Small Cap Value heads Rejoice !!!

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jarjarM
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Re: Small Cap Value heads Rejoice !!!

Post by jarjarM »

Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
When you are ready to tilt back into SCV, let us know. That'll be when we move out of SCV /s :beer That's why no one knows the future and SCV really is for long term holding .
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Re: Small Cap Value heads Rejoice !!!

Post by Stef »

MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
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Stef
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Re: Small Cap Value heads Rejoice !!!

Post by Stef »

willthrill81 wrote: Fri Mar 12, 2021 12:25 pm Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I think it's due to SCV being such a small part of the market. When SCV outperforms you could also say "I should have bought Tesla shares!". Of course there is evidence that SCV could still keep outperforming TSM longterm, but tracking error can really lead to anxiety and I experienced it myself. When holding the market (or even world market with something like VT), you stop caring about how factors or sectors are performing, you just relax and let it ride. So that's what I'll do from now on.
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

Stef wrote: Fri Mar 12, 2021 12:34 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I think it's due to SCV being such a small part of the market. When SCV outperforms you could also say "I should have bought Tesla shares!". Of course there is evidence that SCV could still keep outperforming TSM longterm, but tracking error can really lead to anxiety and I experienced it myself. When holding the market (or even world market with something like VT), you stop caring about how factors or sectors are performing, you just relax and let it ride. So that's what I'll do from now on.
I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
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Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

willthrill81 wrote: Fri Mar 12, 2021 12:25 pm
Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
Just wait. If SCV beats TSM for a year or two, everyone will start complaining and they'll start jumping into SCV. It will be quite the contrast to last year when a few 3 fund advocates were coming into this thread and drumming up anxiety and negative thoughts about SCV. Most of us were holding and buying. Those of us that held firm have already been rewarded. Some didn't hold.

3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
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Re: Small Cap Value heads Rejoice !!!

Post by Anon9001 »

Stef wrote: Fri Mar 12, 2021 12:34 pm I think it's due to SCV being such a small part of the market. When SCV outperforms you could also say "I should have bought Tesla shares!". Of course there is evidence that SCV could still keep outperforming TSM longterm, but tracking error can really lead to anxiety and I experienced it myself. When holding the market (or even world market with something like VT), you stop caring about how factors or sectors are performing, you just relax and let it ride. So that's what I'll do from now on.
Your local country is also very small part of MSCI ACWI and FTSE All World yet you are over-weighting it. I am not saying it is wrong to do as local investments should have better correlation to local inflation (especially if all local investments are in small caps as large caps tend to have some foreign revenue exposure) but I am wondering why dismiss SCV saying it is small part of market if you are are over-weighting your home market?
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

Massdriver wrote: Fri Mar 12, 2021 12:36 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm
Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
Just wait. If SCV beats TSM for a year or two, everyone will start complaining and they'll start jumping into SCV. It will be quite the contrast to last year when a few 3 fund advocates were coming into this thread and drumming up anxiety and negative thoughts about SCV. Most of us were holding and buying. Those of us that held firm have already been rewarded. Some didn't hold.

3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
Personally, I think that all-in-one funds are the best option for reducing behavioral errors.
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Re: Small Cap Value heads Rejoice !!!

Post by Anon9001 »

willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

Anon9001 wrote: Fri Mar 12, 2021 12:45 pm
willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
Yes, ex-US SCV has done well for a long while, much better than total international, which had zero real returns from January, 2007, through May, 2020.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Anon9001 wrote: Fri Mar 12, 2021 12:45 pm
willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
So many people ignore ex-US SCV... it had quite a run indeed.
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Re: Small Cap Value heads Rejoice !!!

Post by Jags4186 »

MotoTrojan wrote: Fri Mar 12, 2021 12:48 pm
Anon9001 wrote: Fri Mar 12, 2021 12:45 pm
willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
So many people ignore ex-US SCV... it had quite a run indeed.
I don’t think many people ignore it, I think that until recently, it was difficult to invest in it as the only Int-SCV fund was the DFA fund which you were stuck paying an investment advisor for. No use talking about something you can’t get in on. The WisdomTree DLS ETF isn’t truly a SCV fund. It’s only now since the Avantis AVDV fund came out could anyone who wants international SCV get it.
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Jags4186 wrote: Fri Mar 12, 2021 12:54 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:48 pm
Anon9001 wrote: Fri Mar 12, 2021 12:45 pm
willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
So many people ignore ex-US SCV... it had quite a run indeed.
I don’t think many people ignore it, I think that until recently, it was difficult to invest in it as the only Int-SCV fund was the DFA fund which you were stuck paying an investment advisor for. No use talking about something you can’t get in on. The WisdomTree DLS ETF isn’t truly a SCV fund. It’s only now since the Avantis AVDV fund came out could anyone who wants international SCV get it.
DLS provided pretty decent exposure to HmL while crushing DFA in RmW (quality):

https://www.portfoliovisualizer.com/fac ... sion=false

There was also FNDC (SFILX) out not long after, which I personally hold (along with IVAL). But yes, AVDV is one of the more pure small-value options. If you really want to expose yourself though and are just tilting with a small allocation, I like IVAL best.
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Re: Small Cap Value heads Rejoice !!!

