Vanguard Core + Avantis factor portfolio

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brademac
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Vanguard Core + Avantis factor portfolio

Post by brademac »

Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
000
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Re: Vanguard Core + Avantis factor portfolio

Post by 000 »

Is this for a 100% stock portfolio or just the stock components of a balanced portfolio?

My thought would be you're making a big bet on SCV and on Avantis's implementation which I think is actually probably a pretty reasonable bet.
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Re: Vanguard Core + Avantis factor portfolio

Post by muffins14 »

50/50 US/International is a bit of an outlier.

Personally I’m about 60 US, 25 international developed, 15 emerging markets.

US and intl dev are about 40% SCV tilted
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nedsaid
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Re: Vanguard Core + Avantis factor portfolio

Post by nedsaid »

What I would recommend is to run the portfolio through Portfolio Visualizer and use similar DFA funds as proxies for the newer Avantis ETFs. You could back test for a number of years. Problem is that Avantis itself goes back only two years though the Avantis people are mostly ex-DFA employees. I would also do a current factor analysis of similar DFA and Avantis Funds. It would be instructive to see how different the factor loadings are between DFA and Avantis, my understanding is that Avantis has further tweaked the factor investing approach beyond what DFA was already doing.
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stan1
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Re: Vanguard Core + Avantis factor portfolio

Post by stan1 »

My equity allocation target is as follows

45% VTI
20% AVUV (actually S&P 600 Value for me)

20% VXUS
10% AVDV
5% AVES

One less ETF, still nice clean ratios, a little more US total market. But not far off from what you propose.
invest2bfree
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Re: Vanguard Core + Avantis factor portfolio

Post by invest2bfree »

brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
I would do 55% VT - 15% AVUV. 15% AVDV, 15% AVES
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brademac
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Re: Vanguard Core + Avantis factor portfolio

Post by brademac »

invest2bfree wrote: Sun Oct 24, 2021 5:59 pm
brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
I would do 55% VT - 15% AVUV. 15% AVDV, 15% AVES
You make a good point. That is essentially same portfolio I mentioned but more simplified.

Only downside would be it costs a few bps more and there would be no foreign tax credit on the VT in a taxable account. That is part of reason I split out the VWO and VEA so I could take advantage of that.

I know I am overweighting emerging markets according to global market cap, but since so much of emerging market economies are not available to directly invest in I wanted to over allocate to what I can invest in to make up for that.
whyme
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Re: Vanguard Core + Avantis factor portfolio

Post by whyme »

Your proposed portfolio takes a reasonable factor-tilted approach. People here will suggest tweaks and alternatives, but whether their version will outperform yours in the long run, nobody knows.

This will be more volatile than a cap weighted portfolio, particularly because the heavy tilt toward emerging markets, but it sounds like you've made your peace with that.

I think there are two other risks you need to consider.

1. The "manager risk" of the Avantis funds. The Avantis funds are actively managed (though structured according to principles drawn from academic research). The possibility exists that the fund's management could change, or the funds could be changed in response to market pressures and you could find yourself with "style drift," in which the factors are not being accessed in a consistent way. The added costs of these funds are also a drag on returns, but you've considered that already. (These concerns did not stop me from buying a couple of Avantis ETFs.)

2. This is the biggest one: the risk of your own behavior in response to disappointing returns over long periods. While there is good evidence that a portfolio of this type will generate some premium eventually, the problem is remaining committed when "eventually" doesn't present itself. What will you do if your portfolio underperforms a simple cap weighted portfolio for five years? Ten years? Twenty years? This is a distinct possibility. Throwing in the towel on a strategy and hopping to a different one is a classic formula for locking in underperformance.

