Small Cap Value heads Rejoice !!!

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MotoTrojan
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

cos wrote: Thu Jun 17, 2021 3:40 pm
MotoTrojan wrote: Sun May 30, 2021 8:53 am I am still sold that this is the best ETF option out there for EM value exposure at the moment, until Avantis or DFA come out with something :twisted:.
Taking FNDE into account, what's your current ideal allocation? Does FNDE play a significant role, or are you sticking with what you shared earlier?

For reference:
MotoTrojan wrote: Thu May 06, 2021 9:43 pm I am liking the following myself:
20% QVAL
20% AVUV
20% VFMO
20% IVAL
20% IMTM
In my deep-dive (thanks to the folks at Rational Reminder...) I made a few adjustments since then.

I decided I wanted some Avantis exposure on the ex-US side (like the diverse, low-turnover, cheap-assets method of value as a barbell to the concentrated AA cheap-profits method).

I decided I didn't really have the conviction for momentum, in particular after trading costs. I also realized that the volatility reduction MTUM/IMTM generated since inception in my portfolio was less due to momentum factor, and more due to negative HmL/RmW loading, something I wanted to avoid. I decided to leave a bit of cheap US beta (VTI) to provide some exposure to US growth and avoid behavioral risk of being all-in on value.

I decided to incorporate EM value, originally via FNDE, although I plan to swap for Avantis' new AVES when available.

Thus I came to the following portfolio:

15% in VTI, AVES (FNDE for now), QVAL, & IVAL
20% in AVUV & AVDV
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

MotoTrojan wrote: Tue Jun 22, 2021 1:17 pm
cos wrote: Thu Jun 17, 2021 3:40 pm
MotoTrojan wrote: Sun May 30, 2021 8:53 am I am still sold that this is the best ETF option out there for EM value exposure at the moment, until Avantis or DFA come out with something :twisted:.
Taking FNDE into account, what's your current ideal allocation? Does FNDE play a significant role, or are you sticking with what you shared earlier?

For reference:
MotoTrojan wrote: Thu May 06, 2021 9:43 pm I am liking the following myself:
20% QVAL
20% AVUV
20% VFMO
20% IVAL
20% IMTM
In my deep-dive (thanks to the folks at Rational Reminder...) I made a few adjustments since then.

I decided I wanted some Avantis exposure on the ex-US side (like the diverse, low-turnover, cheap-assets method of value as a barbell to the concentrated AA cheap-profits method).

I decided I didn't really have the conviction for momentum, in particular after trading costs. I also realized that the volatility reduction MTUM/IMTM generated since inception in my portfolio was less due to momentum factor, and more due to negative HmL/RmW loading, something I wanted to avoid. I decided to leave a bit of cheap US beta (VTI) to provide some exposure to US growth and avoid behavioral risk of being all-in on value.

I decided to incorporate EM value, originally via FNDE, although I plan to swap for Avantis' new AVES when available.

Thus I came to the following portfolio:

15% in VTI, AVES (FNDE for now), QVAL, & IVAL
20% in AVUV & AVDV
Why such a huge value tilt? And why EM value but not EM overall?
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
absolute zero
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Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

Nathan Drake wrote: Tue Jun 22, 2021 2:49 pm Why such a huge value tilt?
He was in UPRO a few years ago. Pretty sure MotoTrojan just likes to take more risk than most of us.
Massdriver
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Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

This is the first time I’ve heard of AVES.

Goodbye EMGF!
MotoTrojan
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Massdriver wrote: Wed Jun 23, 2021 1:54 pm This is the first time I’ve heard of AVES.

Goodbye EMGF!
Fresh off the press! Comes out in September.
Mardoc01
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Re: Small Cap Value heads Rejoice !!!

Post by Mardoc01 »

MotoTrojan wrote: Wed Jun 23, 2021 7:34 pm
Massdriver wrote: Wed Jun 23, 2021 1:54 pm This is the first time I’ve heard of AVES.

Goodbye EMGF!
Fresh off the press! Comes out in September.
What will be the ER ?
MotoTrojan
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Re: Small Cap Value heads Rejoice !!!

Post by MotoTrojan »

Nathan Drake wrote: Tue Jun 22, 2021 2:49 pm
MotoTrojan wrote: Tue Jun 22, 2021 1:17 pm

Thus I came to the following portfolio:

15% in VTI, AVES (FNDE for now), QVAL, & IVAL
20% in AVUV & AVDV
Why such a huge value tilt? And why EM value but not EM overall?
It is pretty tame actually compared to the folks on the Rational Reminder forum; 100% value/momentum with 1.4x leverage :shock:.

I am a strong believer in value and don't see this portfolio as much riskier than TSM (certainly less risky than the 100% US market that is common here) as long as you understand it will not always track the broad market (sometimes the market will lead, sometime this will).