Post by Anon9001 »

willthrill81 wrote: Fri Mar 12, 2021 12:47 pm Yes, ex-US SCV has done well for a long while, much better than total international, which had zero real returns from January, 2007, through May, 2020.
It even has a higher Sharpe and Sortino Ratio than Total International un-like DFSVX which has lower Sharpe and Sortino Ratio than Total Market for the same time period. I assume this is due to what Cliff Assness said in his article "The Long Run is Lying to You" that the realized US value premium has been reduced by value spreads widening. If we take out the valuation changes the premium for HML Devil goes from 1.9% (t-stat:<2) to 3%(t-stat:3) for 1950-present and for S/EV the premium goes from 2.9%(t-stat:1.9) to 3.6% (t-stat:3.4) for 1968-present. This value spread widening must not have happened in Ex-US for it to have higher Sharpe and Sortino Ratio than Total International.
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Re: Small Cap Value heads Rejoice !!!

Post by abuss368 »

MotoTrojan wrote: Fri Mar 12, 2021 12:48 pm
Anon9001 wrote: Fri Mar 12, 2021 12:45 pm
willthrill81 wrote: Fri Mar 12, 2021 12:35 pm I understand, but it would be difficult for me to 'relax and let it ride' if TSM lost money for a decade while SCV was still doing well (e.g., 2000-2009).

'Know thyself.'
I did test the time period you quoted and US SCV has under-performed Ex-US SCV with higher risk. On the bright side the US SCV has out-performed both Total International and Total Market.
So many people ignore ex-US SCV... it had quite a run indeed.
All asset classes have their day in the sun. No one knows when International will out perform US again, if ever.

Look at gold and other commodities. REITs. Value. Growth. Dare I say Bitcoin?

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Re: Small Cap Value heads Rejoice !!!

Post by Steve Reading »

Massdriver wrote: Fri Mar 12, 2021 10:27 am On another note, I'm looking at my tiny new positions in EMGF in my tax advantaged accounts and thinking about moving them to Avantis as well. From Morningstar, here is what they said about EMGF.
IShares Edge MSCI Multifactor Emerging Markets ETF follows a sound approach to portfolio construction. It uses an optimizer to maximize its exposure to names that simultaneously score well on four factors. But the optimizer lacks transparency, making it difficult to understand what is driving the fund's performance. And the fund has underperformed the individual factors it targets. It earns a Morningstar Analyst Rating of Neutral.

...

The fund’s performance can be difficult to understand. It lagged the index by 9.5 percentage points between June 2018 and April 2019. But all four of its targeted factors performed better than the fund over this period, so the reason why it underperformed isn't well understood. Its 0.45% expense ratio is competitive with other multifactor strategies in the category, and it is cheaper than many actively managed alternatives.
I saw your DM, figured answering here would be better for everyone.
1) The index they refer to above is not EMGF's index, but just EM in general. I just checked and EMGF tracked the MSCI EM Multiple Diversified Index beautifully over that period. So M* is saying the index it tracks performs strangely. That's fine, just making sure that's clear (when I first read it, I thought they meant EMGF itself had issues but their issue is with the index it tracks).

2) You can basically translate M*'s point to "hey, over these 9 months, the MSCI index had negative alpha of about -0.8% monthly". I regressed over those months and see the alpha though it's not statistically significant. If you go on PV, you can see this stuff. The MSCI Mult. Diversified index has, at times, underperformed the 4-Factor Clone (go to rolling returns and rolling regression tabs). I'm using EMGF since idk if PV can do index data and EMGF tracked it well any ways:
https://www.portfoliovisualizer.com/fac ... sion=false

Some times positive alpha, some times negative. The period they picked was negative. It does seem to spend a little more time on the negative than the positive but the alpha is not statistically significant over the whole period so *shrugs*.

3) Index goes back to 1998 and since then, alpha is insignificantly positive. So I suppose the concern is just "is this recent behavior of the index concerning or not?".

I'm not concerned and in fact, this is to be expected from the optimizer the methodology uses. Its holdings are unlikely to match neatly to FF factors, which means in the short-term, it could under/outperform. But over the long-term, I would expect the noise to cancel out. Just my opinion.
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Re: Small Cap Value heads Rejoice !!!