If you are confident that you accept the possibility of long term underperformance compared to the low cost cap-weighted standard, go for it. If you have doubts, pare back the factor funds, or eliminate them entirely.
econalex
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Re: Vanguard Core + Avantis factor portfolio

Post by econalex »

I have a similar intended allocation (moving to it slowly):

VTI
AVUV
VXUS
AVDV
EDV
20% each

I mostly have VTI/VXUS/EDV/VWO now and trying not to incur a lot of capital gain hence moving slowly. Also not so sure about AVES/AVEM due to fees/turnover and may end up keeping a small allocation of VWO. I have lots of faith in AVUV/AVDV for long term due to deep exposure to SmL and HmL factors. OTOH I'm somewhat convinced that leveraging total market/SPY may very well beat SCV. So in the end it might be down to fees.
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Re: Vanguard Core + Avantis factor portfolio

Post by grabiner »

I do something like this, although I don't get all my factors from Avantis. I don't find the value exposure of AVUV large enough, so I use I use Vanguard's VFVA for US value (both large-cap and small-cap). I will probably use AVES in the future, but I am waiting for now, particularly because I am not sure about its tax efficiency and thus don't know whether to hold it in taxable or tax-deferred.
I do use Avantis' AVDV for international small-cap value, but I also hold iShares IVLU for international large-cap value. And I hold small-cap blend funds as well, a fund in my employer plan for US small-cap blend, and Vanguard's VSS for international small-cap blend. (There is no low-cost emerging markets small-cap blend fund, so I just use the emerging holding in VSS, although AVES will probably fill that gap for me.)
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Re: Vanguard Core + Avantis factor portfolio

Post by luckyducky99 »

Seems legit to me. Giving equal weight to emerging markets as to developed ex-US is a bold stroke, and I think the riskiest aspect here. There is pretty solid research behind factor premia. Do you expect EM to outperform in the long run for some reason?
rgramma
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Re: Vanguard Core + Avantis factor portfolio

Post by rgramma »

Vanguard core plus tilted Avantis is precisely what I do.

VT/VTWAX: 50%
AVUV: 25%
AVDV: 15%
DGS: 10%

OK, I guess I have the one Wisdom Tree ETF in there, but I'm going to stick with what I have due to the embedded gains. For the DGS that I have in my Roth, I'm seriously considering AVES, but my OCD likes the symmetry of ALL the tilted components tilting to both size AND value. Per Portfolio Visualizer, the overall US side of the portfolio is biased a little bit more towards small than value. I'd prefer more of an even size vs value tilt, but I wouldn't be able to accomplish that without introducing additional ETFs and complexity to the portfolio. 4 funds is enough.
Last edited by rgramma on Mon Oct 25, 2021 11:49 pm, edited 2 times in total.
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Re: Vanguard Core + Avantis factor portfolio

Post by rgramma »

nedsaid wrote: Sun Oct 24, 2021 5:12 pm What I would recommend is to run the portfolio through Portfolio Visualizer and use similar DFA funds as proxies for the newer Avantis ETFs. You could back test for a number of years. Problem is that Avantis itself goes back only two years though the Avantis people are mostly ex-DFA employees. I would also do a current factor analysis of similar DFA and Avantis Funds. It would be instructive to see how different the factor loadings are between DFA and Avantis, my understanding is that Avantis has further tweaked the factor investing approach beyond what DFA was already doing.
Good advice! I should probably be playing around in PV with the DFA equivalents, not the Avantis funds. Thanks!
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Cranberry44
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Re: Vanguard Core + Avantis factor portfolio

Post by Cranberry44 »

Innocent bump -- I'm interested in this exact topic but don't want to start another thread.
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Re: Vanguard Core + Avantis factor portfolio

Post by livesoft »

In years where value and particularly small-cap value are doing well, then such tilted portfolios will do well. And in years where international is doing well compared to US equities, then such a tilted portfolio will do well. Then there are those other years.

A set of 60/40 benchmark funds that I use to help me track the three ideas are VSMGX, VBIAX, and DGSIX. That is, one is basically a Total Market Weight portfolio, another has no international, and the third is small-cap and value-tilted portfolio. Each one can do better than the others in any given year, but VBIAX with no international equities can overwhelm the small-cap and value-tilt of DGSIX when international equities lag US equities.

One can see what I mean by these two tables created at Morningstar.com:

Image

So I guess I am writing that one cannot predict the future.
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Re: Vanguard Core + Avantis factor portfolio

Post by kelway »

brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
I've done very similar including the 50/50 developed/emerging split. However, I haven't gone all-in with Avantis yet, so my SCV is split SLYV / AVUV.
Apathizer
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Re: Vanguard Core + Avantis factor portfolio

Post by Apathizer »

brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
For such a long-term horizon (25+yr) I think that's fine, though that's more in SCV than I prefer, but I'm older. I like to keep things fairly simple, so 6 funds is also more than I prefer.