Developed markets are also 100% value. Don't see any need to have overall dev-markets, EM, or even US markets, but felt a small portion of US market was prudent as an efficient diversifier.
absolute zero wrote: Tue Jun 22, 2021 4:07 pm
He was in UPRO a few years ago. Pretty sure MotoTrojan just likes to take more risk than most of us.
Yup for a short time I had about 1/4 of my portfolio in my version of the hedgefundie adventure, 43/57 UPRO/EDV. Got out with a 44% gain if memory serves after learning more about factor-investing and really digging my conviction in.
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Re: Small Cap Value heads Rejoice !!!

Post by Robert T »

Mardoc01 wrote: Wed Jun 23, 2021 7:37 pm What will be the ER ?
0.36%
https://sec.report/Document/0001710607- ... 021485.htm
Mardoc01
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Re: Small Cap Value heads Rejoice !!!

Post by Mardoc01 »

Robert T wrote: Wed Jun 23, 2021 7:56 pm
Mardoc01 wrote: Wed Jun 23, 2021 7:37 pm What will be the ER ?
0.36%
https://sec.report/Document/0001710607- ... 021485.htm
I wonder if dimensional will release a sim etf
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

How is everyone managing their SCV tilts across their various accounts (Taxable, Roth, 401K, HSA, etc)? I'm having a little FOMO with not having any exposure to the Avantis funds, and would like to increase my allocation to them.

The dilemmas I have:

1. Most taxable accounts have large gains and I do not want to sell (mostly VTSAX/VTIAX).
2. Roth IRA accounts are a decent size, but not nearly as large as 401K and taxable.
3. My 401K is through Fidelity, which offers Brokeragelink - HOWEVER, it appears that transacting in Avantis ETFs would cause a "transaction fee" event with Brokeragelink? I'm not 100% sure on this, and it's very difficult to navigate the Fidelity website to get an answer since it's not very transparent. This is odd because simply buying ETFs through a normal brokerage account would have no fees at all? Would really appreciate some insight on anyone else that has a Fidelity 401k BrokerageLink account.

My current plan is as follows:

- Leave my taxable accounts alone. I'm investing new taxable money through vanguard into VBR since it allows me to auto-invest with Vanguard.
- Roth IRA, since new contributions occur yearly and do not cause a taxable event, this is the easiest one to adjust my tilts with Avantis funds. Currently these are in VBR and FISVX
- 401k with Fidelity Brokeragelink: new contributions are going towards FISVX (Fidelity Small Cap Value, tracks Russell 2000 value index). I do this because it allows me to easily auto-invest new 401k contributions on a regular basis. I could switch to Avantis ETFs, but It appears that I cannot do this automatically, and secondly it may incur a $45 transaction fee each time I place an order (need to verify this).

Changes I'm considering:


- Moving new taxable contributions to M1 Finance where I can do auto-investing with ETFs. I hate that I have to create a new account outside of Vanguard to do this, but it's not looking like Vanguard or Fidelity will be implementing this anytime soon.

- Re-allocating Roth IRAs to Avantis Funds

Seems like there's not much more I can do unless I want to incur taxable events, transaction fees, and/or forego the ease of automatic investing.

Anyone have some thoughts? Perhaps I shouldn't worry so much about this, but it feels like I'm potentially leaving significant money on the table by not being able to invest in a fund that's really deep into these strategies vs. a bog standard Vanguard of Fidelity SCV fund.
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grabiner
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Re: Small Cap Value heads Rejoice !!!

Post by grabiner »

Nathan Drake wrote: Sun Jun 27, 2021 1:46 pm How is everyone managing their SCV tilts across their various accounts (Taxable, Roth, 401K, HSA, etc)? I'm having a little FOMO with not having any exposure to the Avantis funds, and would like to increase my allocation to them.
I won't sell anything current in my taxable account because of huge capital gains, but I have been adding IVLU (MSCI EAFE Value Factor ETF, the most tax-efficient of my value factor ETFs) with new purchases there. My Roth IRA and HSA are entirely REITs and value factor ETFs (AVDV for international small-cap, VFVA for US small-cap and large-cap). I don't have any factor options in my employer plan, so I hold my bonds and blend indexes there.

The net effect is that I don't yet have my target weight to value, but new money is going to value funds in order to get me there eventually. (And new money is getting there much faster than in the past, since I paid off my mortgage last year.)
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Re: Small Cap Value heads Rejoice !!!

Post by BabaWawa »

Nathan Drake wrote: Sun Jun 27, 2021 1:46 pm How is everyone managing their SCV tilts across their various accounts (Taxable, Roth, 401K, HSA, etc)? I'm having a little FOMO with not having any exposure to the Avantis funds...
Have held IJS in taxable since my last big tax loss harvest opportunity in 2009. When SCV was underperforming last few years, I rebalanced by adding shares in Roth. With outperformance past year, I rebalanced by selling entire Roth SCV position.