Post by BabaWawa »

Massdriver wrote: Fri Mar 12, 2021 12:36 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm
Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
Don't beat yourself up too much. Sometimes, such experiments are often needed to reveal what one is and is not capable of. Some can hold one asset that underperforms another for decades, and some cannot do it for a month.

I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
Just wait. If SCV beats TSM for a year or two, everyone will start complaining and they'll start jumping into SCV. It will be quite the contrast to last year when a few 3 fund advocates were coming into this thread and drumming up anxiety and negative thoughts about SCV. Most of us were holding and buying. Those of us that held firm have already been rewarded. Some didn't hold.

3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
How ironic that 3 fund advocates promote the concept that their simple portfolio helps people avoid behavioral mistakes, then they feel the urge to repetitively come to this thread to get us SCV tilters to change our behavior. :oops:.

SCV heads knew to stay the course all along. Ignore the noise, even when it comes from within.
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

Massdriver wrote: Fri Mar 12, 2021 12:36 pm 3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
I suppose this could be true for some people, but not necessarily. A TSM investor is all in on one factor. When it tanks behavioral errors can happen as he looks to other factors. An investor diversified broadly across factors, appreciating the value of diversification and that it means some part of the portfolio is always doing poorly, may avoid behavioral errors because he feels his plan is solid.

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Re: Small Cap Value heads Rejoice !!!

Post by Yarlonkol12 »

Man this SCV rip has been unreal, glad I HODL my IJS etf the last few years and even added alittle last year when it got crushed. Wish I had added more, though feeling a bit overdone at this point.
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Re: Small Cap Value heads Rejoice !!!

Post by Morse Code »

BabaWawa wrote: Fri Mar 12, 2021 1:46 pm How ironic that 3 fund advocates promote the concept that their simple portfolio helps people avoid behavioral mistakes, then they feel the urge to repetitively come to this thread to get us SCV tilters to change our behavior. :oops:.

SCV heads knew to stay the course all along. Ignore the noise, even when it comes from within.
:beer

Someone has been conspicuously missing lately. :shock:
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Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

Massdriver wrote: Fri Mar 12, 2021 12:36 pmJust wait. If SCV beats TSM for a year or two, everyone will start complaining and they'll start jumping into SCV. It will be quite the contrast to last year when a few 3 fund advocates were coming into this thread and drumming up anxiety and negative thoughts about SCV. Most of us were holding and buying. Those of us that held firm have already been rewarded. Some didn't hold.

3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
I'll admit things look much better than they did a year ago. After a very painful March 2020 holding AVUV I did a tax loss harvest to SLYV. Over a month later I made the decision to move from SLYV in my IRA to AVUV and from ISCF to AVDV. Roth IRAs since April have been 100% Avantis. Definitely worked out for me on that end. Now if international could just start moving. I haven't put any new recent money into AVUV. Its all been going to AVDV and AVEM* I try to stay around 50/50 which is hard given the surge of US SCV.

*401ks are just going to Russell 2K and ACWI. I really could use Large International to have a decent run.
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Random Walker wrote: Fri Mar 12, 2021 4:13 pm
MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
I like it, bold tilt indeed.
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Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

Steve Reading wrote: Fri Mar 12, 2021 1:37 pm
Massdriver wrote: Fri Mar 12, 2021 10:27 am On another note, I'm looking at my tiny new positions in EMGF in my tax advantaged accounts and thinking about moving them to Avantis as well. From Morningstar, here is what they said about EMGF.
IShares Edge MSCI Multifactor Emerging Markets ETF follows a sound approach to portfolio construction. It uses an optimizer to maximize its exposure to names that simultaneously score well on four factors. But the optimizer lacks transparency, making it difficult to understand what is driving the fund's performance. And the fund has underperformed the individual factors it targets. It earns a Morningstar Analyst Rating of Neutral.

...

The fund’s performance can be difficult to understand. It lagged the index by 9.5 percentage points between June 2018 and April 2019. But all four of its targeted factors performed better than the fund over this period, so the reason why it underperformed isn't well understood. Its 0.45% expense ratio is competitive with other multifactor strategies in the category, and it is cheaper than many actively managed alternatives.
I saw your DM, figured answering here would be better for everyone.
1) The index they refer to above is not EMGF's index, but just EM in general. I just checked and EMGF tracked the MSCI EM Multiple Diversified Index beautifully over that period. So M* is saying the index it tracks performs strangely. That's fine, just making sure that's clear (when I first read it, I thought they meant EMGF itself had issues but their issue is with the index it tracks).

