Small Cap Value heads Rejoice !!!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
SadCryingValiant
Posts: 15
Joined: Fri Aug 07, 2020 11:32 am

Re: Small Cap Value heads Rejoice !!!

Post by SadCryingValiant »

There's often emphasis on sharpe ratios so you get the most return per unit of risk, but the risk values are typically computed on short term volatility numbers always less than one year. These sharpe ratios really aren't relevant to long term investors. Further, the expected returns are obviously lower than the high risk allocation, and this is typically justified by saying you can lever the portfolio. In practice very few actually do that, and leverage introduces new risks, and further still mayn people cant get the low rates that are typically used in that analysis. So for me, I don't use leverage and simply hold the highest expected return asset, which is small cap value. Since the perpetual withdrawal rate is actually the highest with small cap value it is actually the risk return/risk asset that exists despite what 1-year sharpe ratio allocation studies would suggest, because in reality we care about safe withdrawal rates or perpetual withdrawal rates and not the year by year return per unit of risk.
Wade Garrett
Posts: 235
Joined: Wed Jul 10, 2013 2:41 pm
Location: Jasper, MO/Double Deuce

Re: Small Cap Value heads Rejoice !!!

Post by Wade Garrett »

Morse Code wrote: Wed Jun 16, 2021 7:43 am I have tried a few times to reduce the risk of the equities in my portfolio, only to find myself not sleeping well at night.
Successful investing is more about temperament than knowledge and I was born with the temperament to hold risky equity assets at the lowest possible cost and it has served me well.
yep and same
"I'm not an inventor. I'm an improver. I see things that are wrong, and I improve them." - Larry David, Curb Your Enthusiasm
User avatar
RovenSkyfall
Posts: 267
Joined: Wed Apr 01, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

SadCryingValiant wrote: Wed Jun 16, 2021 12:14 pm There's often emphasis on sharpe ratios so you get the most return per unit of risk, but the risk values are typically computed on short term volatility numbers always less than one year. These sharpe ratios really aren't relevant to long term investors. Further, the expected returns are obviously lower than the high risk allocation, and this is typically justified by saying you can lever the portfolio. In practice very few actually do that, and leverage introduces new risks, and further still many people cant get the low rates that are typically used in that analysis. So for me, I don't use leverage and simply hold the highest expected return asset, which is small cap value. Since the perpetual withdrawal rate is actually the highest with small cap value it is actually the best return/risk asset that exists despite what 1-year sharpe ratio allocation studies would suggest, because in reality we care about safe withdrawal rates or perpetual withdrawal rates and not the year by year return per unit of risk.
I agree with you on a lot of this. Often people suggest levering up the best sharp ratio portfolio. No one talks about the unquantifiable risk of margin (which doesnt fit into Sharpe). Just because the risk is not included in the sharpe ratio, doesnt mean the risk doesn't exist. You are essentially just removing a variable of risk from the equation, which makes it look much less risky than it actually is.

The one area above which you should check your certainty is the PWR and SWR numbers. Typically these only look good when using the academic premium and the historical performance. Those WR are not as good when using actual funds (this doesnt even touch the topic of which metric(s) is used to determine small and value, which seems to be changing and improving).

Although my SCV allocation is higher than most, one area I have persistent uncertainty is whether the academic premium will translate into a practical premium. I have seen a lot of arguments both for and against, which usually means that the answer is not obvious. Ultimately we are living in just one timeline and applying statistics to something which could just be noise. The telltale charts suggest that SCV premiums are the result of short periods of significant out-performance. Depending on when that happens in your retirement, you might have to wait a while before that excellent SWR/PWR becomes a reality.
I saved my money, but it can't save me | The Chariot
thenextguy
Posts: 717
Joined: Wed Mar 25, 2009 12:58 am

Re: Small Cap Value heads Rejoice !!!

