International Investment Alternatives -- Avantis and DFA ETFs

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mikewitteman
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International Investment Alternatives -- Avantis and DFA ETFs

Post by mikewitteman »

I use Vanguard funds for all my ETFs. I've been happy with the low fees and market-based returns.

However, I notice my international Vanguard funds aren't as strong when looking at alternatives. I've been looking at alternatives and read about a lot of people using the Avantis ETFs, specifically AVDE for broad-based International. I am also intrigued by the new DFA ETF -- DFAI. Both AVDE and DFAI have performed much better this year than my Vanguard (VEU) ETF.

On the emerging markets front I've seen similar results. My Vanguard VWO has underperformed the Avantis AVEM and DFA DFAE.

What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives? I've noticed many writing about using the Avantis ETFs in various posts.
UpperNwGuy
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by UpperNwGuy »

You are comparing apples to oranges. AVEM and VWO use different indices. AVEM includes South Korea, an economic powerhouse, as its third largest holding. VWO does not include South Korea. Vanguard puts South Korea into their developed market fund VEA rather than into VWO. Perhaps you should compare AVEM to the iShares ETF IDEV. I think they both use the same index.

I can't explain the difference between VEU and AVDE. Perhaps others know the reason.
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whodidntante
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by whodidntante »

UpperNwGuy wrote: Sat Sep 25, 2021 3:48 pm You are comparing apples to oranges. AVEM and VWO use different indices. AVEM includes South Korea, an economic powerhouse, as its third largest holding. VWO does not include South Korea. Vanguard puts South Korea into their developed market fund VEA rather than into VWO. Perhaps you should compare AVEM to the iShares ETF IDEV. I think they both use the same index.

I can't explain the difference between VEU and AVDE. Perhaps others know the reason.
AVEM is not an index fund. They even brag about that. "[AVEM] pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures), but with the ability to add value by making investment decisions using information in current prices. Efficient portfolio management and trading process that is designed to enhance returns and seeks to reduce unnecessary risks and costs."
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by UpperNwGuy »

whodidntante wrote: Sat Sep 25, 2021 4:05 pm
UpperNwGuy wrote: Sat Sep 25, 2021 3:48 pm You are comparing apples to oranges. AVEM and VWO use different indices. AVEM includes South Korea, an economic powerhouse, as its third largest holding. VWO does not include South Korea. Vanguard puts South Korea into their developed market fund VEA rather than into VWO. Perhaps you should compare AVEM to the iShares ETF IDEV. I think they both use the same index.

I can't explain the difference between VEU and AVDE. Perhaps others know the reason.
AVEM is not an index fund. They even brag about that. "[AVEM] pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures), but with the ability to add value by making investment decisions using information in current prices. Efficient portfolio management and trading process that is designed to enhance returns and seeks to reduce unnecessary risks and costs."
This is true. However, Avantis lists the MSCI Emerging Markets IMI Index as their benchmark for AVEM, and that index includes South Korea, as does AVEM. So I still believe that the primary explanation for AVEM outperforming VWO is the major presence of South Korea in its holdings. VWO does not include South Korea.
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typical.investor
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by typical.investor »

mikewitteman wrote: Sat Sep 25, 2021 3:42 pm I use Vanguard funds for all my ETFs. I've been happy with the low fees and market-based returns.

However, I notice my international Vanguard funds aren't as strong when looking at alternatives.
I see. You are happy with market-based returns until something exceeds that.
mikewitteman wrote: Sat Sep 25, 2021 3:42 pm I've been looking at alternatives and read about a lot of people using the Avantis ETFs, specifically AVDE for broad-based International. I am also intrigued by the new DFA ETF -- DFAI. Both AVDE and DFAI have performed much better this year than my Vanguard (VEU) ETF.
Nobody has ever said that market based returns will exceed everything else over a year's time.
mikewitteman wrote: Sat Sep 25, 2021 3:42 pm
On the emerging markets front I've seen similar results. My Vanguard VWO has underperformed the Avantis AVEM and DFA DFAE.
Yes, and the Schwab fundamental indexes I use (FNDE, FNDC) have also outperformed market cap weighted funds recently. DFA, Advantis, and fundamental indexes all have value exposure.
mikewitteman wrote: Sat Sep 25, 2021 3:42 pm What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives? I've noticed many writing about using the Avantis ETFs in various posts.
Well, if you happen to tilt to value when valuations are quite cheap, I don't think it will hurt you. Know though that value is notorious for being unpleasant for a perhaps a long time until it does well.