2) You can basically translate M*'s point to "hey, over these 9 months, the MSCI index had negative alpha of about -0.8% monthly". I regressed over those months and see the alpha though it's not statistically significant. If you go on PV, you can see this stuff. The MSCI Mult. Diversified index has, at times, underperformed the 4-Factor Clone (go to rolling returns and rolling regression tabs). I'm using EMGF since idk if PV can do index data and EMGF tracked it well any ways:
https://www.portfoliovisualizer.com/fac ... sion=false

Some times positive alpha, some times negative. The period they picked was negative. It does seem to spend a little more time on the negative than the positive but the alpha is not statistically significant over the whole period so *shrugs*.

3) Index goes back to 1998 and since then, alpha is insignificantly positive. So I suppose the concern is just "is this recent behavior of the index concerning or not?".

I'm not concerned and in fact, this is to be expected from the optimizer the methodology uses. Its holdings are unlikely to match neatly to FF factors, which means in the short-term, it could under/outperform. But over the long-term, I would expect the noise to cancel out. Just my opinion.
I appreciate it greatly. I'll probably keep it around and see what happens. AVEM continues to be really tempting, but it doesn't seem to load up on factors as much as EMGF and I'm using this fund to tilt which is why I went EMGF to begin with. I just hope over the long-run, this fund performs!
Massdriver
Posts: 233
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Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

Random Walker wrote: Fri Mar 12, 2021 3:29 pm
Massdriver wrote: Fri Mar 12, 2021 12:36 pm 3 fund advocates are correct that for many it is the best option since it lowers the chance of behavioral errors.
I suppose this could be true for some people, but not necessarily. A TSM investor is all in on one factor. When it tanks behavioral errors can happen as he looks to other factors. An investor diversified broadly across factors, appreciating the value of diversification and that it means some part of the portfolio is always doing poorly, may avoid behavioral errors because he feels his plan is solid.

Dave
I agree and am one of those that prefers to be diversified into other factors. Most bogleheads probably don't think of factors at all when they invest in TSM.
corp_sharecropper
Posts: 590
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Re: Small Cap Value heads Rejoice !!!

Post by corp_sharecropper »

Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
If you really want to test your behavioral mettle, look at some microcap backtesting. I'm convinced there is no human alive that could put up with that sort of duration of underperformance coupled with higher volatility. It comes down to the simple math and statistics of human life expectancy. The data I've seen has it underperforming SPX for waaay too long and by amounts waaay to large for mere mortals to be expected to keep throwing their hard earned money at it, paycheck after paycheck, for like 15 years. The good news is that there's just no cheap/good funds to entice you to go down that path and SCV basically performs the same at the end point. Speaking of which, the data I've seen doesn't seem to show much discrepancy between SCV and midcap value, but once you get to large cap value things change. I'm curious as to why. My initial, no real consideration given, thought is that it has something to do with typical old-school dividend investors and overlap/inclusion in the S&P 500, both due to the massive amount of AUM there, but I like I said, I haven't really given it much thought. Hard to say there's a size premium/factor effect with the discrepancy between SCV/MCV and SCV/LCV.
james22
Posts: 1992
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Re: Small Cap Value heads Rejoice !!!

Post by james22 »

MotoTrojan wrote: Fri Mar 12, 2021 4:19 pm
Random Walker wrote: Fri Mar 12, 2021 4:13 pm
MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
I like it, bold tilt indeed.
Index funds:

SV 60%
EM 40%
Bama12
Posts: 826
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Re: Small Cap Value heads Rejoice !!!

Post by Bama12 »

Love Small.....

15% small cap and 15% small cap value in 401k for 25 years now.

25% small cap value in Roth.

I have no plans to ever change.
HippoSir
Posts: 269
Joined: Tue Jul 03, 2018 2:56 pm

Re: Small Cap Value heads Rejoice !!!

Post by HippoSir »

Just because I can't resist, 1 year returns:

AVUV: +146.05%
QQQ: +79.17%
VTI: +69.36%

Hope nobody listened to the doomsayers last year!
BabaWawa
Posts: 540
Joined: Sun Sep 06, 2020 2:47 pm

Re: Small Cap Value heads Rejoice !!!

Post by BabaWawa »

HippoSir wrote: Fri Mar 12, 2021 7:48 pm Just because I can't resist, 1 year returns:

AVUV: +146.05%
QQQ: +79.17%
VTI: +69.36%

Hope nobody listened to the doomsayers last year!

Taylor has been absent here lately...working on his new book, The Four Fund Portfolio. :sharebeer
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Steve Reading
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Re: Small Cap Value heads Rejoice !!!

