Wisdom Tree funds:Any opinion...

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Topic Author
Ykcor
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Wisdom Tree funds:Any opinion...

Post by Ykcor » Fri Feb 14, 2020 8:51 pm

In discussion with flat fee asset manager who uses a lot of WisdomTree equity funds along with DFA and Vanguard in his proposed allocations of my assets. I am not familiar with WisdomTree. Any thoughts?

Thanks in advance.

retired@50
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Re: Wisdom Tree funds:Any opinion...

Post by retired@50 » Fri Feb 14, 2020 8:59 pm

Will the asset manager be recommending actively managed funds, or index funds? If index funds, expense ratio is, of course, a prime consideration. The lower the better. This also happens to be true for actively managed funds as it is a better predictor of future out-performance than the historical performance record.

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

AlohaJoe
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Re: Wisdom Tree funds:Any opinion...

Post by AlohaJoe » Fri Feb 14, 2020 9:09 pm

WisdomTree is fine. It is (I think) the 4th or 5th largest ETF provider on the planet. Because it isn't the largest it tries to launch fewer "plain vanilla" funds. (Think about it: if they launched an S&P 500 fund why would you use theirs instead of Vanguard's or iShares's?) Because of that, many Bogleheads don't see a need for their somewhat exotic funds. But if someone can provide a decent explanation for why they are picking a specific WisdomTree fund, I don't see any problems with that.

Many years ago (before international and value fell out of favor on Bogleheads), WisdomTree was a somewhat common pick for people looking for international small cap value funds.

aristotelian
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Re: Wisdom Tree funds:Any opinion...

Post by aristotelian » Fri Feb 14, 2020 11:42 pm

I would not use them for a typical Boglehead portfolio. You can find total market ETF's elsewhere for cheaper. They do have some interesting exotic products that are reasonably priced. I own a small amount of NTSX and am considering more.

corp_sharecropper
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Re: Wisdom Tree funds:Any opinion...

Post by corp_sharecropper » Sat Feb 15, 2020 12:39 am

From some reading I've done, wisdom tree has closed more ETF's than any other company. They're a reputable shop but that's not a good look in my opinion. I own some of their ETFs but I wouldn't go whole hog or go off the reservation with some lesser known ETF's of theirs. I'm sure they'd love to screw all of us if there weren't laws & regulations, pretty much like all investment relationships really

corp_sharecropper
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Re: Wisdom Tree funds:Any opinion...

Post by corp_sharecropper » Sat Feb 15, 2020 12:39 am

From some reading I've done, wisdom tree has closed more ETF's than any other company. They're a reputable shop but that's not a good look in my opinion. I own some of their ETFs but I wouldn't go whole hog or go off the reservation with some lesser known ETF's of theirs. I'm sure they'd love to screw all of us if there weren't laws & regulations, pretty much like all investment relationships really

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 9:48 pm

corp_sharecropper wrote:
Sat Feb 15, 2020 12:39 am
From some reading I've done, wisdom tree has closed more ETF's than any other company. They're a reputable shop but that's not a good look in my opinion. I own some of their ETFs but I wouldn't go whole hog or go off the reservation with some lesser known ETF's of theirs. I'm sure they'd love to screw all of us if there weren't laws & regulations, pretty much like all investment relationships really
Thanks

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 9:48 pm

aristotelian wrote:
Fri Feb 14, 2020 11:42 pm
I would not use them for a typical Boglehead portfolio. You can find total market ETF's elsewhere for cheaper. They do have some interesting exotic products that are reasonably priced. I own a small amount of NTSX and am considering more.
Thanks

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 9:49 pm

AlohaJoe wrote:
Fri Feb 14, 2020 9:09 pm
WisdomTree is fine. It is (I think) the 4th or 5th largest ETF provider on the planet. Because it isn't the largest it tries to launch fewer "plain vanilla" funds. (Think about it: if they launched an S&P 500 fund why would you use theirs instead of Vanguard's or iShares's?) Because of that, many Bogleheads don't see a need for their somewhat exotic funds. But if someone can provide a decent explanation for why they are picking a specific WisdomTree fund, I don't see any problems with that.

Many years ago (before international and value fell out of favor on Bogleheads), WisdomTree was a somewhat common pick for people looking for international small cap value funds.
Thanks

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 9:50 pm

retired@50 wrote:
Fri Feb 14, 2020 8:59 pm
Will the asset manager be recommending actively managed funds, or index funds? If index funds, expense ratio is, of course, a prime consideration. The lower the better. This also happens to be true for actively managed funds as it is a better predictor of future out-performance than the historical performance record.

Regards,
Index

Longtermgrowth
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Re: Wisdom Tree funds:Any opinion...