Post by thenextguy »

Ooof....what's going on out there today?
User avatar
RovenSkyfall
Posts: 267
Joined: Wed Apr 01, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

thenextguy wrote: Thu Jun 17, 2021 10:28 am Ooof....what's going on out there today?
The rocket is refueling.
I saved my money, but it can't save me | The Chariot
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

RovenSkyfall wrote: Thu Jun 17, 2021 10:23 am
SadCryingValiant wrote: Wed Jun 16, 2021 12:14 pm There's often emphasis on sharpe ratios so you get the most return per unit of risk, but the risk values are typically computed on short term volatility numbers always less than one year. These sharpe ratios really aren't relevant to long term investors. Further, the expected returns are obviously lower than the high risk allocation, and this is typically justified by saying you can lever the portfolio. In practice very few actually do that, and leverage introduces new risks, and further still many people cant get the low rates that are typically used in that analysis. So for me, I don't use leverage and simply hold the highest expected return asset, which is small cap value. Since the perpetual withdrawal rate is actually the highest with small cap value it is actually the best return/risk asset that exists despite what 1-year sharpe ratio allocation studies would suggest, because in reality we care about safe withdrawal rates or perpetual withdrawal rates and not the year by year return per unit of risk.
I agree with you on a lot of this. Often people suggest levering up the best sharp ratio portfolio. No one talks about the unquantifiable risk of margin (which doesnt fit into Sharpe). Just because the risk is not included in the sharpe ratio, doesnt mean the risk doesn't exist. You are essentially just removing a variable of risk from the equation, which makes it look much less risky than it actually is.

The one area above which you should check your certainty is the PWR and SWR numbers. Typically these only look good when using the academic premium and the historical performance. Those WR are not as good when using actual funds (this doesnt even touch the topic of which metric(s) is used to determine small and value, which seems to be changing and improving).

Although my SCV allocation is higher than most, one area I have persistent uncertainty is whether the academic premium will translate into a practical premium. I have seen a lot of arguments both for and against, which usually means that the answer is not obvious. Ultimately we are living in just one timeline and applying statistics to something which could just be noise. The telltale charts suggest that SCV premiums are the result of short periods of significant out-performance. Depending on when that happens in your retirement, you might have to wait a while before that excellent SWR/PWR becomes a reality.
Even if such a premium doesn’t exist in the future, or is hard to capture, there are significant diversification benefits
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
ckangas
Posts: 122
Joined: Fri May 21, 2021 8:08 pm

Re: Small Cap Value heads Rejoice !!!

Post by ckangas »

thenextguy wrote: Thu Jun 17, 2021 10:28 am Ooof....what's going on out there today?
I'm confused as well. It seems that growth stocks should be suffering more than value due to the recent inflation/rates news. But the Nasdaq is up while SCV is down starkly.
SafeBonds
Posts: 142
Joined: Sat May 22, 2021 6:08 pm

Re: Small Cap Value heads Rejoice !!!

Post by SafeBonds »

Long term rates are going down. EDV (Vanguard Extended Duration Treasury) is up over 3% today. That is good for growth stocks, the bulk of whose earnings are far far in the future. With long term rates going down, $1 in 30 years is worth more than it was yesterday. Therefore growth companies who are expected to make a ton of money 30 years from now are worth more, and investors rotate from value to growth.

But honestly even when explanations seem very plausible I don't actually think anyone can really explain one day market movements in a few sentences.
Last edited by SafeBonds on Thu Jun 17, 2021 10:58 am, edited 1 time in total.
muffins14
Posts: 5528
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Small Cap Value heads Rejoice !!!

Post by muffins14 »

Sold some EDV at +3% to purchase some IJS at -2.7%.

What's up with EDV today?
Crom laughs at your Four Winds
User avatar
RovenSkyfall
Posts: 267
Joined: Wed Apr 01, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

Nathan Drake wrote: Thu Jun 17, 2021 10:43 am
RovenSkyfall wrote: Thu Jun 17, 2021 10:23 am
SadCryingValiant wrote: Wed Jun 16, 2021 12:14 pm There's often emphasis on sharpe ratios so you get the most return per unit of risk, but the risk values are typically computed on short term volatility numbers always less than one year. These sharpe ratios really aren't relevant to long term investors. Further, the expected returns are obviously lower than the high risk allocation, and this is typically justified by saying you can lever the portfolio. In practice very few actually do that, and leverage introduces new risks, and further still many people cant get the low rates that are typically used in that analysis. So for me, I don't use leverage and simply hold the highest expected return asset, which is small cap value. Since the perpetual withdrawal rate is actually the highest with small cap value it is actually the best return/risk asset that exists despite what 1-year sharpe ratio allocation studies would suggest, because in reality we care about safe withdrawal rates or perpetual withdrawal rates and not the year by year return per unit of risk.
I agree with you on a lot of this. Often people suggest levering up the best sharp ratio portfolio. No one talks about the unquantifiable risk of margin (which doesnt fit into Sharpe). Just because the risk is not included in the sharpe ratio, doesnt mean the risk doesn't exist. You are essentially just removing a variable of risk from the equation, which makes it look much less risky than it actually is.