Post by Steve Reading »

HippoSir wrote: Fri Mar 12, 2021 7:48 pm Just because I can't resist, 1 year returns:

AVUV: +146.05%
QQQ: +79.17%
VTI: +69.36%

Hope nobody listened to the doomsayers last year!
Wait til they spin this SCV rally as "whoah, that came out of nowhere, no one can predict when a market segment will outperform, growth beats value, then value beats growth, best to own the market, experts are all wrong".
Random Walker wrote: Fri Mar 12, 2021 4:13 pm
MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
So it's neither here nor there, but something that sucks for long-short value funds like QSPIX is that, because they're leveraged, they have to shed exposure with losses. Whereas a long-only fund can just hold on to the same stocks when spreads widen and then recover all of it once spreads tighten, a long-short leveraged fund has to sell its losing longs and buy back some of its now-overpriced shorts throughout the drawdown. The consequence is that even if spreads tighten right back, QSPIX will trail. Likely by a lot.

Idk if that's the sort of thing your advisor tells you. I wonder if even Swedroe understands that mechanic.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
Random Walker
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Re: Small Cap Value heads Rejoice !!!

Post by Random Walker »

Steve Reading wrote: Fri Mar 12, 2021 8:25 pm
HippoSir wrote: Fri Mar 12, 2021 7:48 pm Just because I can't resist, 1 year returns:

AVUV: +146.05%
QQQ: +79.17%
VTI: +69.36%

Hope nobody listened to the doomsayers last year!
Wait til they spin this SCV rally as "whoah, that came out of nowhere, no one can predict when a market segment will outperform, growth beats value, then value beats growth, best to own the market, experts are all wrong".
Random Walker wrote: Fri Mar 12, 2021 4:13 pm
MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
So it's neither here nor there, but something that sucks for long-short value funds like QSPIX is that, because they're leveraged, they have to shed exposure with losses. Whereas a long-only fund can just hold on to the same stocks when spreads widen and then recover all of it once spreads tighten, a long-short leveraged fund has to sell its losing longs and buy back some of its now-overpriced shorts throughout the drawdown. The consequence is that even if spreads tighten right back, QSPIX will trail. Likely by a lot.

Idk if that's the sort of thing your advisor tells you. I wonder if even Swedroe understands that mechanic.
No, I didn’t know that level of detail. Makes sense. Perhaps there is cash from other sources to cover the shorts? I’m sure Larry knows these things. Advisor hasn’t discussed with me. If I ask, he would either know the answer or get the answer for me from someone on the team with the knowledge.

Dave
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willthrill81
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Re: Small Cap Value heads Rejoice !!!

Post by willthrill81 »

Random Walker wrote: Fri Mar 12, 2021 3:22 pm
willthrill81 wrote: Fri Mar 12, 2021 12:25 pm I do find it interesting that so many behaviorally treat the S&P 500 or TSM as the 'baseline' of all comparisons. Few seem to complain about TSM underperforming SCV of late, for instance.
I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
I generally do too but mostly for a different reason (i.e., me being a trend follower).
The Sensible Steward
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Steve Reading
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Re: Small Cap Value heads Rejoice !!!

Post by Steve Reading »

Random Walker wrote: Fri Mar 12, 2021 8:56 pm
Steve Reading wrote: Fri Mar 12, 2021 8:25 pm
HippoSir wrote: Fri Mar 12, 2021 7:48 pm Just because I can't resist, 1 year returns:

AVUV: +146.05%
QQQ: +79.17%
VTI: +69.36%

Hope nobody listened to the doomsayers last year!
Wait til they spin this SCV rally as "whoah, that came out of nowhere, no one can predict when a market segment will outperform, growth beats value, then value beats growth, best to own the market, experts are all wrong".
Random Walker wrote: Fri Mar 12, 2021 4:13 pm
MotoTrojan wrote: Fri Mar 12, 2021 3:25 pm
Random Walker wrote: Fri Mar 12, 2021 3:22 pm

I might have the strongest tilt to SV on this board, and I can’t help myself from comparing to S&P500 or TSM on a daily basis :-)

Dave
What are you rockin' again?

25% S&P500
25% VBR
20% QVAL
25% FNDC
10% IVAL

VBR and FNDC are a bit weaker in exposure, but the Alpha Architect more than makes up for it.
I’m 45% equity 30% bonds, 25% Alts.
The equities are 50/50 US/Int
US Mkt 5% DFTCX
US LV 2.5% DFMVX
US SV 15% DTMVX and BOTSX

INT mkt 4% DFTWX
ISV 14% DISVX and DFVQX
EM/EMV 4.5% DFCEX and DFEVX

Dave
So it's neither here nor there, but something that sucks for long-short value funds like QSPIX is that, because they're leveraged, they have to shed exposure with losses. Whereas a long-only fund can just hold on to the same stocks when spreads widen and then recover all of it once spreads tighten, a long-short leveraged fund has to sell its losing longs and buy back some of its now-overpriced shorts throughout the drawdown. The consequence is that even if spreads tighten right back, QSPIX will trail. Likely by a lot.