The truth I believe is that value will outperform overtime, but that nobody really knows for certain if value funds will outperform VEU and VWO in any given holding period whether it's 1, 3, 5, 10, 20 or 30 years. It's much easier to predict the orbits of satellite and all the rocket science stuff ...

So yeah, nothing wrong with value tilts. I would say though that value investors really need to be prepared to hold on even during long stretches of underperformance.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by mokaThought »

mikewitteman wrote: Sat Sep 25, 2021 3:42 pm I use Vanguard funds for all my ETFs. I've been happy with the low fees and market-based returns.

However, I notice my international Vanguard funds aren't as strong when looking at alternatives. I've been looking at alternatives and read about a lot of people using the Avantis ETFs, specifically AVDE for broad-based International. I am also intrigued by the new DFA ETF -- DFAI. Both AVDE and DFAI have performed much better this year than my Vanguard (VEU) ETF.

On the emerging markets front I've seen similar results. My Vanguard VWO has underperformed the Avantis AVEM and DFA DFAE.

What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives? I've noticed many writing about using the Avantis ETFs in various posts.
In general, I don't think Avantis's large blend ETFs, AVUS and AVDE, are worth the expense ratio for their tilts. You might consider sticking with a plain jane index fund for the large side and then select how much tilt you're comfortable with.

Rough example portfolio:

VTI 35% (Vanguard Total Stock Market)
AVUV 15% (Avantis U.S. small cap value)
IDEV 30% (iShares international developed markets)
AVDV 15% (Avantis international developed markets small cap value)
AVES 5% (Avantis emerging markets value)

But if you do want Avantis funds on the large cap side, take a hard look at their large value funds, AVLV and AVIV. Their weighing of profitability makes for a fund that's actually "growthier" than you would think. Amazon, Apple, Facebook, and Moderna are definitely not value stocks, but they have enough profitability for Avantis to shove them in there.

---

Concerning international indexes, Avantis uses MSCI indexes, so you won't want to mix a Vanguard international index fund like VEU or VEA with AVDV or AVES. IDEV is MSCI-based.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by Apathizer »

mokaThought wrote: Fri Oct 08, 2021 11:54 amIn general, I don't think Avantis's large blend ETFs, AVUS and AVDE, are worth the expense ratio for their tilts.
If you look at their average cap size and mathematical measures, the factors seemed pretty well measured. The average market cap for all of them is about half of Vanguard and their P:E ratio and other value measures are significantly lower, but not so low that they're dedicated value. As such, they're essentially index fund with light to moderate factor slants which is what I want.
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Sammy_M
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by Sammy_M »

I would appreciate others' thoughts on Avantis International Value (AVIV, 0.25% ER). I am considering holding it within taxable. I already hold AVDV in Roth. My 401K has constrained options so I use American Funds EuroPac Growth. Thus, I look to regain value factor exposure through the Avantis ETFs.

If I need to tax loss harvest, I'd likely use DFA International Value ETF (DFIV, 0.35% ER), which was formerly was the Tax-Managed International Value Portfolio (DTMIX). I'm wondering if it may be worth the 10bp extra to just use it instead of AVIV since I would be holding in taxable.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by pkcrafter »

mikewitteman wrote: Sat Sep 25, 2021 3:42 pm I use Vanguard funds for all my ETFs. I've been happy with the low fees and market-based returns.

However, I notice my international Vanguard funds aren't as strong when looking at alternatives. I've been looking at alternatives and read about a lot of people using the Avantis ETFs, specifically AVDE for broad-based International. I am also intrigued by the new DFA ETF -- DFAI. Both AVDE and DFAI have performed much better this year than my Vanguard (VEU) ETF.

On the emerging markets front I've seen similar results. My Vanguard VWO has underperformed the Avantis AVEM and DFA DFAE.

