Is a factor tilt warranted?

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TheContrarian
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Re: Is a factor tilt warranted?

Post by TheContrarian »

secondopinion wrote: Mon Jun 05, 2023 12:38 pm
isaachemingway wrote: Mon Jun 05, 2023 11:44 am
secondopinion wrote: Mon Jun 05, 2023 11:10 am
isaachemingway wrote: Mon Jun 05, 2023 10:48 am
secondopinion wrote: Mon Jun 05, 2023 10:45 am

A value tilt takes more of some risks and less of others (which a growth tilt takes the contrary). Unless one accepts the tilt with its risks given/taken without the expectation of a premium, I cannot say it is wise.
My growth stock exposure would be through the blend funds (VV, VO, VB) which tend to overweight growth stocks compared to value stocks (because investors are more likely to invest in a hot, high-growth company than a boring, "declining" business).

The old Bill Bernstein quote that "good companies [well-known growth companies] are often bad stocks to own and bad companies [struggling, lesser-known value companies] are often good stocks to own" (Bernstein, "The Intelligent Asset Allocator") has held true over the long-run.

Thanks for the input!
- @isaachemingway
But could you explain to me how value is riskier? If it is not riskier, then why should it pay you a premium? Dare I say, if it is not riskier, then it is you that should be the one paying the premium.

Some of this is more a probe of understanding than I need to know the answers.
I would highly recommend this resource: https://www.youtube.com/watch?v=zlexP0hIprg&t=37s
But this does not describe how that value is riskier for yourself or that you understand how the risks relate to you favorably or not. I have read it; still does not explain the personal portfolio choice. e.g. Should you be taking the risk in the first place? Is it even a risk in composite to your situation?
In my mind, the main risk associated with factor tilts is the common occurrence of underperforming the market for long periods of time and giving up on the strategy right before it has a massive comeback. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
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Re: Is a factor tilt warranted?

Post by TheContrarian »

rkhusky wrote: Mon Jun 05, 2023 12:56 pm
isaachemingway wrote: Mon Jun 05, 2023 10:42 am
muffins14 wrote: Mon Jun 05, 2023 10:30 am
isaachemingway wrote: Mon Jun 05, 2023 6:54 am
What do you think?
What are your goals?
To outperform the market by 0.25% - 0.5%+ over the long-run by taking on added risks (value, size, etc.) in addition to market risk. Even an added 25 bps over the long run adds a ton of value.

However, I fully recognize that, when investing in factor premiums, you must be content with long-run underperformance and continue to hold on during those underperforming seasons.
And you could also lose 25 bps over the long run, which would lose a ton of value.
True. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
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Taylor Larimore
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Re: Is a factor tilt warranted?

Post by Taylor Larimore »

isaachemingway

You seem to have made up your mind to "factor tilt". Nevertheless, you may be interested in what experts say about total market index funds:

viewtopic.php?f=10&t=156579

Finally, you might also take a look at the many benefits of The Three Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “I don’t believe in Factor funds.”
"Simplicity is the master key to financial success." -- Jack Bogle
secondopinion
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Re: Is a factor tilt warranted?

Post by secondopinion »

isaachemingway wrote: Tue Jun 06, 2023 2:49 pm
secondopinion wrote: Mon Jun 05, 2023 12:38 pm
isaachemingway wrote: Mon Jun 05, 2023 11:44 am
secondopinion wrote: Mon Jun 05, 2023 11:10 am
isaachemingway wrote: Mon Jun 05, 2023 10:48 am

My growth stock exposure would be through the blend funds (VV, VO, VB) which tend to overweight growth stocks compared to value stocks (because investors are more likely to invest in a hot, high-growth company than a boring, "declining" business).

The old Bill Bernstein quote that "good companies [well-known growth companies] are often bad stocks to own and bad companies [struggling, lesser-known value companies] are often good stocks to own" (Bernstein, "The Intelligent Asset Allocator") has held true over the long-run.

Thanks for the input!
- @isaachemingway
But could you explain to me how value is riskier? If it is not riskier, then why should it pay you a premium? Dare I say, if it is not riskier, then it is you that should be the one paying the premium.

