Stambaugh and Taylor (I have no idea who they are lol, but the paper seems solid)

https://papers.ssrn.com/sol3/papers.cfm ... id=2318788
Abstract
We empirically analyze the nature of returns to scale in active mutual fund management. We find strong evidence of decreasing returns at the industry level: As the size of the active mutual fund industry increases, a fund's ability to outperform passive benchmarks declines. At the fund level, all methods considered indicate decreasing returns, though estimates that avoid econometric biases are insignificant. We also find that the active management industry has become more skilled over time. This upward trend in skill coincides with industry growth, which precludes the skill improvement from boosting fund performance. Finally, we find that performance deteriorates over a typical fund's lifetime. This result can also be explained by industry-level decreasing returns to scale.
FWIW I don’t think AVUV is levered. But it is concentrated in securities representing about 3% of the market in a non-cap weighted fashion. So it’s predictably more volatile than the market as a whole.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by HomerJ »

livesoft wrote: Tue Feb 13, 2024 8:24 pm
HomerJ wrote: Tue Feb 13, 2024 7:57 pm AVUV went down 3.4% today.

It's obviously leveraged or highly concentrated in certain value stocks.

It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.

They may or may not be smarter than the average bear.

I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.

Gambling is fun...
IJS went down 3.96% today. Is IJS leveraged and an active fund? Anyways, maybe AVUV has that secret sauce which you are alluding to since it did not drop as much as IJS?

Full disclosure: I bought some IJS and AVUV today (they both had RBDs), but yesterday I had sold all the shares of IJS that I owned.
I apologize... you are correct... Russell 2000 index was down 3.96% today.... I don't why I compared a small value fund to Total Stock Market instead of the small-cap index.

Ouch though... down 4% in one day. People here keep telling me how awesome the PE is on small stocks. They even convinced me to put all of my small Roth IRA into it... Thanks guys!
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by HomerJ »

folkher0 wrote: Tue Feb 13, 2024 8:43 pm
HomerJ wrote: Tue Feb 13, 2024 7:57 pm I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.
This is actually a well described phenomenon. Active funds tend to outperform in their early years, but over time that outperformance tends not to persist. Here’s a paper written by Pastor, Stambaugh and Taylor (I have no idea who they are lol, but the paper seems solid)
This happens because once a fund has great returns, everyone piles into it, and when it has $10 billion to invest instead of $100 million, it can't find enough small stock winners to beat the indexes. This happens CONSISTENLY.

When you are playing around with $100 million, finding a small company worth $10 million that grows 5 times in value is a huge win. When you have $10 billion in funds, those $10 million dollar companies don't move the needle... Need to find huge winners in the $300-$500 million range, and those are harder to find.

Great for the managers though... 1% fees on $10 billion is $100 million a year instead $1 million on $100 million.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by ivgrivchuck »

HomerJ wrote: Tue Feb 13, 2024 7:57 pm AVUV went down 3.4% today.
So? Business as usual.
It's obviously leveraged or highly concentrated in certain value stocks.
No leverage, but risky value stocks, yes.
It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.
There is a team tuning the stock buy/sell algorithm. I don't think they review each holding individually.
They may or may not be smarter than the average bear.
These are high risk securities, so the expected return is a notch higher than VTI. But risks are high.
I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.
DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63

We are alright, thank you. It won't be all roses, I expect there will be some deep drawdowns in the coming years (covid crash was -42%) and large recoveries as well.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by HomerJ »

ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63
Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Nathan Drake »

HomerJ wrote: Tue Feb 13, 2024 9:10 pm
ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63
Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
After fees.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Gaston »

HomerJ wrote: Tue Feb 13, 2024 9:10 pm Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
My understanding is that you can put “extra fees” (eg, a 1% advisor fee) into PortfolioVisualizer only if you have a paid account.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Northern Flicker »

Nathan Drake wrote: Tue Feb 13, 2024 9:12 pm
HomerJ wrote: Tue Feb 13, 2024 9:10 pm
ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63
Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
After fees.
No, the PV data does not take the advisor AUM needed to invest in DFA funds during most of their life. And DFA used the marketing through advisors method to save them the cost of marketing and customer support, so some of the advisor AUM are costs that would have been part of ER with other fund companies.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Northern Flicker »

There could be leverage in AVUV through the use of derivatives. I don't know if they hold futures or options much or if it is just boilerplate language in the prospectus so that they have the theoretical authorization to do so.

The prospectus also authorizes securities lending with investing the collateral in the fund portfolio. This is not traditional leverage, but it levers up risk.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Nathan Drake »

Northern Flicker wrote: Tue Feb 13, 2024 10:00 pm
Nathan Drake wrote: Tue Feb 13, 2024 9:12 pm
HomerJ wrote: Tue Feb 13, 2024 9:10 pm
ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63
Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
After fees.
No, the PV data does not take the advisor AUM needed to invest in DFA funds during most of their life. And DFA used the marketing through advisors method to save them the cost of marketing and customer support, so some of the advisor AUM are costs that would have been part of ER with other fund companies.
It was restrictive, but this isn't a blanket case across the board to assume that:

1) An advisor was required (DFA funds were in some 401k plans)
2) An advisor WOULD charge a high fee