The one area above which you should check your certainty is the PWR and SWR numbers. Typically these only look good when using the academic premium and the historical performance. Those WR are not as good when using actual funds (this doesnt even touch the topic of which metric(s) is used to determine small and value, which seems to be changing and improving).

Although my SCV allocation is higher than most, one area I have persistent uncertainty is whether the academic premium will translate into a practical premium. I have seen a lot of arguments both for and against, which usually means that the answer is not obvious. Ultimately we are living in just one timeline and applying statistics to something which could just be noise. The telltale charts suggest that SCV premiums are the result of short periods of significant out-performance. Depending on when that happens in your retirement, you might have to wait a while before that excellent SWR/PWR becomes a reality.
Even if such a premium doesn’t exist in the future, or is hard to capture, there are significant diversification benefits
I agree, although SadCryingValiant (just realized thats SCV initials) said they were all in on SCV meaning it is not adding to diversification for them.

Regarding the diversification benefit, that all depends on what the investor values most, their CRRA function and what the alternative of their SCV would be.
I saved my money, but it can't save me | The Chariot
SafeBonds
Posts: 142
Joined: Sat May 22, 2021 6:08 pm

Re: Small Cap Value heads Rejoice !!!

Post by SafeBonds »

muffins14 wrote: Thu Jun 17, 2021 10:56 am Sold some EDV at +3% to purchase some IJS at -2.7%.

What's up with EDV today?
What are your rebalancing bands? Do you just 'wing it' on "RBDs"? Or was that move part of a systematic process? Lately I'm liking Swedroe's suggestion of 5/25 bands (rebalance after 5% absolute or 25% relative drift from target)
countmein
Posts: 653
Joined: Fri Dec 06, 2013 8:10 pm

Re: Small Cap Value heads Rejoice !!!

Post by countmein »

Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
e5116
Posts: 867
Joined: Mon Oct 05, 2009 11:22 am

Re: Small Cap Value heads Rejoice !!!

Post by e5116 »

countmein wrote: Thu Jun 17, 2021 11:23 am Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
Mega-cap growth: +1.14%

I don't have the answers, though....
muffins14
Posts: 5528
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Small Cap Value heads Rejoice !!!

Post by muffins14 »

SafeBonds wrote: Thu Jun 17, 2021 10:59 am
muffins14 wrote: Thu Jun 17, 2021 10:56 am Sold some EDV at +3% to purchase some IJS at -2.7%.

What's up with EDV today?
What are your rebalancing bands? Do you just 'wing it' on "RBDs"? Or was that move part of a systematic process? Lately I'm liking Swedroe's suggestion of 5/25 bands (rebalance after 5% absolute or 25% relative drift from target)
I do 5/25 but on days like today with a +/- 3% movement, I take my chances with opportunistically rebalancing. I’ll buy the EDV back via new contributions
Crom laughs at your Four Winds
fennewaldaj
Posts: 1097
Joined: Sun Oct 22, 2017 11:30 pm

Re: Small Cap Value heads Rejoice !!!

Post by fennewaldaj »

countmein wrote: Thu Jun 17, 2021 11:23 am Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
this perhaps?
https://www.morningstar.com/news/dow-jo ... ead-update
SadCryingValiant
Posts: 15
Joined: Fri Aug 07, 2020 11:32 am

Re: Small Cap Value heads Rejoice !!!

Post by SadCryingValiant »

If I did diversify I would be adding large tech. You typically see names like AMZN dominating on days SCV is doing badly. Today is a good example of that. If you optimize on portfoliovisualizer IJS with some of the big names you get some min drawdown / variance portfolios that are 2/3 IJS and 1/3 large tech. This is basically a barbell strategy, where I'm getting exposure to the largest growth companies. Seems like a step in the direction of just getting a total market index fund.

Image
thenextguy
Posts: 717
Joined: Wed Mar 25, 2009 12:58 am

Re: Small Cap Value heads Rejoice !!!

Post by thenextguy »

fennewaldaj wrote: Thu Jun 17, 2021 11:59 am
countmein wrote: Thu Jun 17, 2021 11:23 am Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
this perhaps?
https://www.morningstar.com/news/dow-jo ... ead-update
That was Tuesday.
User avatar
RovenSkyfall
Posts: 267
Joined: Wed Apr 01, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by RovenSkyfall »

SadCryingValiant wrote: Thu Jun 17, 2021 12:20 pm If I did diversify I would be adding large tech. You typically see names like AMZN dominating on days SCV is doing badly. Today is a good example of that. If you optimize on portfoliovisualizer IJS with some of the big names you get some min drawdown / variance portfolios that are 2/3 IJS and 1/3 large tech. This is basically a barbell strategy, where I'm getting exposure to the largest growth companies. Seems like a step in the direction of just getting a total market index fund.

