Considering AVUV for a Roth IRA

[smartinvestor2020]

I am thinking about adding the small cap value ETF, AVUV, to my Roth IRA. The fund has had enough history to show that the stock selection methodology outperforms passive ETFs, like VBR and SLYV, at least over the last 5 years. The fund appears to be very volatile, so it would be a few % of my net worth. I see small cap value as potentially returning more than the S&P 500 over the next few years. I cannot predict the future, but small value appears attractive from a valuations point of view. I like how AVUV is managed even though I'm not a fan of actively managed funds. I haven't owned an active fund for many years now, so I'm a little cautious about the managers. What if the managers change or retire or pass away? Would the new managers still follow the rules for stock selection?

[grabiner]

Factor funds such as Avantis's and DFA's ETFs aren't active funds in the usual sense. They are not index funds because they do not track a specific index, but they choose stocks based on a specific methodology; value factor funds choose stocks to get value exposure. Thus the specific manager does not make as much difference to the performance.

Also, in an IRA, if a fund changes in a way that you do not like, you can switch to another fund which serves the purpose of the original fund. (This can happen even with index funds if a fund changes indexes.)

Therefore, as long as you are committed to the value factor strategy, and to sticking with it for the long term, this fund is a good choice. I don't hold the fund myself because I use Vanguard's factor value fund VFVA for my US value exposure, but I hold Avantis ETFs for international value.

[renegade06]

I've owned AVUV in taxable for a while and have been pleased with the fund. Can't go wrong with VFVA either.

[snowday2022]

Not worth it for a few % of NW. Run the numbers, it will have almost no effect. Tilt heavy or don’t at all.

[Itzapi]

Regarding the management team, there is one in favour of that statement. As much as the strategy looks good today, tomorrow fund managers are a different ball game all together. I will probably watch the team and the update posts to see how they evolve the fund when the time comes. Perhaps, they should also try to find out how this fund has been fairing during regimes transition if the information is accessible.

[jebmke]

Not worth it for a few % of NW. Run the numbers, it will have almost no effect. Tilt heavy or don’t at all.

Agree; small slices become eyesores and don't do much for total results. My min is 20% and during accumulation we were much higher SCV.

[BornInCA]

Love both AVUV and DFSV so +1

[mhadden1]

What if the managers change or retire or pass away? Would the new managers still follow the rules for stock selection?

Management definitely will change if the fund survives long enough. The rules may change too. In tax-advantaged though you can freely switch to something you like better.

[rkhusky]

If it is likely to outperform the S&P 500 over the next few years, everyone already knows that and has already bid up the price. You need to invest in some hot prospect before everyone else knows about it.