Post by Longtermgrowth » Sat Feb 15, 2020 10:21 pm

Ykcor wrote:
Fri Feb 14, 2020 8:51 pm
In discussion with flat fee asset manager who uses a lot of WisdomTree equity funds along with DFA and Vanguard in his proposed allocations of my assets. I am not familiar with WisdomTree. Any thoughts?

Thanks in advance.
WisdomTree's small value funds track closely to DFA since inception, last time I checked. I use three of their funds for global small value exposure, but I don't have access to DFA.

I'm curious why this manager uses WisdomTree along with DFA (possibly tax efficiency differences if this is a taxable account?), and which funds they are proposing?

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nisiprius
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Re: Wisdom Tree funds:Any opinion...

Post by nisiprius » Sat Feb 15, 2020 10:32 pm

Assuming that you want to use an asset manager (what's the difference between that and an "advisor?") and that the chemistry is generally good, the statement that he uses "WisdomTree, DFA, and Vanguard funds" seems promising to me, as all three of these firms have funds and ETFs that are low cost, and more or less index-like or passive in their approach. WisdomTree is a well-known "brand name," it is not as if it were something so tiny or weird or offbeat as to raise eyebrows.

(WisdomTree is not my dish of tea; they got started offering "fundamental index" products which are indexes-with-a-gimmick, and I prefer mine straight...)
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Wisdom Tree funds:Any opinion...

Post by MotoTrojan » Sat Feb 15, 2020 10:37 pm

They have some interesting products in the ex-US arena that outside DFA (which many can't access) weren't well covered for a while. DLS is an example which covers small-cap value developed nations. A lot more products are available though now, including Schwab Fundamental, IShares multi-factor, and now Avantis which has the lowest ER of the bunch for that particular class in AVDV.

Costs matter so I would pick an allocation and then pick the funds that get you the desired exposure for the lowest expense.

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 11:19 pm

Longtermgrowth wrote:
Sat Feb 15, 2020 10:21 pm
Ykcor wrote:
Fri Feb 14, 2020 8:51 pm
In discussion with flat fee asset manager who uses a lot of WisdomTree equity funds along with DFA and Vanguard in his proposed allocations of my assets. I am not familiar with WisdomTree. Any thoughts?

Thanks in advance.
WisdomTree's small value funds track closely to DFA since inception, last time I checked. I use three of their funds for global small value exposure, but I don't have access to DFA.

I'm curious why this manager uses WisdomTree along with DFA (possibly tax efficiency differences if this is a taxable account?), and which funds they are proposing?
DLN,DON,DES

Topic Author
Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sat Feb 15, 2020 11:27 pm

MotoTrojan wrote:
Sat Feb 15, 2020 10:37 pm
They have some interesting products in the ex-US arena that outside DFA (which many can't access) weren't well covered for a while. DLS is an example which covers small-cap value developed nations. A lot more products are available though now, including Schwab Fundamental, IShares multi-factor, and now Avantis which has the lowest ER of the bunch for that particular class in AVDV.

Costs matter so I would pick an allocation and then pick the funds that get you the desired exposure for the lowest expense.
This advisor doesn't recommend any international exposure. 45% US equity, 28% taxable fixed income, 14% muni fixed income plus 13% real estate.

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Re: Wisdom Tree funds:Any opinion...

Post by MotoTrojan » Sat Feb 15, 2020 11:39 pm

Ykcor wrote:
Sat Feb 15, 2020 11:27 pm
MotoTrojan wrote:
Sat Feb 15, 2020 10:37 pm
They have some interesting products in the ex-US arena that outside DFA (which many can't access) weren't well covered for a while. DLS is an example which covers small-cap value developed nations. A lot more products are available though now, including Schwab Fundamental, IShares multi-factor, and now Avantis which has the lowest ER of the bunch for that particular class in AVDV.

Costs matter so I would pick an allocation and then pick the funds that get you the desired exposure for the lowest expense.
This advisor doesn't recommend any international exposure. 45% US equity, 28% taxable fixed income, 14% muni fixed income plus 13% real estate.
I would get a new adviser myself (or just not use one).

Longtermgrowth
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Re: Wisdom Tree funds:Any opinion...

Post by Longtermgrowth » Sun Feb 16, 2020 7:51 am

Ykcor wrote:
Sat Feb 15, 2020 11:19 pm
DLN,DON,DES
So they're splitting, in some percentage, large, mid, and small value with those funds.
Ykcor wrote:
Sat Feb 15, 2020 11:27 pm
This advisor doesn't recommend any international exposure. 45% US equity, 28% taxable fixed income, 14% muni fixed income plus 13% real estate.
No international? Seems odd, though there are other ways to gain exposure to value that seem less odd as well, unless they're selling it as an income portfolio.