I'm still over allocated in IJS, but huge unrealized CGs in taxable position won't allow further reduction. I'm stuck with IJS, so I guess I have to live with FOMO on newer factors like momentum and quality, plus whatever else comes along.

I've never felt need to balance my allocation across all accounts, just focus on placing them in most prudent available location. Primarily equities in taxable/Roth, bonds in tIRA.
Last edited by BabaWawa on Mon Jun 28, 2021 11:04 am, edited 1 time in total.
Massdriver
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Re: Small Cap Value heads Rejoice !!!

Post by Massdriver »

Nathan Drake wrote: Sun Jun 27, 2021 1:46 pm How is everyone managing their SCV tilts across their various accounts (Taxable, Roth, 401K, HSA, etc)? I'm having a little FOMO with not having any exposure to the Avantis funds, and would like to increase my allocation to them.

The dilemmas I have:

1. Most taxable accounts have large gains and I do not want to sell (mostly VTSAX/VTIAX).
2. Roth IRA accounts are a decent size, but not nearly as large as 401K and taxable.
3. My 401K is through Fidelity, which offers Brokeragelink - HOWEVER, it appears that transacting in Avantis ETFs would cause a "transaction fee" event with Brokeragelink? I'm not 100% sure on this, and it's very difficult to navigate the Fidelity website to get an answer since it's not very transparent. This is odd because simply buying ETFs through a normal brokerage account would have no fees at all? Would really appreciate some insight on anyone else that has a Fidelity 401k BrokerageLink account.

My current plan is as follows:

- Leave my taxable accounts alone. I'm investing new taxable money through vanguard into VBR since it allows me to auto-invest with Vanguard.
- Roth IRA, since new contributions occur yearly and do not cause a taxable event, this is the easiest one to adjust my tilts with Avantis funds. Currently these are in VBR and FISVX
- 401k with Fidelity Brokeragelink: new contributions are going towards FISVX (Fidelity Small Cap Value, tracks Russell 2000 value index). I do this because it allows me to easily auto-invest new 401k contributions on a regular basis. I could switch to Avantis ETFs, but It appears that I cannot do this automatically, and secondly it may incur a $45 transaction fee each time I place an order (need to verify this).

Changes I'm considering:


- Moving new taxable contributions to M1 Finance where I can do auto-investing with ETFs. I hate that I have to create a new account outside of Vanguard to do this, but it's not looking like Vanguard or Fidelity will be implementing this anytime soon.

- Re-allocating Roth IRAs to Avantis Funds

Seems like there's not much more I can do unless I want to incur taxable events, transaction fees, and/or forego the ease of automatic investing.

Anyone have some thoughts? Perhaps I shouldn't worry so much about this, but it feels like I'm potentially leaving significant money on the table by not being able to invest in a fund that's really deep into these strategies vs. a bog standard Vanguard of Fidelity SCV fund.
If there's transaction fees in your 401k for purchasing Avantis, then it isn't worth it.

It's up to you to determine how important the ease of automatic investing is to you. It may outweigh any benefit of going with Avantis. Whatever you decide, it has to be something you are comfortable with and will stick with.

I face a similar situation in my taxable account by wanting 100% Avantis SCV funds but already having a bunch of unrealized gains in SLYV/IJS. I am not going to realize any of those gains, but I will look for opportunities in the future to tax loss harvest and swap over. Otherwise in my taxable, new contributions are going to Avantis funds. I do not have automatic ETF investing, so that's not an issue for me. My advice to you is not to take a tax hit just to get another SCV fund, but with any new funds to put it into Avantis.

In my 401k and roth, I already switched all my SCV funds to Avantis. I don't have transaction fees, so the choice was easy. I don't have automatic ETF investing either.

I hope this helps.
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

Thanks all!

I discussed with Fidelity and brokeragelink is actually a great option. Verified that there were no transaction fees, no roundabout infractions, etc. Only downside is I can’t automatically invest in Avantis, so I will need to periodically buy their funds, which I may manually do 1x per month or 1x per quarter.

I will be selling all my Roth IRAs and going into AVUV/AVDV.

So my taxable accounts will mostly be VTSAX/VTIAX and my retirement accounts will mostly be SCV. I did set up an M1 finance account and will now use that to auto-invest in Avantis for taxable.

I’m looking forward to the Avantis EM Value fund - though it looks like it’s not small cap.

I’m thinking my ideal portfolio construction looks something like this: 1/3 US, 1/3 DM, 1/3 EM.

Half of the positions above will be total market, and half will be SCV (or just Value for EM). Curious to hear any thoughts/criticisms of such an approach
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Re: Small Cap Value heads Rejoice !!!