We discussed this in another thread, but I'll briefly summarize here. While others disagree, I actually prefer to just use 3 Avantis all cap equity funds: US (AVUS), international (AVDE) and emerging markets (AVEM). These are essentially all-cap index funds with light to moderate 5 factor slants.

Some understandably prefer more SCV slant, but for me they provide adequate exposure (about 10-15%). To keep things fairly simple, which is my preference, I combine them with Vanguard Total World Bond Fund (BNDW) since I'm getting older and want to mitigate volatility somewhat. I'm a little overweight in emerging markets since they seem to provide better diversification (less US correlation) than ex-US developed markets.

AVUS: 45%
AVDE: 20%
AVEM: 15%
BNDW: 20%

While there isn't much history to work with, so far the equity returns have been very similar to combining about 15% AVUV and 15% AVDV with Vanguard Total World Stock (VT) according to portfolio visualizer.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
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Re: Vanguard Core + Avantis factor portfolio

Post by ramink »

I would replace VEA with DFIV and AVES with a combination of DGS and EWX. Emerging Markets Value with state owned enterprises is not a investor friendly asset class.
NoMansLand
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Re: Vanguard Core + Avantis factor portfolio

Post by NoMansLand »

I replace VTI and VXUS with ACWV, IMOM, QMOM. Min vol and momentum are better counterweights to small value then simple dilution through beta.
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Re: Vanguard Core + Avantis factor portfolio

Post by grabiner »

ramink wrote: Sun Oct 31, 2021 9:55 am I would replace VEA with DFIV and AVES with a combination of DGS and EWX. Emerging Markets Value with state owned enterprises is not a investor friendly asset class.
DGS and EWX are significantly more expensive than the alternatives, particularly in a taxable account (DGS has a high dividend yield, and EWX has distributed capital gains). Are you willing to pay that extra cost to avoid the undesirable portion of AVES?

I held EWX years ago, but gave up on it because of the expenses and tax costs. The tax costs are particularly important to me because I don't have Roth IRA room; almost all my international ETFs have to be in my taxable account.
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Re: Vanguard Core + Avantis factor portfolio

Post by stan1 »

NoMansLand wrote: Sun Oct 31, 2021 9:57 am I replace VTI and VXUS with ACWV, IMOM, QMOM. Min vol and momentum are better counterweights to small value then simple dilution through beta.
Thanks for posting that. What asset allocation do you use, and how did you choose it? Also are you mostly in tax advantaged accounts?
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Re: Vanguard Core + Avantis factor portfolio

Post by NoMansLand »

stan1 wrote: Sun Oct 31, 2021 10:34 am
NoMansLand wrote: Sun Oct 31, 2021 9:57 am I replace VTI and VXUS with ACWV, IMOM, QMOM. Min vol and momentum are better counterweights to small value then simple dilution through beta.
Thanks for posting that. What asset allocation do you use, and how did you choose it? Also are you mostly in tax advantaged accounts?
60% Small Value (1/3 each US, Dev Int, EM)
20% Momentum
10% Min Vol
10% writing insurance (covered calls and cash backed puts)

I’m about 2/3 tax advantaged, 1/3 taxable.

Edit: chosen based on extensive research into risk premiums and current massive Value/Growth spread.
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Re: Vanguard Core + Avantis factor portfolio

Post by stan1 »

NoMansLand wrote: Sun Oct 31, 2021 10:50 am
stan1 wrote: Sun Oct 31, 2021 10:34 am
NoMansLand wrote: Sun Oct 31, 2021 9:57 am I replace VTI and VXUS with ACWV, IMOM, QMOM. Min vol and momentum are better counterweights to small value then simple dilution through beta.
Thanks for posting that. What asset allocation do you use, and how did you choose it? Also are you mostly in tax advantaged accounts?
60% Small Value (1/3 each US, Dev Int, EM)
20% Momentum
10% Min Vol
10% writing insurance (covered calls and cash backed puts)

I’m about 2/3 tax advantaged, 1/3 taxable.