If all that is in taxable, and in a high enough tax bracket for a municipal fund, there are more tax efficient funds to gain exposure to value with.

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Re: Wisdom Tree funds:Any opinion...

Post by nisiprius » Sun Feb 16, 2020 10:48 am

Ykcor wrote:
Sat Feb 15, 2020 11:19 pm
Longtermgrowth wrote:
Sat Feb 15, 2020 10:21 pm
...I'm curious...which funds they are proposing?
DLN,DON,DES
DLN, WisdomTree U.S. LargeCap Dividend Fund, 0.28% ER, $2.5 billion in assets
DON, WisdomTree U.S. MidCap Dividend Fund, 0.38% ER, $4.2 billion in assets
DES, WisdomTree U.S. SmallCap Dividend Fund, 0.38% ER, $2.1 billion in assets

They all have inception 6/16/2006, which makes them pretty old and well-established as ETFs go, and those are very substantial asset holdings. I think these three funds could be called WisdomTree's flagship funds.

So these are plain vanilla choices, nice big funds, index-y funds with the WisdomTree "fundamental indexing" secret sauce. Very reasonable.

WisdomTree is connected with Professor Jeremy Siegel, who is "Senior Advisor" at WisdomTree. Siegel is best known as the author of the classic book, Stocks for the Long Run, now in its fifth edition. He also was involved in developing and promoting fundamental indexing.

Here is some background you might want to know.

Traditional index funds use "cap-weighting;" "Fundamental indexing" try to improve on that by putting more weight on stocks that have better "fundamentals;" for example, given two stocks with the same cap weight, it will put more money into one of them if it is paying higher dividends.

Here's a thing to know. John C. Bogle actually tweaked Siegel in his book, The Little Book of Common Sense Investing.

Since 1922, when economist Irving Fisher wrote The Making of Index Numbers, in finance, "index" has usually meant "cap-weighted index." The S&P 500 is cap-weighted, and so are the indexes tracked by Vanguard's big index funds. Cap-weighting has a number of arguments in its favor, but I won't bother to present them here. Cap-weighting means matching the dollar weights in the market. If there were 4 billion shares of AAPL stock in the market, and each were priced at $300, then the total "market cap" of Apple would be $1.2 trillion. If the grand total market cap of the US stock market were $30 trillion, that would mean that 4% of all the dollars in the market were in Apple stock. A cap-weighted index would duplicate that by putting a weight of 4% on Apple.

Vanguard became famous for cap-weighted broad market index funds and now dominates the market for these funds. As a result, understandably, one of the most common things you hear from everyone but Vanguard is attacks on cap-weighting. There could be legitimate arguments, but in many cases critics seem to be using talking points that sound plausible but are nonsense. For example, if the price of Apple goes up, a higher percentage of the dollars in the market are in Apple. It is often suggested that if Apple's cap weighting increases from, say, 3% to 4% of the market, index funds must buy more shares of Apple in order to boost their allocation within the fund to 4%. In reality, the fund does not need to do anything. The Total Stock Market Fund might have been holding $30 billion worth of Apple shares; as a result of their market price increase those same shares would now be worth about $40 billion, and they would now be worth about 4% of the fund's total automatically. The same price increase that boosts cap weight in the market boosts cap weight in the fund.

Anyway, Bogle and Siegel. John C. Bogle wrote in 2007:
Finally, consider this affirmation of traditional indexing from Wharton School professor Jeremy Siegel, author of Stocks for the Long Run and adviser to WisdomTree Investments, the promoter of the dividend-driven factor model. "It can be shown that maximum diversification is achieved by holding each stock in proportion to its value to the entire market [italics added]. . . ." ... (This quotation is from the first edition of Dr. Siegel's book in 1994. I understand that he has every right to change his mind.)
That is, Siegel originally argued for cap-weighting, and then changed his mind--at roughly the same time that he became involved with WisdomTree.

Since inception, DLN (blue) has done about the same as a traditional cap-weighted S&P 500 index fund, Vanguard's VFINX (orange):

Source

Image

DON (blue) has done about the same as Vanguard's cap-weighted mid-cap index fund, VIMSX(orange)

Source

Image

And DES (blue) has done about the same as Vanguard's cap-weighted small-cap index fund, NAESX (orange)

Source

Image
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Wiggums
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Re: Wisdom Tree funds:Any opinion...

Post by Wiggums » Sun Feb 16, 2020 11:08 am

Thanks for the charts, nisiprius

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nedsaid
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Re: Wisdom Tree funds:Any opinion...