Some of this is more a probe of understanding than I need to know the answers.
I would highly recommend this resource: https://www.youtube.com/watch?v=zlexP0hIprg&t=37s
But this does not describe how that value is riskier for yourself or that you understand how the risks relate to you favorably or not. I have read it; still does not explain the personal portfolio choice. e.g. Should you be taking the risk in the first place? Is it even a risk in composite to your situation?
In my mind, the main risk associated with factor tilts is the common occurrence of underperforming the market for long periods of time and giving up on the strategy right before it has a massive comeback. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
This is not the risk as this is a potential outcome whether the tilt was right or wrong in the first place; it is general behavior risk subject to any investor regardless of their choices. Explain to me why the value tilt is right for you regardless of the outcome.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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TheContrarian
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Re: Is a factor tilt warranted?

Post by TheContrarian »

burritoLover wrote: Tue Jun 06, 2023 6:49 am
isaachemingway wrote: Mon Jun 05, 2023 11:42 am
burritoLover wrote: Mon Jun 05, 2023 11:34 am
isaachemingway wrote: Mon Jun 05, 2023 10:52 am
burritoLover wrote: Mon Jun 05, 2023 10:45 am
In your mind, what is the likelihood that you will underperform the market portfolio over the investing period you would keep these assets? Is it extremely unlikely, unlikely, 50/50, ?
Compared to what I need invested to have a comfortable retirement, I am drastically overinvested and will have much more than I need at age 65+. Therefore, I plan to maintain a 100% equity portfolio for the rest of my life (50+ years). I believe that the chances of value and size factor underperformance over such a period are very unlikely.
Sounds like you take on a risky portfolio, although I'd be more concerned about the lack of lower-risk assets (like bonds) than the value tilt. And to a lesser degree, the entire portfolio in US stocks. I would say "very unlikely" is overstating things here, even over long periods.
Why exactly would factor tilts be unlikely to outperform over a 50+ year time horizon?

Also, even with a moderate return expectation of 5%, I am set to have slightly more than $10,000,000 at retirement. Thus, even if my 100% stock portfolio dropped by 90% in retirement (which would be highly unlikely), I would still have $1,000,000 to live off of.

With that amount of starting retirement capital, would I really need any fixed-income investments?
Factors are a model - they are not reality. There are many reasons it could underperform the market portfolio, even over very long periods. Keep in mind that I have a 30% SCV tilt so I'm not the typical factor-basher here:
1. The premium was the result of behavioral biases of investors that can be arbitraged away once known.
2. A portion of the premium was the result of trading frictions that do not exist today - illiquidity in small stocks, transactions costs of maintaining a value-sorted portfolio (vs market-cap weight).
3. The sorts and screenings that Avantis (or other fund providers) uses may end up excluding some value stocks that perform extremely well.
4. The funds you are planning to invest in do not invest in academic long-short factors - there is already an expectation of a lower premium in a long-only fund (probably by half depending on the fund).
5. There is more drag on a value concentrated portfolio which typically has larger dividends (especially larger value stocks) so higher tax consequences and funds generally have a higher expense ratio.
6. Long periods of underperformance can occur with value - think periods of 10-20-ish years historically where you would be constantly rebalancing into the underperforming value side of the portfolio. Think what you were doing 20 years ago and now imagine that every year practically until today, you having to sell the blend portion of your portfolio to buy more value. And these periods of underperformance could be even longer or more severe in the future. That takes nerves of absolute steel - a robot-like consistency that few have.
I agree with everything that you just said. Just curious, do you regret the SCV tilt? Also, regarding this point of yours:
The sorts and screenings that Avantis (or other fund providers) uses may end up excluding some value stocks that perform extremely well.
Are you saying that I should use broader value funds (like VTV and VBR)? The only reason that I'm using AVLV (lrg cap val) and AVUV (sm. cap val) in place of broader funds is that they seem to be the only reasonably priced funds that exclude everything but value stocks.

This is evident in the price-to-book and price-to-earnings ratios of:

AVLV vs. VTV
AVUV vs. VBR

In both cases, the Avantis funds are much deeper into value territory. On the other hand, Vanguard's broad "value funds" are based on CRSP's Value Indexes, which force categorize essentially half of the market into their value indexes (CRSP Lrg Value, Mid Value, and Sm Value). They do the same thing for their growth indexes.