Idk if that's the sort of thing your advisor tells you. I wonder if even Swedroe understands that mechanic.
No, I didn’t know that level of detail. Makes sense. Perhaps there is cash from other sources to cover the shorts? I’m sure Larry knows these things. Advisor hasn’t discussed with me. If I ask, he would either know the answer or get the answer for me from someone on the team with the knowledge.

Dave
It's long-short so it should have about as much cash as its net asset value. So yes, plenty of cash. But it can't just use that cash to buy back shorts, otherwise it would end up with positive beta and somewhat unhedged. To stay hedged in the face of losses, it has to delever by buying back shorts via the selling of its longs.

It just came to mind after seeing you mention alternatives.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
manlymatt83
Posts: 1287
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Re: Small Cap Value heads Rejoice !!!

Post by manlymatt83 »

How does everyone determine when they need to rebalance? Spreadsheet? Calculator? Personal Capital or Morningstar X-Ray? I've learned that it will be healthiest for me to "delete my spreadsheet", as maintaining it is just a distraction. But that means I won't have an easy way of calculating when SCV is out of band relative to TSM. Is guesstimating based on info provided by Personal Capital enough?
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jason2459
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Re: Small Cap Value heads Rejoice !!!

Post by jason2459 »

manlymatt83 wrote: Fri Mar 12, 2021 9:59 pm How does everyone determine when they need to rebalance? Spreadsheet? Calculator? Personal Capital or Morningstar X-Ray? I've learned that it will be healthiest for me to "delete my spreadsheet", as maintaining it is just a distraction. But that means I won't have an easy way of calculating when SCV is out of band relative to TSM. Is guesstimating based on info provided by Personal Capital enough?

I'm not extremely precise with tracking exactly how much SCV I'm holding. I hold some blend funds that I don't count towards my SCV AA and I have my SCV funds I don't count as my US holdings.


I'm trying to keep a balance of simplicity and diversity across multiple accounts. HSA, 401ks, Roth IRAs, taxable accounts, etc.

Though I do have some tools available to me that could break down my small, mid, large factors. I guess I never really cared to look though.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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jason2459
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Re: Small Cap Value heads Rejoice !!!

Post by jason2459 »

So, curiosity got this cat.

My current AA that I just care about is

47.5% US (40%)
17.5% ex-US (20%)
17.5% SCV (20%)
4% Bonds (5%)
9.5% alternative fun stuff (<5%)
4% Cash (<5%)

Rough rounding and my current targets in parentheses. I don't separate my emergency fund so its included there too. I've never been strict on rebalancing and have gotten even less so but I have a high risk tolerance. I do allocate new money to under target allocations as I can.

According to one tool my equity break down is as follows.

Across is Value, Blend, Growth. Morning star box style

Large 8, 14, 11
Mid 6, 10, 6
Small 16, 21, 9

Tech 16
Financial 16
Industrial 14
Consumer discretionary 13
Health care 12
Materials 6
Real estate 6
Consumer staples 5
Comm services 5
Energy 4
Utilities 4
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
manlymatt83
Posts: 1287
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Re: Small Cap Value heads Rejoice !!!

Post by manlymatt83 »

:twisted:
jason2459 wrote: Fri Mar 12, 2021 10:54 pm So, curiosity got this cat.

My current AA that I just care about is

47.5% US (40%)
17.5% ex-US (20%)
17.5% SCV (20%)
4% Bonds (5%)
9.5% alternative fun stuff (<5%)
4% Cash (<5%)

Rough rounding and my current targets in parentheses. I don't separate my emergency fund so its included there too. I've never been strict on rebalancing and have gotten even less so but I have a high risk tolerance. I do allocate new money to under target allocations as I can.

According to one tool my equity break down is as follows.

Across is Value, Blend, Growth. Morning star box style

Large 8, 14, 11
Mid 6, 10, 6
Small 16, 21, 9

Tech 16
Financial 16
Industrial 14
Consumer discretionary 13
Health care 12
Materials 6
Real estate 6
Consumer staples 5
Comm services 5
Energy 4
Utilities 4
This is really helpful. So sounds like if I want to get rid of my spreadsheet and just always make sure I’m “within 5%” it shouldn’t break the bank.
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jason2459
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Re: Small Cap Value heads Rejoice !!!