Post by nedsaid » Sun Feb 16, 2020 11:13 am

MotoTrojan wrote:
Sat Feb 15, 2020 10:37 pm
They have some interesting products in the ex-US arena that outside DFA (which many can't access) weren't well covered for a while. DLS is an example which covers small-cap value developed nations. A lot more products are available though now, including Schwab Fundamental, IShares multi-factor, and now Avantis which has the lowest ER of the bunch for that particular class in AVDV.

Costs matter so I would pick an allocation and then pick the funds that get you the desired exposure for the lowest expense.
I do own DLS for International Small-Cap Value. I have considered the new Avantis funds. As MotoTrojan noted above, there are lots of good low-cost factor products out there.
A fool and his money are good for business.

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nisiprius
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Re: Wisdom Tree funds:Any opinion...

Post by nisiprius » Sun Feb 16, 2020 11:17 am

Wiggums wrote:
Sun Feb 16, 2020 11:08 am
Thanks for the charts, nisiprius
These are Morningstar's old-style charts, which I prefer. You can get them using a URL like http://quotes.morningstar.com/chart/fund/chart?t=DLN
and replacing the ticker symbol with whichever one you want. Although Morningstar's new charts now let you use a log scale for the vertical axis if you are showing a single fund, at the moment it does not seem to be possible to use a log scale if you are comparing two different funds.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Re: Wisdom Tree funds:Any opinion...

Post by retired@50 » Sun Feb 16, 2020 12:14 pm

nisiprius wrote:
Sun Feb 16, 2020 11:17 am
Wiggums wrote:
Sun Feb 16, 2020 11:08 am
Thanks for the charts, nisiprius
These are Morningstar's old-style charts, which I prefer. You can get them using a URL like http://quotes.morningstar.com/chart/fund/chart?t=DLN
and replacing the ticker symbol with whichever one you want. Although Morningstar's new charts now let you use a log scale for the vertical axis if you are showing a single fund, at the moment it does not seem to be possible to use a log scale if you are comparing two different funds.
Thanks from me as well. Always a thoughtful response from nisiprius.

Regards,
Boggle - a game from Parker Brothers. Bogle - investor, founder of Vanguard.

Longtermgrowth
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Re: Wisdom Tree funds:Any opinion...

Post by Longtermgrowth » Sun Feb 16, 2020 6:11 pm

nisiprius wrote:
Sun Feb 16, 2020 10:48 am
Ykcor wrote:
Sat Feb 15, 2020 11:19 pm
Longtermgrowth wrote:
Sat Feb 15, 2020 10:21 pm
...I'm curious...which funds they are proposing?
DLN,DON,DES
DLN, WisdomTree U.S. LargeCap Dividend Fund, 0.28% ER, $2.5 billion in assets
DON, WisdomTree U.S. MidCap Dividend Fund, 0.38% ER, $4.2 billion in assets
DES, WisdomTree U.S. SmallCap Dividend Fund, 0.38% ER, $2.1 billion in assets

So these are plain vanilla choices, nice big funds, index-y funds with the WisdomTree "fundamental indexing" secret sauce. Very reasonable.
You're right, so far their "secret sauce" hasn't hurt or produced huge excess returns in their respective morningstar stylebox category, but lets at least compare them to other value funds, and not blend funds.

I have only researched the small value funds, as I wanted something close to DFA for international small value, and DLS along with DGS were at the time, as close as I could get along with DES for the US.

Here's a link comparing DES to DFA's US small value and IJS (S&P 600 value):
https://www.portfoliovisualizer.com/bac ... ion3_3=100

As you can see, DES did slightly better than DFA during this small timeframe of just over a decade, but over the past few years the S&P 600 value index has done quite well.

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Ykcor
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Re: Wisdom Tree funds:Any opinion...

Post by Ykcor » Sun Feb 16, 2020 8:54 pm

Many thanks to nisiprius for his thoughtful and expansive analysis of the WisdomTree funds.

My only concern with this FA's recommendation is that he recommends we go from my current 25% equities to his recommended 45% equities. This for my investable assets, would be an extra $960,000 in the market at on time. I know Bogleheads do not recommend market timing, but historically this current bull market is long of tooth and has to end one day. It would be painful if we are near the market peak and we have a major correction or a recession. If I let him handle my assets I think dollar cost averaging would make sense? Over how long? 6 month? 12 months? 24 months?

Longtermgrowth
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Re: Wisdom Tree funds:Any opinion...

Post by Longtermgrowth » Mon Feb 17, 2020 2:35 am

Ykcor wrote:
Sun Feb 16, 2020 8:54 pm
My only concern with this FA's recommendation is that he recommends we go from my current 25% equities to his recommended 45% equities.
This is probably worth starting a new asset allocation thread with. You'll get more views/replies to help determine your need, ability and willingness to take risk.

Here's a helpful post on the best way to list everything: viewtopic.php?f=1&t=6212#p76191

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