What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives? I've noticed many writing about using the Avantis ETFs in various posts.
I believe the recent outperformance of AVDE and AFAI is largely due to the recent creation of these funds. In other words, the stocks were selected on recent performance and not because the creators know which stocks will outperform in the future. The expense ratios are low, so that's OK, but we will see how long the outperformance holds up.

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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by mrpotatoheadsays »

mikewitteman wrote: Sat Sep 25, 2021 3:42 pm What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives?
Best in Class ETFs from the Merriman Foundation:
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by DesertInvestor »

mokaThought wrote: Fri Oct 08, 2021 11:54 am
mikewitteman wrote: Sat Sep 25, 2021 3:42 pm I use Vanguard funds for all my ETFs. I've been happy with the low fees and market-based returns.

However, I notice my international Vanguard funds aren't as strong when looking at alternatives. I've been looking at alternatives and read about a lot of people using the Avantis ETFs, specifically AVDE for broad-based International. I am also intrigued by the new DFA ETF -- DFAI. Both AVDE and DFAI have performed much better this year than my Vanguard (VEU) ETF.

On the emerging markets front I've seen similar results. My Vanguard VWO has underperformed the Avantis AVEM and DFA DFAE.

What do the forum gurus think about switching my Vanguard ETFs, VEU and VWO to Avantis or DFA alternatives? I've noticed many writing about using the Avantis ETFs in various posts.
In general, I don't think Avantis's large blend ETFs, AVUS and AVDE, are worth the expense ratio for their tilts. You might consider sticking with a plain jane index fund for the large side and then select how much tilt you're comfortable with.

Rough example portfolio:

VTI 35% (Vanguard Total Stock Market)
AVUV 15% (Avantis U.S. small cap value)
IDEV 30% (iShares international developed markets)
AVDV 15% (Avantis international developed markets small cap value)
AVES 5% (Avantis emerging markets value)

But if you do want Avantis funds on the large cap side, take a hard look at their large value funds, AVLV and AVIV. Their weighing of profitability makes for a fund that's actually "growthier" than you would think. Amazon, Apple, Facebook, and Moderna are definitely not value stocks, but they have enough profitability for Avantis to shove them in there.

---

Concerning international indexes, Avantis uses MSCI indexes, so you won't want to mix a Vanguard international index fund like VEU or VEA with AVDV or AVES. IDEV is MSCI-based.
I have international in taxable and can't sell without capital gains. So adding small value international or emerging markets will create something not as diversified lets say? Wouldn't it still add something to portfolio with emerging market value and small international value even if index fund is vanguard total international?
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by Sammy_M »

mrpotatoheadsays wrote: Mon Dec 06, 2021 11:54 am Best in Class ETFs from the Merriman Foundation:
Image
I'm confident that Merriman will ultimately replace EFV with AVIV. The latter is fairly new.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by reln »

UpperNwGuy wrote: Sat Sep 25, 2021 3:48 pm You are comparing apples to oranges. AVEM and VWO use different indices. AVEM includes South Korea, an economic powerhouse, as its third largest holding. VWO does not include South Korea. Vanguard puts South Korea into their developed market fund VEA rather than into VWO. Perhaps you should compare AVEM to the iShares ETF IDEV. I think they both use the same index.

I can't explain the difference between VEU and AVDE. Perhaps others know the reason.
AVEM doesn't track an index.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by Sammy_M »

DesertInvestor wrote: Mon Dec 06, 2021 12:32 pm I have international in taxable and can't sell without capital gains. So adding small value international or emerging markets will create something not as diversified lets say? Wouldn't it still add something to portfolio with emerging market value and small international value even if index fund is vanguard total international?
You're perfectly fine with Vanguard Total Intl. If you wish to tilt to small value, I'd look at AVDV for developed and AVES for emerging. If you're only looking to tilt to value, but not small, look at AVIV and AVEM.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by UpperNwGuy »

reln wrote: Mon Dec 06, 2021 12:40 pm
UpperNwGuy wrote: Sat Sep 25, 2021 3:48 pm You are comparing apples to oranges. AVEM and VWO use different indices. AVEM includes South Korea, an economic powerhouse, as its third largest holding. VWO does not include South Korea. Vanguard puts South Korea into their developed market fund VEA rather than into VWO. Perhaps you should compare AVEM to the iShares ETF IDEV. I think they both use the same index.