Post by Forester »

Right at the start of this interview, Toby Carlisle states that value (likely referring solely to the USA) is neither cheap nor expensive in absolute terms, it's right in the historic median. https://tunein.com/podcasts/Markets-and ... -p1131833/ He is bullish on "quality value", I understand from his POV that this would be why generic ETFs such as $IJS have outperformed $QVAL & $ZIG because it's been a speculative junky stock rally, not just a value rebound.
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Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

Forester wrote: Tue Jun 29, 2021 4:38 am Right at the start of this interview, Toby Carlisle states that value (likely referring solely to the USA) is neither cheap nor expensive in absolute terms, it's right in the historic median. https://tunein.com/podcasts/Markets-and ... -p1131833/ He is bullish on "quality value", I understand from his POV that this would be why generic ETFs such as $IJS have outperformed $QVAL & $ZIG because it's been a speculative junky stock rally, not just a value rebound.
So his opinion would be that Avantis Value funds look to be reasonable buys based on quality screens and normal valuations?
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Re: Small Cap Value heads Rejoice !!!

Post by imak »

I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
YRT70
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

imak wrote: Thu Jul 01, 2021 12:53 pm I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
Nice performance. DGS is up 15.8% YTD. But it's a lot cheaper on the value metrics. Cap size is the same.

https://www.morningstar.com/etfs/arcx/dgs/portfolio
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Re: Small Cap Value heads Rejoice !!!

Post by gtwhitegold »

YRT70 wrote: Fri Jul 02, 2021 8:07 am
imak wrote: Thu Jul 01, 2021 12:53 pm I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
Nice performance. DGS is up 15.8% YTD. But it's a lot cheaper on the value metrics. Cap size is the same.

https://www.morningstar.com/etfs/arcx/dgs/portfolio
I'm sticking with FEMS for the long haul. It normally has the best value metrics of any of the EMSC funds. The average market cap is a little chunky at 1.99 billion though.

https://www.morningstar.com/etfs/xnas/fems/portfolio
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

Going to wait and see what the Avantis EM Value fund looks like.

Curious if I should go all in on EM value or have a split between VWO and EM value.

I’m wanting to have 1/3 of my total portfolio in EM right now.
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

gtwhitegold wrote: Sun Jul 04, 2021 12:10 am
YRT70 wrote: Fri Jul 02, 2021 8:07 am
imak wrote: Thu Jul 01, 2021 12:53 pm I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
Nice performance. DGS is up 15.8% YTD. But it's a lot cheaper on the value metrics. Cap size is the same.

https://www.morningstar.com/etfs/arcx/dgs/portfolio
I'm sticking with FEMS for the long haul. It normally has the best value metrics of any of the EMSC funds. The average market cap is a little chunky at 1.99 billion though.

https://www.morningstar.com/etfs/xnas/fems/portfolio
Interesting! It's performing quite a bit better than DGS, in spite of the TER of 0.8%.
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Re: Small Cap Value heads Rejoice !!!

Post by lassevirensghost »

Why is SCV all cranky today?
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Re: Small Cap Value heads Rejoice !!!

Post by SafeBonds »

lassevirensghost wrote: Tue Jul 06, 2021 8:54 am Why is SCV all cranky today?
EDV (Extended duration Treasury STRIPS) up over 1.5% this morning at the time of this post. I've noticed SCV and long term treasuries have been inversely correlated lately. When long term rates go down, people value dollars far off in the future closer to a dollar today, so large growth companies who are expected to grow their earnings and make boatloads of money decades into the future look better compared to value stocks who are making their money today.
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Re: Small Cap Value heads Rejoice !!!

Post by gtwhitegold »

YRT70 wrote: Tue Jul 06, 2021 8:50 am
gtwhitegold wrote: Sun Jul 04, 2021 12:10 am
YRT70 wrote: Fri Jul 02, 2021 8:07 am
imak wrote: Thu Jul 01, 2021 12:53 pm I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
Nice performance. DGS is up 15.8% YTD. But it's a lot cheaper on the value metrics. Cap size is the same.

https://www.morningstar.com/etfs/arcx/dgs/portfolio
I'm sticking with FEMS for the long haul. It normally has the best value metrics of any of the EMSC funds. The average market cap is a little chunky at 1.99 billion though.

https://www.morningstar.com/etfs/xnas/fems/portfolio
Interesting! It's performing quite a bit better than DGS, in spite of the TER of 0.8%.
Yes, and I expect it to continue to. There would need to be really good offering for me to move money out of FEMS. Previously, I was split between DGS and FEMS, but FEMS has maintained better value metrics most of the time and it's outperformed DGS for the life of the fund. I definitely don't regret it. If Avantis offers a EMSCV fund in the future, I'll probably consider it, but that will be several months after it hits the market.
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

gtwhitegold wrote: Sat Jul 10, 2021 10:24 pm
YRT70 wrote: Tue Jul 06, 2021 8:50 am
gtwhitegold wrote: Sun Jul 04, 2021 12:10 am
YRT70 wrote: Fri Jul 02, 2021 8:07 am
imak wrote: Thu Jul 01, 2021 12:53 pm I hold 5% of my taxable portfolio in EEMS: iShares MSCI Emerging Markets Small Cap ETF and recently looked up Morningstar Portfolio characteristics.
It has been really long time since I saw these kind of earnings characteristics & it seems unreal. It is poised for a good run in 2021.