Edit: chosen based on extensive research into risk premiums and current massive Value/Growth spread.
Thanks, I always enjoy reading different perspectives even if they are different than the typical BH portfolio.
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Re: Vanguard Core + Avantis factor portfolio

Post by NoMansLand »

stan1 wrote: Sun Oct 31, 2021 11:00 am
NoMansLand wrote: Sun Oct 31, 2021 10:50 am
stan1 wrote: Sun Oct 31, 2021 10:34 am
NoMansLand wrote: Sun Oct 31, 2021 9:57 am I replace VTI and VXUS with ACWV, IMOM, QMOM. Min vol and momentum are better counterweights to small value then simple dilution through beta.
Thanks for posting that. What asset allocation do you use, and how did you choose it? Also are you mostly in tax advantaged accounts?
60% Small Value (1/3 each US, Dev Int, EM)
20% Momentum
10% Min Vol
10% writing insurance (covered calls and cash backed puts)

I’m about 2/3 tax advantaged, 1/3 taxable.

Edit: chosen based on extensive research into risk premiums and current massive Value/Growth spread.
Thanks, I always enjoy reading different perspectives even if they are different than the typical BH portfolio.

I just joined a week ago. Strange place. Some good content. Lots and lots of group think. Which is t a dig. For beginners, training wheels and a support group drives relative success
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Re: Vanguard Core + Avantis factor portfolio

Post by Activesloth »

If I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. I need proof that international will beat domestic stocks before I can commit to a large international allocation.
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Re: Vanguard Core + Avantis factor portfolio

Post by Activesloth »

If I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. For myself, I need proof that international will beat domestic stocks before I can commit to a large international allocation.
NoMansLand
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Re: Vanguard Core + Avantis factor portfolio

Post by NoMansLand »

Activesloth wrote: Sun Oct 31, 2021 11:49 am If I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. I need proof that international will beat domestic stocks before I can commit to a large international allocation.
So your thesis for why my portfolio is “uncomfortable” is to say it doesn’t overweight recent winners? Sounds to me that there is a risk factor associated with your discomfort. And also a heavy dose of home country bias.

To each their own. I’ll happily collect the risk premium from your discomfort. Comfort is expensive!
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Re: Vanguard Core + Avantis factor portfolio

Post by Activesloth »

NoMansLand wrote: Sun Oct 31, 2021 11:55 am
Activesloth wrote: Sun Oct 31, 2021 11:49 am If I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. I need proof that international will beat domestic stocks before I can commit to a large international allocation.
So your thesis for why my portfolio is “uncomfortable” is to say it doesn’t overweight recent winners? Sounds to me that there is a risk factor associated with your discomfort. And also a heavy dose of home country bias.

To each their own. I’ll happily collect the risk premium from your discomfort. Comfort is expensive!
I’m sorry, you sound offended. You are right about the home bias. I know Apple and Amazon but I have no idea what Sichuan Development Corporation is. It’s not just about recent winners. If you look at 10 year returns, very few funds beat VTI or VOO. I’ve studied their graphs, and only large cap growth beats them. At any rate, I am not opposed to international investing. With online investing, one can shift to international funds in under 5 minutes. I’ll shift when I see international stocks take off.
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Re: Vanguard Core + Avantis factor portfolio

Post by NoMansLand »

Activesloth wrote: Sun Oct 31, 2021 12:30 pm
NoMansLand wrote: Sun Oct 31, 2021 11:55 am
Activesloth wrote: Sun Oct 31, 2021 11:49 am If I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. I need proof that international will beat domestic stocks before I can commit to a large international allocation.
So your thesis for why my portfolio is “uncomfortable” is to say it doesn’t overweight recent winners? Sounds to me that there is a risk factor associated with your discomfort. And also a heavy dose of home country bias.

To each their own. I’ll happily collect the risk premium from your discomfort. Comfort is expensive!
I’m sorry, you sound offended. You are right about the home bias. I know Apple and Amazon but I have no idea what Sichuan Development Corporation is. It’s not just about recent winners. If you look at 10 year returns, very few funds beat VTI or VOO. I’ve studied their graphs, and only large cap growth beats them. At any rate, I am not opposed to international investing. With online investing, one can shift to international funds in under 5 minutes. I’ll shift when I see international stocks take off.