Post by jason2459 »

All depends on how you feel about your AA. I'm not very strict. I did plunge down to near 0 cash and bonds last March to buy discounted equities and blame it on "rebalancing". :mrgreen:

I don't know if I'd advise most people to do this though. Risks are increased potentially.

Edit: to add I do have a google sheet that keeps track of my overall AA percentages so I do know where to push new money into. So I do some tracking. Just not more detailed then that.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
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imak
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Location: Austin, TX

Re: Small Cap Value heads Rejoice !!!

Post by imak »

I am about 40% SCV with majority allocations in RAFI Indexes and targeting approximately 70/30 US/Intl split

Tax-deferred/Taxable:
30% FNDX/PRF
30% FNDA/PRFZ
10% FNDF/PXF
10% FNDC/PDN
5% VWO/IEMG
5% REET/EEMS
10% TMF/TMF

It has been a wild ride the past year.
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Metsfan91
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Re: Small Cap Value heads Rejoice !!!

Post by Metsfan91 »

Stef wrote: Fri Mar 12, 2021 12:22 pm
MotoTrojan wrote: Fri Mar 12, 2021 12:19 pm
Stef wrote: Fri Mar 12, 2021 11:09 am Since I sold VIOV back in 2020, it went up 100% lol. I switched to QQQ and I'm underperforming VTI again. Maybe I shouldn't tilt at all and just hold the market.
I think I warned you this would happen :twisted:.
I know I know! Theory is one thing, but behavioral finance something completely different. I've should have known better :oops:

Still really crazy to see how SCV went up so fast! The lesson I learned from all of this: just buy the market and stop caring about factors and sectors.
Stated by many bogleheads, and I have read many times on this forum, "Have an investment policy and stick to it."

My IPS calls for buying and holding small cap and small value. Never had any second thought. High or low - always buying if there is any money in the pocket. These are in my ultimate portfolio.

As another poster noted, "know thyself" and think before act should help avoid regrets.
"Know what you own, and know why you own it." — Peter Lynch
gtwhitegold
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Re: Small Cap Value heads Rejoice !!!

Post by gtwhitegold »

A few months ago, I decided that I would no longer use large caps in my portfolio unless it was necessary. I also have wanted to focus on factor loadings more for a while than I have, but I've been restricted due to the large amount of my portfolio that is in the TSP.

Since then, I've completely disposed of all of my US large caps and moved my TSP over to the S (US Extended Market) Fund and I (International EAFE Fund). I'm also only investing new money in taxable and IRAs aside from matching contributions in order to maximize factor tilt in my portfolio.

So far, all new money allocated to equities in IRA accounts has gone towards FEMS (First Trust Emerging Markets Small Cap AlphaDEX ETF) since I'm underweight Emerging Markets in relation to my IPS. once I get closer to my desired allocation to EM, I will be investing in AVDV and moving my TSP more towards the S fund. I'm also planning on rolling over my TSP in a few years after I transition from the Military. Once that happens, I will probably be investing in AVUV for US.

For my desired equity allocation, I target:

50% US
20% Developed ex US
25% EM
5% FM

Within that, I'm buying funds that are as small and as valuey as possible.
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Admiral Fun
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did I already miss the run up?

Post by Admiral Fun »

I was going to move some extended market to AVUV back in december but I hesitated and now there's a wide gap between VXF and AVUV recent returns.

Now I'm concerned that the recent run up in small cap value is just another speculative mini-bubble.

Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
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drumboy256
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Re: did I already miss the run up?

Post by drumboy256 »

Admiral Fun wrote: Sat Mar 13, 2021 7:53 am I was going to move some extended market to AVUV back in december but I hesitated and now there's a wide gap between VXF and AVUV recent returns.

Now I'm concerned that the recent run up in small cap value is just another speculative mini-bubble.

Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
My personal opinion is that the SCV rotation is on for another year or so as fund managers realize that the mega cap growth has stalled--- not stopped, but stalled. The "cyclical" rotation that seems to be happening now across the SP500 is signs that "value" isn't just a buzz word, it's a play on a future that requires innovation to chew our way out of this pandemic. In essence, the SCV today, will be the SP500 weighted additions of tomorrow. I've researched this topic a lot and finally jumped in with FISVX of which I'm buying my way to my allocation of SCV within my portfolio long term. Why? Because having correct weighting of the market will matter over the next 40 years (imo) of which the total indexes of today don't really account for a good portion of small cap, let alone small cap value.

In terms of missing the train--- doubtful. SCV should outperform in the next few decades based on the lagging indicators as well as a new spark that has been kindled within the US via COVID. The narrative on this board has always been "buy the haystack".... sure--- but I want to buy the Barn and the farm as well. :sharebeer
Promise is one thing. Fulfilling that promise is quite another. - Sir Alex Ferguson | 20% IVV / 40% IBIT / 20% IXUS / 20% VGLT + chill
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Steve Reading
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Re: did I already miss the run up?