https://www.morningstar.com/etfs/arcx/eems/portfolio

Long-term Earnings (projected) : 24.35%
P/E : 12.81
P/B : 1.4
P/CF : 6.13
Mkt Cap (Avg) : 1.57B

YTD performance of EEMS : 19.4% (versus 9% for VWO)
Nice performance. DGS is up 15.8% YTD. But it's a lot cheaper on the value metrics. Cap size is the same.

https://www.morningstar.com/etfs/arcx/dgs/portfolio
I'm sticking with FEMS for the long haul. It normally has the best value metrics of any of the EMSC funds. The average market cap is a little chunky at 1.99 billion though.

https://www.morningstar.com/etfs/xnas/fems/portfolio
Interesting! It's performing quite a bit better than DGS, in spite of the TER of 0.8%.
Yes, and I expect it to continue to. There would need to be really good offering for me to move money out of FEMS. Previously, I was split between DGS and FEMS, but FEMS has maintained better value metrics most of the time and it's outperformed DGS for the life of the fund. I definitely don't regret it. If Avantis offers a EMSCV fund in the future, I'll probably consider it, but that will be several months after it hits the market.
I bought a couple of pieces last week. I'm planning on buying more.
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Re: Small Cap Value heads Rejoice !!!

Post by DB2 »

SafeBonds wrote: Tue Jul 06, 2021 9:12 am
lassevirensghost wrote: Tue Jul 06, 2021 8:54 am Why is SCV all cranky today?
EDV (Extended duration Treasury STRIPS) up over 1.5% this morning at the time of this post. I've noticed SCV and long term treasuries have been inversely correlated lately. When long term rates go down, people value dollars far off in the future closer to a dollar today, so large growth companies who are expected to grow their earnings and make boatloads of money decades into the future look better compared to value stocks who are making their money today.
Yes, the 'inflation trade' is basically over (for now at least).
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

Market never makes much sense but SCV taking a bath today on inflation fears?

And yields on bonds aren’t really adjusting much to this news?
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Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

Nathan Drake wrote: Tue Jul 13, 2021 9:09 pm Market never makes much sense but SCV taking a bath today on inflation fears?
I think it got hammered yesterday already. Today is the rebound.

Edit: but trending down at the moment.
Nicolas
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Re: Small Cap Value heads Rejoice !!!

Post by Nicolas »

What’s the short-term outlook for SCV for the rest of the year? I have quite a bit of AVUV (American Century ETF Trust— Avantis U.S. Small Cap Value Fund) and need to decide whether to hold or sell.

I never considered it to be a long-term holding for my purposes but I don’t want to sell if this is just a temporary dip. Some pundits say that SCV has peaked.
deltaneutral83
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Re: Small Cap Value heads Rejoice !!!

Post by deltaneutral83 »

Nicolas wrote: Fri Jul 16, 2021 1:38 pm What’s the short-term outlook for SCV for the rest of the year? I have quite a bit of AVUV (American Century ETF Trust— Avantis U.S. Small Cap Value Fund) and need to decide whether to hold or sell.

I never considered it to be a long-term holding for my purposes but I don’t want to sell if this is just a temporary dip. Some pundits say that SCV has peaked.
I would ask around from people who invest in SCV and see if any of them intend to make 12 month decisions for SCV. Every single person that has published anything remotely relevant on SCV mentions it's a career investment, not 1/3/5 or even 10 years.
deltaneutral83
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Re: Small Cap Value heads Rejoice !!!

Post by deltaneutral83 »

Nicolas wrote: Fri Jul 16, 2021 1:38 pm What’s the short-term outlook for SCV for the rest of the year? I have quite a bit of AVUV (American Century ETF Trust— Avantis U.S. Small Cap Value Fund) and need to decide whether to hold or sell.

I never considered it to be a long-term holding for my purposes but I don’t want to sell if this is just a temporary dip. Some pundits say that SCV has peaked.
I would ask around from people who invest in SCV and see if any of them intend to make 12 month decisions for SCV. Every single person that has published anything remotely relevant on SCV mentions it's a career investment, not 1/3/5 or even 10 years.

BH in general aren't really interested in "pundits" and that's putting it mildly, as market timing is not a trusted strategy.
Nicolas
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Re: Small Cap Value heads Rejoice !!!

Post by Nicolas »

deltaneutral83 wrote: Fri Jul 16, 2021 1:43 pm Every single person that has published anything remotely relevant on SCV mentions it's a career investment, not 1/3/5 or even 10 years.