I’m not the least bit offended. If you believe you can time the market re: international/us have at it!
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Re: Vanguard Core + Avantis factor portfolio

Post by Apathizer »

Activesloth wrote: Sun Oct 31, 2021 11:51 amIf I owned your portfolio, it would exceed my comfort level. It’s betting heavily on international stocks. In particular, the 25% allocation for emerging markets is very bold, considering they’re currently at the bottom of the heap. People have been predicting for years that international stocks will outperm domestic, but it hasn’t happened yet. I still think President Biden’s infrastructure bill might spur the US economy (and stock market) in 2022. If not, it’s easy to switch to foreign funds. For myself, I need proof that international will beat domestic stocks before I can commit to a large international allocation.
Yeah, as a US investor benefits of international diversification aren't clear. Historically global diversification improves risk adjusted returns (less volatility), but not overall returns, to say nothing of tax considerations. Considering the P:E ratio of ex-US markets, especially emerging markets, investing exclusively in the US doesn't seem sensible, but of course we can't predict the future. Statistically though, global diversification makes sense.
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Re: Vanguard Core + Avantis factor portfolio

Post by Cranberry44 »

What’s the consensus here: is it better to hold AVUV and/or AVDV in taxable or tax advantaged?
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Re: Vanguard Core + Avantis factor portfolio

Post by zincTwo »

Apathizer wrote: Sat Oct 30, 2021 6:10 pm
brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI, 20% AVUV, 15% VEA, 10% AVDV, 15% VWO, 10% AVES

Key: VTI- Total stock market, AVUV- Small cap Value, VEA- international developed, AVDV- developed small cap value , VWO- emerging markets,
AVES- emerging markets all cap value
For such a long-term horizon (25+yr) I think that's fine, though that's more in SCV than I prefer, but I'm older. I like to keep things fairly simple, so 6 funds is also more than I prefer.
This strategy also aligns with another book I recently read "2 Funds for Life: A quest for simple & effective investing strategies, by Chris Pedersen (Amazon)...where one of the "aggressive" recommended post-retirement portfolios was a 80% TDF (target-date-fund) + 20% SCV, even after retirement (the 20% SCV could be all US, or half US and half International, AVUV+AVDV). The stated argument for splitting the SCV into 10 in US and 10 intl, was to ensure US didn't get overweighted with the TDF. After reading the book, I found the included backtested data comparison against pure VT/SP500 portfolio to be very compelling.
All of the data and comparisons were included in the book.

It aligns with a "simplicity" factor with the automatic rebalancing within the target-date fund. Personally, I prefer the factor/tilts, but a post-retirement portfolio with lots of factors makes my spouse nervous. The TDF+SCV is simple enough, and yet brings in the goodness of the other factor.
Ref: 2fundsforlife.com
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brademac
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Re: Vanguard Core + Avantis factor portfolio

Post by brademac »

Cranberry44 wrote: Mon Nov 08, 2021 9:01 am What’s the consensus here: is it better to hold AVUV and/or AVDV in taxable or tax advantaged?
AVUV was extremely tax efficient last year. It had low dividend and they were 100% qualified.

AVDV was 65% qualified and dividend is not real high. Also, get foreign tax credit with this

I think both are great choices for taxable account.
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Re: Vanguard Core + Avantis factor portfolio

Post by grabiner »

Cranberry44 wrote: Mon Nov 08, 2021 9:01 am What’s the consensus here: is it better to hold AVUV and/or AVDV in taxable or tax advantaged?
Everything is relative; you want to hold the most tax-efficient funds in your taxable account, provided that you are willing to hold them forever.

In Tax costs for US and international value ETFs, I noted that in 2020, AVUV was extremely tax-efficient (low dividend yield, 100% qualified) while AVDV was relatively tax-inefficient (low foreign tax credit for an international fund, only 55% of dividends qualified). AVUV is as tax-efficient as total-market funds, so it should be one of your first choices for taxable; AVDV should be one of your last choices among index funds.