Post by Steve Reading »

Admiral Fun wrote: Sat Mar 13, 2021 7:53 am Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
Compared to the market, it is still dirt-cheap. The value spread (at least from what I can calculate using Ken French data) looks basically the same as it was back in 2020, and higher than 2019 (which is when AQR committed more to value).

As an asset class itself, its book/price is about 50th percentile, so similarly priced vs its historical mean. That's just another way of saying that the value spreads are really large not because value is is particularly cheap vs its history, but because growth is far richer in price vs its history.

Just my opinion, I am not a financial advisor.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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willthrill81
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Re: did I already miss the run up?

Post by willthrill81 »

Steve Reading wrote: Sat Mar 13, 2021 9:12 am
Admiral Fun wrote: Sat Mar 13, 2021 7:53 am Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
Compared to the market, it is still dirt-cheap. The value spread (at least from what I can calculate using Ken French data) looks basically the same as it was back in 2020, and higher than 2019 (which is when AQR committed more to value).

As an asset class itself, its book/price is about 50th percentile, so similarly priced vs its historical mean. That's just another way of saying that the value spreads are really large not because value is is particularly cheap vs its history, but because growth is far richer in price vs its history.

Just my opinion, I am not a financial advisor.
Further, as noted above, the very high concentration in the S&P 500 is historically indicative that SCV may have cumulative returns ranging from roughly 50% to 100% greater than those of the S&P 500 over the next five years. So there is still a lot of upside potential left in SCV.
The Sensible Steward
MotoTrojan
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Re: did I already miss the run up?

Post by MotoTrojan »

Steve Reading wrote: Sat Mar 13, 2021 9:12 am
Admiral Fun wrote: Sat Mar 13, 2021 7:53 am Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
Compared to the market, it is still dirt-cheap. The value spread (at least from what I can calculate using Ken French data) looks basically the same as it was back in 2020, and higher than 2019 (which is when AQR committed more to value).

As an asset class itself, its book/price is about 50th percentile, so similarly priced vs its historical mean. That's just another way of saying that the value spreads are really large not because value is is particularly cheap vs its history, but because growth is far richer in price vs its history.

Just my opinion, I am not a financial advisor.
Good point that much of the movement in the spread has been driven by growth while value has been fairly well constant.

People like to get excited about the returns of SCV from 2000-2010 when compared to the S&P500, and then have the opposite view for 2010-2020. This is pretty silly when you realize VISVX returned 9.14% (0.32% S&P500) CAGR from 2000-2010, and a whopping 11.21% (13.83% S&P500) for 2010-2020.

So small-value has been pretty consistent through the last 2 decades, and even performed BETTER in the recent decade where everyone likes to talk badly about it.

Would you rather have a decade of basically 0% and then another of 14%, or a steady 9-11% for the full 20 years? I know which I would prefer.
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willthrill81
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Re: did I already miss the run up?

Post by willthrill81 »

MotoTrojan wrote: Sat Mar 13, 2021 9:58 am
Steve Reading wrote: Sat Mar 13, 2021 9:12 am
Admiral Fun wrote: Sat Mar 13, 2021 7:53 am Has small cap value already moved from "cheap" to "fairly priced" or even frothy???
Compared to the market, it is still dirt-cheap. The value spread (at least from what I can calculate using Ken French data) looks basically the same as it was back in 2020, and higher than 2019 (which is when AQR committed more to value).

As an asset class itself, its book/price is about 50th percentile, so similarly priced vs its historical mean. That's just another way of saying that the value spreads are really large not because value is is particularly cheap vs its history, but because growth is far richer in price vs its history.

Just my opinion, I am not a financial advisor.
Good point that much of the movement in the spread has been driven by growth while value has been fairly well constant.

People like to get excited about the returns of SCV from 2000-2010 when compared to the S&P500, and then have the opposite view for 2010-2020. This is pretty silly when you realize VISVX returned 9.14% (0.32% S&P500) CAGR from 2000-2010, and a whopping 11.21% (13.83% S&P500) for 2010-2020.

So small-value has been pretty consistent through the last 2 decades, and even performed BETTER in the recent decade where everyone likes to talk badly about it.

Would you rather have a decade of basically 0% and then another of 14%, or a steady 9-11% for the full 20 years? I know which I would prefer.
Excellent point. I've made it myself on numerous occasions.

Over the last 50 years, SCV has had far lower start date sensitivity than TSM (i.e., more consistent performance). Some could argue that higher expected returns are just a bonus.
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