Image
What they would say over at the RR community is to use momentum as the other barbel to SCV.
I saved my money, but it can't save me | The Chariot
countmein
Posts: 653
Joined: Fri Dec 06, 2013 8:10 pm

Re: Small Cap Value heads Rejoice !!!

Post by countmein »

thenextguy wrote: Thu Jun 17, 2021 12:38 pm
fennewaldaj wrote: Thu Jun 17, 2021 11:59 am
countmein wrote: Thu Jun 17, 2021 11:23 am Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
this perhaps?
https://www.morningstar.com/news/dow-jo ... ead-update
That was Tuesday.
No, it's today, Thursday 6/17/2021. 10-year is now down almost 5%.
e5116
Posts: 867
Joined: Mon Oct 05, 2009 11:22 am

Re: Small Cap Value heads Rejoice !!!

Post by e5116 »

RovenSkyfall wrote: Thu Jun 17, 2021 12:46 pm
SadCryingValiant wrote: Thu Jun 17, 2021 12:20 pm If I did diversify I would be adding large tech. You typically see names like AMZN dominating on days SCV is doing badly. Today is a good example of that. If you optimize on portfoliovisualizer IJS with some of the big names you get some min drawdown / variance portfolios that are 2/3 IJS and 1/3 large tech. This is basically a barbell strategy, where I'm getting exposure to the largest growth companies. Seems like a step in the direction of just getting a total market index fund.

Image
What they would say over at the RR community is to use momentum as the other barbel to SCV.
Momentum used to be overwhlemingly tech, but could now be more value financials. Depending on your exact holding.

I actually do somewhat of a barbell strategy. I hold SCV, Mega-Cap Growth fund, AND Momentum......However, I admit my Mega-Cap Growth and momentum holdings are quite small....In the past, I'd see SCV on one end of it always (comparing to other holdings like Total Stock, Total International, Total Bond), where MGG and Momentum were on the other side. Basically, my "best" and "worst" holding were almost always one of those three. Recently after Momentum changed its holdings, I see momentum in the middle somewhere now.
index245
Posts: 239
Joined: Wed Feb 12, 2020 8:28 pm

Re: Small Cap Value heads Rejoice !!!

Post by index245 »

Is today a RBD for SCV?

I bought some AVUV.
muffins14
Posts: 5528
Joined: Wed Oct 26, 2016 4:14 am
Location: New York

Re: Small Cap Value heads Rejoice !!!

Post by muffins14 »

muffins14 wrote: Thu Jun 17, 2021 11:58 am
SafeBonds wrote: Thu Jun 17, 2021 10:59 am
muffins14 wrote: Thu Jun 17, 2021 10:56 am Sold some EDV at +3% to purchase some IJS at -2.7%.

What's up with EDV today?
What are your rebalancing bands? Do you just 'wing it' on "RBDs"? Or was that move part of a systematic process? Lately I'm liking Swedroe's suggestion of 5/25 bands (rebalance after 5% absolute or 25% relative drift from target)
I do 5/25 but on days like today with a +/- 3% movement, I take my chances with opportunistically rebalancing. I’ll buy the EDV back via new contributions
I've made $40 so far today. Early retirement! rejoice! ;)
Crom laughs at your Four Winds
livesoft
Posts: 86075
Joined: Thu Mar 01, 2007 7:00 pm

Re: Small Cap Value heads Rejoice !!!

Post by livesoft »

index245 wrote: Thu Jun 17, 2021 2:10 pm Is today a RBD for SCV?

I bought some AVUV.
Yes, AVUV is having an RBD.
Wiki This signature message sponsored by sscritic: Learn to fish.
User avatar
LadyGeek
Site Admin
Posts: 95686
Joined: Sat Dec 20, 2008 4:34 pm
Location: Philadelphia
Contact:

Re: Small Cap Value heads Rejoice !!!

Post by LadyGeek »

Acronym decoder: Abbreviations and Acronyms
RBD - Really Bad Day. A Bogleheads' idiomatic term coined by forum member livesoft. An early mention is in this thread: Today was a Really Bad Day.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.
User avatar
cos
Posts: 506
Joined: Fri Aug 23, 2019 7:34 pm
Location: Boston
Contact:

Re: Small Cap Value heads Rejoice !!!