So, all of that is to say that I only chose Avantis' funds because:
- they only buy value stocks (they don't force categorize ~half the market into the value category)
- they have lower exp ratios, bid-ask spreads, and NAV premiums/discounts than DFA etfs

With that in mind, which funds do you use for value tilting?
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Re: Is a factor tilt warranted?

Post by TheContrarian »

swilgu1 wrote: Tue Jun 06, 2023 8:38 am
nisiprius wrote: Mon Jun 05, 2023 10:34 am I've never seen an explanation for including both "blend" and "value." (In the forum people have guessed that the answer is "timidity.") (Nor have I seen an explanation for splitting large and small 50/50. And for that matter it is far less than clear why Fama and French split value into three bins, but size into only two, or why value was split 30-40-30 rather than ⅓ each...)
One explanation is to tilt towards value while still holding all the other non-value companies, both for diversification and rebalancing. Periods of growth (found in the blend) doing better than value or vice versa can offer an opportunity to rebalance back into an out of favor asset. The maximum rebalancing benefit within stocks would be holding an equal amount of both growth and value (this has does better than the market due to the rebalancing benefit), but then you're back to a non-tilted portfolio. By instead holding blend and value, you can achieve a similar result while still maintaining a value tilt.

You're also right about timidity, although this is a valid reason the same as why people hold bonds instead of 100% stocks. Risk in a portfolio isn't an on or off switch and can be tailored to an investors appetite for tracking error by mixing blend with value.

As for the seemingly arbitrary thresholds for the size and value factors, Fama and French acknowledge that they are, indeed, arbitrary, but reflect the finding that value explains more variance in stock returns than size, so splitting into a high, medium, and low group captures stock returns better than just a high and low group. To quote Fama and French:

"Our decision to sort firms into three groups on BE/ME and only two on ME follows evidence in Fama and French (1992b) that book-to-market equity has a stronger role in average stock returns than size. The splits are arbitrary, however, and we have not searched over alternatives. The hope is that the tests here and in Fama and French (1992b) are not sensitive to these choices. We see no reason to argue that they are."

In other words, Fama and French made a call to give more levels to the stronger factor and decided to do so arbitrarily rather than data mine for the "optimal" levels. I hope this helps!
Agreed. My reason for holding value and blend funds is that the blend funds provide me with ownership of the entire market (using CRSP Lrg, Mid, and Sm. Indexes). On the other hand, if I decided to own value and growth funds in equal proportions, I would not own the entire market. This is because, oftentimes, stocks that score lowly in both value and growth characteristics are excluded from both value and growth funds.

Thus, I choose to own value and blend funds because, by doing so, I can have a large value tilt while still owning the entire market of stocks. Also, owning large, mid, and small stocks separately provides a great rebalancing benefit. After all, sometimes large caps will do best, sometimes mid caps will do best, and sometimes small caps will do best.
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Re: Is a factor tilt warranted?

Post by TheContrarian »

Taylor Larimore wrote: Tue Jun 06, 2023 3:02 pm isaachemingway

You seem to have made up your mind to "factor tilt". Nevertheless, you may be interested in what experts say about total market index funds:

viewtopic.php?f=10&t=156579

Finally, you might also take a look at the many benefits of The Three Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “I don’t believe in Factor funds.”
Jack Bogle's Words of Wisdom: “I don’t believe in Factor funds.”
I believe that Mr. Bogle probably hated factor funds so much because, until a few years ago, factor funds (even from DFA) had high expense ratios (50 bps+). Nowadays, however, US Value funds from Avantis have very low expense ratios (.15% - .25%).

Simplicity isn't an issue for me because I use M1 Finance (which does auto-rebalancing and dynamic rebalancing).
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burritoLover
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Re: Is a factor tilt warranted?