Regardless, it's somewhat irrelevant - there's no requirement today for a high advisor fee. "Market" index funds also had highly restrictive and/or fees associated with them historically until they became more widely available.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Northern Flicker »

Nathan Drake wrote: Tue Feb 13, 2024 10:18 pm
Northern Flicker wrote: Tue Feb 13, 2024 10:00 pm
Nathan Drake wrote: Tue Feb 13, 2024 9:12 pm
HomerJ wrote: Tue Feb 13, 2024 9:10 pm
ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63
Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
After fees.
No, the PV data does not take the advisor AUM needed to invest in DFA funds during most of their life. And DFA used the marketing through advisors method to save them the cost of marketing and customer support, so some of the advisor AUM are costs that would have been part of ER with other fund companies.
It was restrictive, but this isn't a blanket case across the board to assume that:

1) An advisor was required (DFA funds were in some 401k plans)
2) An advisor WOULD charge a high fee

Regardless, it's somewhat irrelevant - there's no requirement today for a high advisor fee.
The relevance is for interpreting backtests that include DFA fund data. The funds you may compare with were charging fees that were pushed off into advisor AUM with a DFA fund.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Nathan Drake »

Northern Flicker wrote: Tue Feb 13, 2024 10:26 pm
Nathan Drake wrote: Tue Feb 13, 2024 10:18 pm
Northern Flicker wrote: Tue Feb 13, 2024 10:00 pm
Nathan Drake wrote: Tue Feb 13, 2024 9:12 pm
HomerJ wrote: Tue Feb 13, 2024 9:10 pm

Is that before, or after fees?

Because I know, for sure, that you couldn't even get into DFA funds in the 1990s (and the 2000s? 2010s?) without paying extra fees.
After fees.
No, the PV data does not take the advisor AUM needed to invest in DFA funds during most of their life. And DFA used the marketing through advisors method to save them the cost of marketing and customer support, so some of the advisor AUM are costs that would have been part of ER with other fund companies.
It was restrictive, but this isn't a blanket case across the board to assume that:

1) An advisor was required (DFA funds were in some 401k plans)
2) An advisor WOULD charge a high fee

Regardless, it's somewhat irrelevant - there's no requirement today for a high advisor fee.
The relevance is for interpreting backtests that include DFA fund data. The funds you may compare with were charging fees that were pushed off into advisor AUM with a DFA fund.
And why would this backtest not be applicable to today's investors, who do not have that advisor fee? Is the suggestion that this has somehow narrowed the value spread due to more adoption? Because that's the only mechanism that's relevant, and we're at historic levels of Value spread, so does not appear to be a concern.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by comeinvest »

ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm
HomerJ wrote: Tue Feb 13, 2024 7:57 pm AVUV went down 3.4% today.
So? Business as usual.
It's obviously leveraged or highly concentrated in certain value stocks.
No leverage, but risky value stocks, yes.
It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.
There is a team tuning the stock buy/sell algorithm. I don't think they review each holding individually.
They may or may not be smarter than the average bear.
These are high risk securities, so the expected return is a notch higher than VTI. But risks are high.
I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.
DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63

We are alright, thank you. It won't be all roses, I expect there will be some deep drawdowns in the coming years (covid crash was -42%) and large recoveries as well.
Sharpe ratio and drawdown-adjusted returns of AVUV were still lower than the S&P 500 though. Only a rebalanced 50/50 portfolio had ever so slightly better risk-adjusted returns https://www.portfoliovisualizer.com/bac ... zchvqaLsUz . But supposedly big tech was particularly good and value particularly bad lately.
I just realized we are not in a factor thread; I'm sure that has been discussed 1000 times.
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Re: AVUV - PE ratio single digits [Avantis US Small-Cap Value ETF]

Post by Nathan Drake »

comeinvest wrote: Wed Feb 14, 2024 12:24 am
ivgrivchuck wrote: Tue Feb 13, 2024 9:03 pm
HomerJ wrote: Tue Feb 13, 2024 7:57 pm AVUV went down 3.4% today.
So? Business as usual.
It's obviously leveraged or highly concentrated in certain value stocks.
No leverage, but risky value stocks, yes.
It's an active fund. Either they have leverage across a bunch of value stocks, or some team is picking value stocks.
There is a team tuning the stock buy/sell algorithm. I don't think they review each holding individually.
They may or may not be smarter than the average bear.
These are high risk securities, so the expected return is a notch higher than VTI. But risks are high.
I hope you all are right... There's been a lot of active funds that did great at first, and poorly later... But maybe this time it will all be roses.
DFA has been running a similar kind of fund for 30 years. Here is how they have done: https://www.portfoliovisualizer.com/bac ... 37dAP6oO63

We are alright, thank you. It won't be all roses, I expect there will be some deep drawdowns in the coming years (covid crash was -42%) and large recoveries as well.
Sharpe ratio and drawdown-adjusted returns of AVUV were still lower than the S&P 500 though. Only a rebalanced 50/50 portfolio had ever so slightly better risk-adjusted returns https://www.portfoliovisualizer.com/bac ... zchvqaLsUz . But supposedly big tech was particularly good and value particularly bad lately.
I just realized we are not in a factor thread; I'm sure that has been discussed 1000 times.
If you want lower returns but higher risk adjusted returns, then you’d be 100% bonds
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