Post by cos »

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
index245
Posts: 239
Joined: Wed Feb 12, 2020 8:28 pm

Re: Small Cap Value heads Rejoice !!!

Post by index245 »

livesoft wrote: Thu Jun 17, 2021 2:53 pm
index245 wrote: Thu Jun 17, 2021 2:10 pm Is today a RBD for SCV?

I bought some AVUV.
Yes, AVUV is having an RBD.
Excellent, good to know, thanks.
thenextguy
Posts: 717
Joined: Wed Mar 25, 2009 12:58 am

Re: Small Cap Value heads Rejoice !!!

Post by thenextguy »

countmein wrote: Thu Jun 17, 2021 1:18 pm
thenextguy wrote: Thu Jun 17, 2021 12:38 pm
fennewaldaj wrote: Thu Jun 17, 2021 11:59 am
countmein wrote: Thu Jun 17, 2021 11:23 am Anyone want to try to make sense of today's (thursday) wild moves?

small value: down 3.5%
gold: down 4%
10 year yield: down 4%
this perhaps?
https://www.morningstar.com/news/dow-jo ... ead-update
That was Tuesday.
No, it's today, Thursday 6/17/2021. 10-year is now down almost 5%.
Retail Sales were released on Tuesday.

The link provided is even dated as such:
Provided by Dow Jones
Jun 14, 2021 11:15 AM PDT
HippoSir
Posts: 269
Joined: Tue Jul 03, 2018 2:56 pm

Re: Small Cap Value heads Rejoice !!!

Post by HippoSir »

Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
So far I only have US SCV

I invest in EM and exUS (but don’t tilt). I’m wondering if it’s worth the effort

My current portfolio looks similar to this:

20% US TSM
20% US SCV
30% EM
30% exUS
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
dml130
Posts: 166
Joined: Wed Sep 02, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by dml130 »

My plan recently (for my US allocation) has been to move towards 50% VTI, 50% VFMF. Would that be considered a mild tilt, or is it more on the aggressive side as far as SCV tilting goes?
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

dml130 wrote: Mon Jun 21, 2021 12:56 pm My plan recently (for my US allocation) has been to move towards 50% VTI, 50% VFMF. Would that be considered a mild tilt, or is it more on the aggressive side as far as SCV tilting goes?
I tilt about 50% of my US portion which ends up being 20% total. This is fairly modest, but SCV is certainly a lot more volatile

If you can handle the volatility then 50% of total may not be an issue, I think it has more to do with whether you have an ability to stay the course
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
SafeBonds
Posts: 142
Joined: Sat May 22, 2021 6:08 pm

Re: Small Cap Value heads Rejoice !!!

Post by SafeBonds »

HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
This is great news. I’m a lucky one who has access to DFEVX DFA Emerging Markets Value which has been 20% of my stock portfolio but has not been doing well as other stock investments during my holding period. I’m staying the course.

I’m happy for all interested that soon you will get Avantis EM Value. I’m curious too if it will be an upgrade for me. I’m looking forward to that discussion. It’s possible a mix of both may be where I land. The biggest difference between Avantis and DFA I’ve seen is Avantis loads heavily on profitability. I’m looking forward to seeing if their new EM Value ETF is the same.
dml130
Posts: 166
Joined: Wed Sep 02, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by dml130 »

Nathan Drake wrote: Mon Jun 21, 2021 1:01 pm
dml130 wrote: Mon Jun 21, 2021 12:56 pm My plan recently (for my US allocation) has been to move towards 50% VTI, 50% VFMF. Would that be considered a mild tilt, or is it more on the aggressive side as far as SCV tilting goes?
I tilt about 50% of my US portion which ends up being 20% total. This is fairly modest, but SCV is certainly a lot more volatile

If you can handle the volatility then 50% of total may not be an issue, I think it has more to do with whether you have an ability to stay the course
Thanks for the reply. That makes sense. My understanding is that VFMF (a multifactor fund) is about effectively about 2/3's mid and small (the remaining 1/3 is large, I believe). So 35% small/mid within my US portfolio might be more accurate, I guess, if just splitting that fund with VTI.
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

SafeBonds wrote: Mon Jun 21, 2021 1:11 pm
HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
This is great news. I’m a lucky one who has access to DFEVX DFA Emerging Markets Value which has been 20% of my stock portfolio but has not been doing well as other stock investments during my holding period. I’m staying the course.