Post by burritoLover »

isaachemingway wrote: Tue Jun 06, 2023 3:23 pm
burritoLover wrote: Tue Jun 06, 2023 6:49 am
isaachemingway wrote: Mon Jun 05, 2023 11:42 am
burritoLover wrote: Mon Jun 05, 2023 11:34 am
isaachemingway wrote: Mon Jun 05, 2023 10:52 am

Compared to what I need invested to have a comfortable retirement, I am drastically overinvested and will have much more than I need at age 65+. Therefore, I plan to maintain a 100% equity portfolio for the rest of my life (50+ years). I believe that the chances of value and size factor underperformance over such a period are very unlikely.
Sounds like you take on a risky portfolio, although I'd be more concerned about the lack of lower-risk assets (like bonds) than the value tilt. And to a lesser degree, the entire portfolio in US stocks. I would say "very unlikely" is overstating things here, even over long periods.
Why exactly would factor tilts be unlikely to outperform over a 50+ year time horizon?

Also, even with a moderate return expectation of 5%, I am set to have slightly more than $10,000,000 at retirement. Thus, even if my 100% stock portfolio dropped by 90% in retirement (which would be highly unlikely), I would still have $1,000,000 to live off of.

With that amount of starting retirement capital, would I really need any fixed-income investments?
Factors are a model - they are not reality. There are many reasons it could underperform the market portfolio, even over very long periods. Keep in mind that I have a 30% SCV tilt so I'm not the typical factor-basher here:
1. The premium was the result of behavioral biases of investors that can be arbitraged away once known.
2. A portion of the premium was the result of trading frictions that do not exist today - illiquidity in small stocks, transactions costs of maintaining a value-sorted portfolio (vs market-cap weight).
3. The sorts and screenings that Avantis (or other fund providers) uses may end up excluding some value stocks that perform extremely well.
4. The funds you are planning to invest in do not invest in academic long-short factors - there is already an expectation of a lower premium in a long-only fund (probably by half depending on the fund).
5. There is more drag on a value concentrated portfolio which typically has larger dividends (especially larger value stocks) so higher tax consequences and funds generally have a higher expense ratio.
6. Long periods of underperformance can occur with value - think periods of 10-20-ish years historically where you would be constantly rebalancing into the underperforming value side of the portfolio. Think what you were doing 20 years ago and now imagine that every year practically until today, you having to sell the blend portion of your portfolio to buy more value. And these periods of underperformance could be even longer or more severe in the future. That takes nerves of absolute steel - a robot-like consistency that few have.
I agree with everything that you just said. Just curious, do you regret the SCV tilt? Also, regarding this point of yours:
The sorts and screenings that Avantis (or other fund providers) uses may end up excluding some value stocks that perform extremely well.
Are you saying that I should use broader value funds (like VTV and VBR)? The only reason that I'm using AVLV (lrg cap val) and AVUV (sm. cap val) in place of broader funds is that they seem to be the only reasonably priced funds that exclude everything but value stocks.

This is evident in the price-to-book and price-to-earnings ratios of:

AVLV vs. VTV
AVUV vs. VBR

In both cases, the Avantis funds are much deeper into value territory. On the other hand, Vanguard's broad "value funds" are based on CRSP's Value Indexes, which force categorize essentially half of the market into their value indexes (CRSP Lrg Value, Mid Value, and Sm Value). They do the same thing for their growth indexes.

So, all of that is to say that I only chose Avantis' funds because:
- they only buy value stocks (they don't force categorize ~half the market into the value category)
- they have lower exp ratios, bid-ask spreads, and NAV premiums/discounts than DFA etfs

With that in mind, which funds do you use for value tilting?
I don't regret my 30% SCV tilt but I'm realistic that I might be worse-off with this tilt even over a long time-frame. There are no certainties in investing. There have been many in the past that thought they had a fool-proof strategy based on the prevailing wisdom at the time only to find out that the market does something unexpected. Decades from now, what we know about the markets will likely change drastically. The only real certainty is cost and adapting a strategy that is higher cost (whether ER and/or taxes) is already facing an instant headwind (which can add up over many decades of compounding).

I invest in Avantis funds primarily and I also believe in their strategy (profitability and momentum screenings) but that, too, could turn out to be wrong or not very optimal for some reason we'll learn in the future. I also invest in some cheaper Vanguard value funds in the roth account (for easing TLH opportunities in taxable and also to diversify the value strategies). I'm also not 100% stock - my 401k is all TDF with glidepath to add bonds. And my roth and taxable have 40% international value funds.
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Re: Is a factor tilt warranted?