BH in general aren't really interested in "pundits" and that's putting it mildly, as market timing is not a trusted strategy.
I know. I bought SCV in November just after the first vaccine was announced and I’ve made a tidy sum since then. But I had no selling plan which is a problem when you performance-chase! I’m mostly in the S&P 500 but this is a significant fraction of my portfolio. Thanks for replying.
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

Nicolas wrote: Fri Jul 16, 2021 1:38 pm What’s the short-term outlook for SCV for the rest of the year? I have quite a bit of AVUV (American Century ETF Trust— Avantis U.S. Small Cap Value Fund) and need to decide whether to hold or sell.

I never considered it to be a long-term holding for my purposes but I don’t want to sell if this is just a temporary dip. Some pundits say that SCV has peaked.
SCV should only be used as a long term hold. I would not worry about what it is doing any given month. If you cannot handle the short term volatility, then you will not be able to
capture the premium
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stocknoob4111
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Re: Small Cap Value heads Rejoice !!!

Post by stocknoob4111 »

I think people are concerned because they've already held for a while (past 10 years at least) and it's not performed as well as Large Caps... this is the time it's supposed to catch up, during the reflation period, coming out of the recession, if it does not perform now then odds are it will not perform as well going forward when we get further into the cycle. That is at least the way I am thinking about it.
Nathan Drake wrote: Fri Jul 16, 2021 3:54 pm SCV should only be used as a long term hold.
What is long term to you? 10-15 years is long term to me... if what you're saying is 30-40 years then most people will not have that type of investing horizon. A lot of people start investing in their early 30s, with most of their contributions coming their peak years of 40s and 50s, so a good chunk subject to an investment horizon less than 20 years perhaps before withdrawals start.

Also to note that those who held SC/SCV experienced EXTREME volatility, so what is the risk adjusted return? Absolutely horrendous.
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

stocknoob4111 wrote: Fri Jul 16, 2021 4:26 pm I think people are concerned because they've already held for a while (past 10 years at least) and it's not performed as well as Large Caps... this is the time it's supposed to catch up, during the reflation period, coming out of the recession, if it does not perform now then odds are it will not perform as well going forward when we get further into the cycle. That is at least the way I am thinking about it.
Nathan Drake wrote: Fri Jul 16, 2021 3:54 pm SCV should only be used as a long term hold.
What is long term to you? 10-15 years is long term to me... if what you're saying is 30-40 years then most people will not have that type of investing horizon. A lot of people start investing in their early 30s, with most of their contributions coming their peak years of 40s and 50s, so a good chunk subject to an investment horizon less than 20 years perhaps before withdrawals start.

Also to note that those who held SC/SCV experienced EXTREME volatility, so what is the risk adjusted return? Absolutely horrendous.
SCV is just part of my asset allocation. I see no reason to ever get rid of it unless it's to gradually decrease risk. The historical data shows that SCV has outperformed every 20 year period, so I would at least plan to hold for that long. It has outperformed the market 80% of the time in general.

Of course, like this week, it comes with higher volatility. It's not necessarily a free lunch, and shouldn't be used to market time for a short term (few month) trading window.

I would expect long-term mean reversion. Just because it has not performed as well as large cap growth over the decade does not mean that going forward it's a bad investment. Most of the growth is based on the speculative fervor of our times to LCG. Fundamentals matter. The more fundamentals look like they don't matter, the more conviction I have of SCV outperforming.
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stocknoob4111
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Re: Small Cap Value heads Rejoice !!!

Post by stocknoob4111 »

Nathan Drake wrote: Fri Jul 16, 2021 4:39 pm The historical data shows that SCV has outperformed every 20 year period,
SCV has significantly underperformed in the last 10 years. The 20 year outperformance came from significant outperformance during the 2000-2009 period. This means that as we move forward and the 2000-09 period moves out of the 20 year window, IF SCV does not start significantly outperforming *again* then mathematically we will have a 20 year window that SCV will underperform, perhaps for the first time in history? I don't know. But those are the facts.

Sure, it's too early to say what will happen but all I am saying is that 2021-2029 is the time for SCV to do something much bigger than Large Caps... if that does not happen then it will be unfortunate for holders of this asset class who experienced ridiculous volatility for no good reason. Well, that is the risk I guess but it would be a historical first.
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

stocknoob4111 wrote: Fri Jul 16, 2021 6:15 pm
Nathan Drake wrote: Fri Jul 16, 2021 4:39 pm The historical data shows that SCV has outperformed every 20 year period,
SCV has significantly underperformed in the last 10 years. The 20 year outperformance came from significant outperformance during the 2000-2009 period. This means that as we move forward and the 2000-09 period moves out of the 20 year window, IF SCV does not start significantly outperforming *again* then mathematically we will have a 20 year window that SCV will underperform, perhaps for the first time in history? I don't know. But those are the facts.