I use VFVA rather than AVUV for my US value holdings, and since it has a high dividend yield, I hold it in my IRA. And I hold IVLU for international large-cap value and AVDV for international small-cap value; since IVLU is more tax-efficient, I hold IVLU in my taxable account and AVDV in my HSA and Roth IRA.
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Cranberry44
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Re: Vanguard Core + Avantis factor portfolio

Post by Cranberry44 »

brademac wrote: Mon Nov 08, 2021 6:34 pm
Cranberry44 wrote: Mon Nov 08, 2021 9:01 am What’s the consensus here: is it better to hold AVUV and/or AVDV in taxable or tax advantaged?
AVUV was extremely tax efficient last year. It had low dividend and they were 100% qualified.

AVDV was 65% qualified and dividend is not real high. Also, get foreign tax credit with this

I think both are great choices for taxable account.
grabiner wrote: Mon Nov 08, 2021 6:36 pm
Cranberry44 wrote: Mon Nov 08, 2021 9:01 am What’s the consensus here: is it better to hold AVUV and/or AVDV in taxable or tax advantaged?
Everything is relative; you want to hold the most tax-efficient funds in your taxable account, provided that you are willing to hold them forever.

In Tax costs for US and international value ETFs, I noted that in 2020, AVUV was extremely tax-efficient (low dividend yield, 100% qualified) while AVDV was relatively tax-inefficient (low foreign tax credit for an international fund, only 55% of dividends qualified). AVUV is as tax-efficient as total-market funds, so it should be one of your first choices for taxable; AVDV should be one of your last choices among index funds.

I use VFVA rather than AVUV for my US value holdings, and since it has a high dividend yield, I hold it in my IRA. And I hold IVLU for international large-cap value and AVDV for international small-cap value; since IVLU is more tax-efficient, I hold IVLU in my taxable account and AVDV in my HSA and Roth IRA.
Amazing. Thanks folks!
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Re: Vanguard Core + Avantis factor portfolio

Post by ramink »


DGS and EWX are significantly more expensive than the alternatives, particularly in a taxable account (DGS has a high dividend yield, and EWX has distributed capital gains). Are you willing to pay that extra cost to avoid the undesirable portion of AVES?

I held EWX years ago, but gave up on it because of the expenses and tax costs. The tax costs are particularly important to me because I don't have Roth IRA room; almost all my international ETFs have to be in my taxable account.
Agree these are not tax efficient. However, I am not sure how tax efficient the Avantis funds are expected to be. The DFA tax managed value funds converted to ETFs (DFIV and DFAT) have a track record. I would hold Avantis funds in tax advantaged accounts for now.
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mrpotatoheadsays
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Re: Vanguard Core + Avantis factor portfolio

Post by mrpotatoheadsays »

brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES

Key
VWO- emerging markets
AVES- emerging markets all cap value
I do not invest in pure emerging market funds: too much risk; too much china; two much communism; too much authoritarianism; too much currency fluctuation. If you want to go that way consider: AVEM (3000+ equities) and EWX (value tilted; 55% small) instead.
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Re: Vanguard Core + Avantis factor portfolio

Post by DesertInvestor »

invest2bfree wrote: Sun Oct 24, 2021 5:59 pm
brademac wrote: Sun Oct 24, 2021 4:58 pm Please give me your thoughts on a portfolio like this. I know it is more risky than a standard total market portfolio but hoped it might have potential for higher returns in the longer term (25+ years). My guess is it would have higher volatility and I know it is significantly more expensive than a standard VTI VXUS portfolio, but feel like it is more diversified because it is not as large growth oriented due to the small value tilt.

30% VTI
20% AVUV

15% VEA
10% AVDV

15% VWO
10% AVES


Key
VTI- Total stock market
AVUV- Small cap Value
VEA- international developed
AVDV- developed small cap value
VWO- emerging markets
AVES- emerging markets all cap value
I would do 55% VT - 15% AVUV. 15% AVDV, 15% AVES
I have 10% small cap value tilt with VBR. I'm considering adding to that to make 15% with AVUV as you propose.

Also adding to my vanguard total international stake of 30% with AVDV and AVES, but not sure how I'm going to do this.

What is rational for proposed allocations above? Thanks!
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