I’m happy for all interested that soon you will get Avantis EM Value. I’m curious too if it will be an upgrade for me. I’m looking forward to that discussion. It’s possible a mix of both may be where I land. The biggest difference between Avantis and DFA I’ve seen is Avantis loads heavily on profitability. I’m looking forward to seeing if their new EM Value ETF is the same.
The biggest question I have is regarding the worth of SCV in exUS and EM

With US TSM, it’s basically a huge growth fund, so adding US SCV makes sense

But exUS and EM look a bit more balanced in terms of value, and I’m not seeing as much dispersion of returns in those markets
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
User avatar
nisiprius
Advisory Board
Posts: 52211
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Small Cap Value heads Rejoice !!!

Post by nisiprius »

SadCryingValiant wrote: Wed Jun 16, 2021 12:14 pm...There's often emphasis on sharpe ratios so you get the most return per unit of risk, but the risk values are typically computed on short term volatility numbers always less than one year...
I don't think so. The Sharpe ratios that I know are based on the standard deviation of the entire data set, however long it is. And when I calculate them myself I get the same numbers that Morningstar and PortfolioVisualizer report.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Bulgogi Head
Posts: 88
Joined: Thu Dec 21, 2017 6:45 pm

Re: Small Cap Value heads Rejoice !!!

Post by Bulgogi Head »

HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
Will this be much different than AVEM?
absolute zero
Posts: 1244
Joined: Thu Dec 29, 2016 3:59 pm

Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

Bulgogi Head wrote: Mon Jun 21, 2021 3:02 pm
HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
Will this be much different than AVEM?
Would guess it will be similar to DFEVX. So basically no size exposure (AVEM has some) but a lot more value exposure than AVEM.
dml130
Posts: 166
Joined: Wed Sep 02, 2020 11:40 am

Re: Small Cap Value heads Rejoice !!!

Post by dml130 »

Nathan Drake wrote: Mon Jun 21, 2021 2:10 pm
The biggest question I have is regarding the worth of SCV in exUS and EM

With US TSM, it’s basically a huge growth fund, so adding US SCV makes sense

But exUS and EM look a bit more balanced in terms of value, and I’m not seeing as much dispersion of returns in those markets
That's the way I view it as well, plus the value funds seem more expensive on the international side. I just use VSS to tilt for my international allocation, since fees are relatively low and it's well diversified in the sense of having thousands of companies (both developed and EM).
thenextguy
Posts: 717
Joined: Wed Mar 25, 2009 12:58 am

Re: Small Cap Value heads Rejoice !!!

Post by thenextguy »

Nathan Drake wrote: Mon Jun 21, 2021 2:10 pm
SafeBonds wrote: Mon Jun 21, 2021 1:11 pm
HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
This is great news. I’m a lucky one who has access to DFEVX DFA Emerging Markets Value which has been 20% of my stock portfolio but has not been doing well as other stock investments during my holding period. I’m staying the course.

I’m happy for all interested that soon you will get Avantis EM Value. I’m curious too if it will be an upgrade for me. I’m looking forward to that discussion. It’s possible a mix of both may be where I land. The biggest difference between Avantis and DFA I’ve seen is Avantis loads heavily on profitability. I’m looking forward to seeing if their new EM Value ETF is the same.
The biggest question I have is regarding the worth of SCV in exUS and EM

With US TSM, it’s basically a huge growth fund, so adding US SCV makes sense

But exUS and EM look a bit more balanced in terms of value, and I’m not seeing as much dispersion of returns in those markets
I could be mistaken, but hasn’t the value premium been more consistent ex-US? I thought I remembered reading that somewhere.
Nathan Drake
Posts: 6234
Joined: Mon Apr 11, 2011 12:28 am

Re: Small Cap Value heads Rejoice !!!

Post by Nathan Drake »

thenextguy wrote: Mon Jun 21, 2021 3:22 pm
Nathan Drake wrote: Mon Jun 21, 2021 2:10 pm
SafeBonds wrote: Mon Jun 21, 2021 1:11 pm
HippoSir wrote: Mon Jun 21, 2021 12:18 pm Some good news for those of you wanting a solid EM value fund:

https://twitter.com/EtfHearsay/status/1 ... 2673714176

Avantis filed to launch 4 new funds, a dedicated Emerging Markets Value ETF among them. .36% ER which is competitive vs other options. Now I need to decide if I should drop EMGF for this new fund (probably will use it for TLH pair instead)... 8-)
This is great news. I’m a lucky one who has access to DFEVX DFA Emerging Markets Value which has been 20% of my stock portfolio but has not been doing well as other stock investments during my holding period. I’m staying the course.