Sure, it's too early to say what will happen but all I am saying is that 2021-2029 is the time for SCV to do something much bigger than Large Caps... if that does not happen then it will be unfortunate for holders of this asset class who experienced ridiculous volatility for no good reason. Well, that is the risk I guess but it would be a historical first.
It also significantly outperformed the prior 10 years. Basically having 10% annualized over the entire period. To me, that's better than -1% for 00-09 and 14% for 10-2021

So, I do not particularly care that it had a good, but not outsized decade this past 10 years. But let's not kid ourselves into thinking it was poor just because it underperformed one time period, which is of course possible. Poor relative to the volatility? Sure, maybe, but I'd still be happy with 10% annualized, sub optimal outcome.

Bonds outperformed LCG for 00-09....is that enough to declare the market dead? 2021-2029 is anyone's guess. The value vs growth spreads are near historic records. Nothing says that they can't widen. This obviously isn't due to fundamentals, but irrational markets over the short term. Fundamentally they will mean revert unless investors have decided they do not care about profits and care more about memes.
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phantom0308
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Re: Small Cap Value heads Rejoice !!!

Post by phantom0308 »

stocknoob4111 wrote: Fri Jul 16, 2021 6:15 pm
Nathan Drake wrote: Fri Jul 16, 2021 4:39 pm The historical data shows that SCV has outperformed every 20 year period,
SCV has significantly underperformed in the last 10 years. The 20 year outperformance came from significant outperformance during the 2000-2009 period. This means that as we move forward and the 2000-09 period moves out of the 20 year window, IF SCV does not start significantly outperforming *again* then mathematically we will have a 20 year window that SCV will underperform, perhaps for the first time in history? I don't know. But those are the facts.

Sure, it's too early to say what will happen but all I am saying is that 2021-2029 is the time for SCV to do something much bigger than Large Caps... if that does not happen then it will be unfortunate for holders of this asset class who experienced ridiculous volatility for no good reason. Well, that is the risk I guess but it would be a historical first.
It's always possible SCV could perform average and Large caps stagnate or fall. They don't need 30% growth YoY or something crazy like that.
countmein
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Re: Small Cap Value heads Rejoice !!!

Post by countmein »

HmL and SmB premia have not existed for decades.

Check PV's factor stats page. Try 5/1/1986 to present (35 years), AQR model. Value and small are near zero

You can also see this in a backtest of DFSVX vs VTSMX, since inception.

We have to acknowledge that these premia just don't exist anymore. Or, if so, just barely.

Quality and Low-Vol are (were) a different story: quite large premia. Shouldn't we be more interested in those?

Note that AVUV has double the volatility and double the drawdown of VOO (S&P500). Does it have a higher expected return? Why?
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

countmein wrote: Sun Jul 18, 2021 2:50 pm HmL and SmB premia have not existed for decades.

Check PV's factor stats page. Try 5/1/1986 to present (35 years), AQR model. Value and small are near zero

You can also see this in a backtest of DFSVX vs VTSMX, since inception.

We have to acknowledge that these premia just don't exist anymore. Or, if so, just barely.

Quality and Low-Vol are (were) a different story: quite large premia. Shouldn't we be more interested in those?

Note that AVUV has double the volatility and double the drawdown of VOO (S&P500). Does it have a higher expected return? Why?
You're going to cherry pick a start date and declare the premium is dead? Go back to 2000 and tell me the SCV premium didn't exist.

Further, even using your ideal back-test shows a 1% annualized premium and an additional $50K in account value on an initial $10K investment in favor of SCV.
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countmein
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Re: Small Cap Value heads Rejoice !!!

Post by countmein »

Didn't intend to cherry pick. I picked 35 years because that's about the extent of the drought. Prior to that, there was a small value premium. The point is: isn't it a problem that these "persistent" premia have been nonexistent for 35 years?

In any case, happy to look at more endpoints.

35 years to present (May 1986 to May 2021)
small ... -0.07%
value ... 0.35%

30 years
small ... 1.13%
value ... 0.38%

25 years
small ... 0.94%
value ... -0.47%

20 years
small ... 2.67%
value ... -0.98%

15 years
small ... 0.16%
value ... -3.79%

10 years
small ... -0.60%
value ... -4.84%

5 years
small ... 1.49%
value ... -7.16%
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

countmein wrote: Sun Jul 18, 2021 4:47 pm Didn't intend to cherry pick. I picked 35 years because that's about the extent of the drought. Prior to that, there was a small value premium. The point is: isn't it a problem that these "persistent" premia have been nonexistent for 35 years?

In any case, happy to look at more endpoints.

35 years to present (May 1986 to May 2021)
small ... -0.07%
value ... 0.35%

30 years
small ... 1.13%
value ... 0.38%

25 years
small ... 0.94%
value ... -0.47%

20 years
small ... 2.67%
value ... -0.98%

15 years
small ... 0.16%
value ... -3.79%

10 years
small ... -0.60%
value ... -4.84%

5 years
small ... 1.49%
value ... -7.16%

Now re-run your analysis with an end date of 2009
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countmein
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Re: Small Cap Value heads Rejoice !!!