I can't explain the difference between VEU and AVDE. Perhaps others know the reason.
AVEM doesn't track an index.
Index or no index, it includes South Korea, and that differentiates it from VWO.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by DesertInvestor »

Sammy_M wrote: Mon Dec 06, 2021 12:42 pm
DesertInvestor wrote: Mon Dec 06, 2021 12:32 pm I have international in taxable and can't sell without capital gains. So adding small value international or emerging markets will create something not as diversified lets say? Wouldn't it still add something to portfolio with emerging market value and small international value even if index fund is vanguard total international?
You're perfectly fine with Vanguard Total Intl. If you wish to tilt to small value, I'd look at AVDV for developed and AVES for emerging. If you're only looking to tilt to value, but not small, look at AVIV and AVEM.
Looked up morningstar style box. Looks like AVES just tilts slightly to mid and large cap value, but otherwise the same as AVEM? I'm assuming even AVEM is value and profitability weighted to some extent relative to a ishares or vanguard equivalent.
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by mokaThought »

Sammy_M wrote: Mon Dec 06, 2021 12:37 pm
mrpotatoheadsays wrote: Mon Dec 06, 2021 11:54 am Best in Class ETFs from the Merriman Foundation:
Image
I'm confident that Merriman will ultimately replace EFV with AVIV. The latter is fairly new.
I like the asset mix of AVIV better, hence my earlier comment about it, but it has liquidity problems likely due to having only $10 million AUM.

Larry Swedroe also recently wrote concerning the difference in value premium between large and small stocks:
https://alphaarchitect.com/2021/12/02/s ... al-stocks/
One takeaway for investors is that if you are going to seek exposure to the Fama-French factors, consider concentrating that exposure in smaller stocks (other side of that story is here and here). For example, the global value premium in the smallest quintile of stocks was 0.78 percent per month (t-stat = 3.4), while in the largest quintile it was just 0.07 percent per month (t-stat = 0.34). That has implications for fund selection. In addition, because trading costs are greater in smaller stocks when choosing a fund, you should have a preference for one that trades patiently—it doesn’t have to slavishly trade to eliminate tracking variance to an index and avoids the high turnover typically found in actively managed funds. Investors should also consider that another benefit of “going small” is that the correlations of returns have been the lowest for the size factor—the largest benefit of international diversification comes from small stocks.
"October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February."
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Sammy_M
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Re: International Investment Alternatives -- Avantis and DFA ETFs

Post by Sammy_M »

mokaThought wrote: Tue Dec 07, 2021 10:15 am I like the asset mix of AVIV better, hence my earlier comment about it, but it has liquidity problems likely due to having only $10 million AUM.

Larry Swedroe also recently wrote concerning the difference in value premium between large and small stocks:
https://alphaarchitect.com/2021/12/02/s ... al-stocks/
One takeaway for investors is that if you are going to seek exposure to the Fama-French factors, consider concentrating that exposure in smaller stocks (other side of that story is here and here). For example, the global value premium in the smallest quintile of stocks was 0.78 percent per month (t-stat = 3.4), while in the largest quintile it was just 0.07 percent per month (t-stat = 0.34). That has implications for fund selection. In addition, because trading costs are greater in smaller stocks when choosing a fund, you should have a preference for one that trades patiently—it doesn’t have to slavishly trade to eliminate tracking variance to an index and avoids the high turnover typically found in actively managed funds. Investors should also consider that another benefit of “going small” is that the correlations of returns have been the lowest for the size factor—the largest benefit of international diversification comes from small stocks.
Agree that if you want value exposure and do not mind adding more small exposure, best to use AVUV / AVDV or similar. I do, I am also looking to counterbalance a growth-oriented international fund in my 401K (AEPGX, best intl option) with international large value, so that's what is attractive about AVIV.

If I had cheap access to VEA or IDEV (0.05% ER) in my 401K I would not bother with AVIV. I'm still weighing the decision of whether holding AVIV (0.25% ER) in taxable is worth it vs. having a lower tilt toward value.

The other one I'm considering is DFA International Value ETF (DFIV, 0.35% ER) which was previously a tax-managed fund. I am wondering if it will be more tax-sensitive than AVIV given legacy holders desires to remain tax conscious, i.e. seek qualified vs unqualified dividends.
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