I’m happy for all interested that soon you will get Avantis EM Value. I’m curious too if it will be an upgrade for me. I’m looking forward to that discussion. It’s possible a mix of both may be where I land. The biggest difference between Avantis and DFA I’ve seen is Avantis loads heavily on profitability. I’m looking forward to seeing if their new EM Value ETF is the same.
The biggest question I have is regarding the worth of SCV in exUS and EM

With US TSM, it’s basically a huge growth fund, so adding US SCV makes sense

But exUS and EM look a bit more balanced in terms of value, and I’m not seeing as much dispersion of returns in those markets
I could be mistaken, but hasn’t the value premium been more consistent ex-US? I thought I remembered reading that somewhere.
I’ve read that as well but at least for the short time the Avantis funds have existed I’m not seeing a big delta between AVDV and VTIAX, nowhere near as dramatic as AVUV vs VTSAX
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Wade Garrett
Posts: 235
Joined: Wed Jul 10, 2013 2:41 pm
Location: Jasper, MO/Double Deuce

Re: Small Cap Value heads Rejoice !!!

Post by Wade Garrett »

absolute zero wrote: Mon Jun 21, 2021 3:04 pm Would guess it will be similar to DFEVX. So basically no size exposure (AVEM has some) but a lot more value exposure than AVEM.
DFEVX's average market cap is $10.9 bil. AVEM's average market cap is $15.17 bil. So DFEVX has more size exposure than AVEM. I agree that AVES when launched will be similar to DFEVX.
"I'm not an inventor. I'm an improver. I see things that are wrong, and I improve them." - Larry David, Curb Your Enthusiasm
absolute zero
Posts: 1244
Joined: Thu Dec 29, 2016 3:59 pm

Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

Wade Garrett wrote: Mon Jun 21, 2021 5:53 pm
absolute zero wrote: Mon Jun 21, 2021 3:04 pm Would guess it will be similar to DFEVX. So basically no size exposure (AVEM has some) but a lot more value exposure than AVEM.
DFEVX's average market cap is $10.9 bil. AVEM's average market cap is $15.17 bil. So DFEVX has more size exposure than AVEM. I agree that AVES when launched will be similar to DFEVX.
Average market cap is not a very useful metric. Look at weighted average market cap instead. Can find this on ETF.com. You will see that AVEM is smaller than DFEVX by this metric, and this metric is far more reflective of size exposure than an unweighted average.
Wade Garrett
Posts: 235
Joined: Wed Jul 10, 2013 2:41 pm
Location: Jasper, MO/Double Deuce

Re: Small Cap Value heads Rejoice !!!

Post by Wade Garrett »

absolute zero wrote: Mon Jun 21, 2021 5:59 pm Average market cap is not a very useful metric. Look at weighted average market cap instead. Can find this on ETF.com. You will see that AVEM is smaller than DFEVX by this metric, and this metric is far more reflective of size exposure than an unweighted average.
Thanks for the tip. But PV's factor regression is showing more size exposure for DFEVX. Can you explain the difference between weighted and unweighted average market cap? Also, where are you getting the weighted number for DFEVX since ETF.com doesn't cover MFs?
"I'm not an inventor. I'm an improver. I see things that are wrong, and I improve them." - Larry David, Curb Your Enthusiasm
absolute zero
Posts: 1244
Joined: Thu Dec 29, 2016 3:59 pm

Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

absolute zero wrote: Mon Jun 21, 2021 5:59 pm
Wade Garrett wrote: Mon Jun 21, 2021 5:53 pm
absolute zero wrote: Mon Jun 21, 2021 3:04 pm Would guess it will be similar to DFEVX. So basically no size exposure (AVEM has some) but a lot more value exposure than AVEM.
DFEVX's average market cap is $10.9 bil. AVEM's average market cap is $15.17 bil. So DFEVX has more size exposure than AVEM. I agree that AVES when launched will be similar to DFEVX.
Average market cap is not a very useful metric. Look at weighted average market cap instead. Can find this on ETF.com. You will see that AVEM is smaller than DFEVX by this metric, and this metric is far more reflective of size exposure than an unweighted average.
One of the more educated factor investors could probably give more details, but a factor regression on AVEM won’t tell you much of anything useful because AVEM has only been around for 1.5 years. Would need more like 5 years, better yet 10 years of returns data to have faith in a regression.