Post by countmein »

I could. But that would be cherry picking.
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

countmein wrote: Sun Jul 18, 2021 5:29 pm I could. But that would be cherry picking.
Ok, so let’s only cherry pick end dates that coincide with the largest spreads in growth vs value

Despite also showing 1% premium and simultaneously concluding there is no premium
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countmein
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Re: Small Cap Value heads Rejoice !!!

Post by countmein »

Your accusation of cherry picking is unreasonable. I "picked" the present on one end (up to May 2021 per PV limitations), which is an obvious thing to do. From there, I demonstrated an openness to any start date as far back as 35 years.

I agree that pre 35 years ago there was a premium. But the fact remains that we can pick any start date up to 35 years in the past and find no premia for small and value. :shock:

No need to get defensive about it. It beehoves us to ask what it means that we have nonexistent premia for so long. False accusations of cherry picking aren't helpful.
Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

countmein wrote: Sun Jul 18, 2021 6:05 pm Your accusation of cherry picking is unreasonable. I "picked" the present on one end (up to May 2021 per PV limitations), which is an obvious thing to do. From there, I demonstrated an openness to any start date as far back as 35 years.

I agree that pre 35 years ago there was a premium. But the fact remains that we can pick any start date up to 35 years in the past and find no premia for small and value. :shock:

No need to get defensive about it. It beehoves us to ask what it means that we have nonexistent premia for so long. False accusations of cherry picking aren't helpful.
Your own backtest shows a 1% premium
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Nathan Drake
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Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

And even with a sub-optimal end date, and investor that placed money into SCV 35 years ago has done considerably better than someone in the S&P 500. 1% over 30 years is a considerable difference.I should also add, that Rob Arnott discusses this at length in the video, time stamped already around 40 minutes in:

https://youtu.be/sPwBeok5DTM?t=2379

The spreads between Growth vs. Value are essentially at the 98-100 percentiles. Your end date certainly matters. In other words, Value is at the cheapest levels it's ever been in history, the only other time it was nearly as large was the tech bubble in 2000. What happened the following decade? The premium showed up.

If the performance of Value was bad and the spreads did not increase, perhaps you'd be right and the Value premium is dead. But anytime anyone says a factor is "dead", it should make you raise your eyebrow and look a little deeper. People thought the market was dead in 1979 after failing to perform against bonds. People also thought the same thing in 2009 after a dead decade of stocks vs. bonds.

You will have periods, sometimes long, where the market (or other risk factors such as small value) underperform some other relative benchmark. That doesn't mean the factor is dead. And even if the premium has disappeared, if the expected return is the same for both assets (which I disagree with, since SCV is a risk story - if you disagree that risk premiums exist, you disagree that the market premium exists over bonds), there's still significant diversification benefits. Periods that are great for growth don't tend to show up at the same time as great periods for Value.
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countmein
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Re: Small Cap Value heads Rejoice !!!

Post by countmein »

1- Even if we round 0.35% up to 1%, that's not good. Doesn't look any different than noise.

2- Even if say a 0.5% premium "exists", is it worth double the volatility and a worsening of your portfolio's Sharpe?

3- Rm-Rf has been zero for a stretch of somewhere around 13 years in the past (fact check me please, just going off memory). If correct, not really comparable.

4- Re the current spread, I agree there is a market timing argument to be made for value. Has nothing to do with the existence of a premium.

5- Diversification is overstated. Unless you're holding long-short factors, you're not getting much: DFSVX has 0.85 ave historical monthly correlation to VTSAX.

6- Investors would be better off using a 2x SP500 fund: same vol as SCV, much higher expected return, better Sharpe, similar correlation. (AVUV's drawdown in the 2020 crash was actually worse than a 2x fund).

7- Why the obsession with small value when quality and low vol have historical premia that are many multiples larger (technically infinitely larger if HmL = 0)?
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Re: Small Cap Value heads Rejoice !!!

Post by KyleAAA »

countmein wrote: Mon Jul 19, 2021 10:01 am 1- Even if we round 0.35% up to 1%, that's not good. Doesn't look any different than noise.
FF shows a 1.13% value premium over the same period and even AQR shows an HML-Dev of 0.74% over that same period. Looks like a significant premium to me. 0.35% over 35 years makes a significant difference.
absolute zero
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Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

countmein wrote: Mon Jul 19, 2021 10:01 am Even if we round 0.35% up to 1%, that's not good. Doesn't look any different than noise.
Where are you getting 0.35%? Maybe post a link? When I backtest DFSVX and VTSMX from inception to present, I see a 1% difference in CAGR, not 0.35%. This results in a 26% increase in the ending balance of DFSVX. This doesn't mean everyone should invest in small value, but I'm just wondering where you are getting your numbers from.

https://www.portfoliovisualizer.com/bac ... ion2_2=100
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