Good point on ETF.com. I’m not sure where weighted average market cap can be found elsewhere. Anyone else know?

As for how it’s calculated - check out example below.
Imagine a fund that has only 5 holdings
90% CocaCola (market cap = $200B)
2.5% Marathon Oil (market cap = $4B)
2.5% Boot Barn (market cap = $4B)
2.5% El Pollo Loco (market cap = $4B)
2.5% Fiesta Restaurant Group (market cap = $4B)

The avg market cap would be $43.2B
The weighted avg market cap would be $180.4B

The first metric might make you think you were buying a fund that was almost small enough to be a mid cap fund. The second metric is far more reflective of what you are actually buying - a large cap fund.
Wade Garrett
Posts: 235
Joined: Wed Jul 10, 2013 2:41 pm
Location: Jasper, MO/Double Deuce

Re: Small Cap Value heads Rejoice !!!

Post by Wade Garrett »

absolute zero wrote: Mon Jun 21, 2021 6:34 pm One of the more educated factor investors could probably give more details, but a factor regression on AVEM won’t tell you much of anything useful because AVEM has only been around for 1.5 years. Would need more like 5 years, better yet 10 years of returns data to have faith in a regression.
Good point on ETF.com. I’m not sure where weighted average market cap can be found elsewhere. Anyone else know?
Thanks for the average vs weighted average explanation.

As for the factor regression, I hear ya and agree that the longer the back test the better. But it's not like AVEM's AMC or WAMC will be wildly different a few years from now than it is today. PV shows a significantly higher current size loading for DFEVX. Not sure how else to interpret that other than it's smaller.

As for ETF.com, how do you know AVEM is smaller than DFEVX by WAMC if ETF.com doesn't have a WAMC for DFEVX?
"I'm not an inventor. I'm an improver. I see things that are wrong, and I improve them." - Larry David, Curb Your Enthusiasm
absolute zero
Posts: 1244
Joined: Thu Dec 29, 2016 3:59 pm

Re: Small Cap Value heads Rejoice !!!

Post by absolute zero »

Wade Garrett wrote: Mon Jun 21, 2021 7:20 pm As for ETF.com, how do you know AVEM is smaller than DFEVX by WAMC if ETF.com doesn't have a WAMC for DFEVX?
Apparently I DIDNT know that after-all. In fact, I was probably wrong - looking at Morningstar’s style box, DFEVX is *slightly* below AVEM (i.e. more size exposure).

If AVES does end up looking the same as DFEVX then it seems like AVES would be a true bargain relative to AVEM. Same size and lots more value, for an extra 3 bps? That is very tempting.
YRT70
Posts: 1289
Joined: Sat Apr 27, 2019 8:51 am

Re: Small Cap Value heads Rejoice !!!

Post by YRT70 »

absolute zero wrote: Mon Jun 21, 2021 6:34 pm I’m not sure where weighted average market cap can be found elsewhere. Anyone else know?
Morningstar.com has detailed info on market cap weights.

AVEM % - DFVEX %
Giant 31.67 - 25.93
Large 31.23 - 37.27
Mid 22.96 - 24.55
Small 8.08 - 7.58
Micro 1.91 - 3.28
caklim00
Posts: 2420
Joined: Mon May 26, 2008 10:09 am

Re: Small Cap Value heads Rejoice !!!

Post by caklim00 »

Looks like avantis is trying to finish off dfa.

It took dfa about 8 months to release their ETFs after announcing them. Avantis only 2 months now and better coverage for less.
User avatar
imak
Posts: 212
Joined: Fri Mar 22, 2019 5:18 pm
Location: Austin, TX

Re: Small Cap Value heads Rejoice !!!

Post by imak »

caklim00 wrote: Tue Jun 22, 2021 11:36 am Looks like avantis is trying to finish off dfa.

It took dfa about 8 months to release their ETFs after announcing them. Avantis only 2 months now and better coverage for less.
+1. In addition, I find Avantis' investor communications/articles are quite insightful and helps stay the course.
For example, their Monthly ETF Field Guide:
https://www.avantisinvestors.com/conten ... r-intm.pdf
thenextguy
Posts: 717
Joined: Wed Mar 25, 2009 12:58 am

Re: Small Cap Value heads Rejoice !!!

Post by thenextguy »

caklim00 wrote: Tue Jun 22, 2021 11:36 am Looks like avantis is trying to finish off dfa.
Lol.

DFA AUM $637 billion

I love Avantis, but gimme a break.
Locked