Post by TheContrarian »

secondopinion wrote: Tue Jun 06, 2023 3:18 pm
isaachemingway wrote: Tue Jun 06, 2023 2:49 pm
secondopinion wrote: Mon Jun 05, 2023 12:38 pm
isaachemingway wrote: Mon Jun 05, 2023 11:44 am
secondopinion wrote: Mon Jun 05, 2023 11:10 am

But could you explain to me how value is riskier? If it is not riskier, then why should it pay you a premium? Dare I say, if it is not riskier, then it is you that should be the one paying the premium.

Some of this is more a probe of understanding than I need to know the answers.
I would highly recommend this resource: https://www.youtube.com/watch?v=zlexP0hIprg&t=37s
But this does not describe how that value is riskier for yourself or that you understand how the risks relate to you favorably or not. I have read it; still does not explain the personal portfolio choice. e.g. Should you be taking the risk in the first place? Is it even a risk in composite to your situation?
In my mind, the main risk associated with factor tilts is the common occurrence of underperforming the market for long periods of time and giving up on the strategy right before it has a massive comeback. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
This is not the risk as this is a potential outcome whether the tilt was right or wrong in the first place; it is general behavior risk subject to any investor regardless of their choices. Explain to me why the value tilt is right for you regardless of the outcome.
A value tilt is right for me regardless of the outcome because I am set to have more than enough when I retire (10mil+ assuming a conservative 5% growth rate) and am willing to take on the risk of market underperformance (and larger drawdowns, which value stocks do occasionally have) in order to achieve potentially greater returns.
secondopinion
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Re: Is a factor tilt warranted?

Post by secondopinion »

isaachemingway wrote: Tue Jun 06, 2023 3:40 pm
Taylor Larimore wrote: Tue Jun 06, 2023 3:02 pm isaachemingway

You seem to have made up your mind to "factor tilt". Nevertheless, you may be interested in what experts say about total market index funds:

viewtopic.php?f=10&t=156579

Finally, you might also take a look at the many benefits of The Three Fund Portfolio.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: “I don’t believe in Factor funds.”
Jack Bogle's Words of Wisdom: “I don’t believe in Factor funds.”
I believe that Mr. Bogle probably hated factor funds so much because, until a few years ago, factor funds (even from DFA) had high expense ratios (50 bps+). Nowadays, however, US Value funds from Avantis have very low expense ratios (.15% - .25%).

Simplicity isn't an issue for me because I use M1 Finance (which does auto-rebalancing and dynamic rebalancing).
This has nothing to do with fees. The truth is that highly truncated quote of Bogle comes from an interview question as to why Vanguard offers factor funds. Bogle suggested that the market timing and premium seeking was why he "[did not] believe in factor funds"; instead, he saw them as a way to improve the accumulation/de-accumulation of their portfolios (growth/value respectively). He had factor funds available since 1993, and this was one of his late-life interviews; he could have retracted his previous claims, but he clearly did not.

I tend to follow the same vein that they have usage in one's portfolio. But I do question the concept that value is a more profitable risk than growth.
Last edited by secondopinion on Tue Jun 06, 2023 4:01 pm, edited 2 times in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: Is a factor tilt warranted?

Post by secondopinion »

isaachemingway wrote: Tue Jun 06, 2023 3:45 pm
secondopinion wrote: Tue Jun 06, 2023 3:18 pm
isaachemingway wrote: Tue Jun 06, 2023 2:49 pm
secondopinion wrote: Mon Jun 05, 2023 12:38 pm
isaachemingway wrote: Mon Jun 05, 2023 11:44 am

I would highly recommend this resource: https://www.youtube.com/watch?v=zlexP0hIprg&t=37s
But this does not describe how that value is riskier for yourself or that you understand how the risks relate to you favorably or not. I have read it; still does not explain the personal portfolio choice. e.g. Should you be taking the risk in the first place? Is it even a risk in composite to your situation?
In my mind, the main risk associated with factor tilts is the common occurrence of underperforming the market for long periods of time and giving up on the strategy right before it has a massive comeback. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
This is not the risk as this is a potential outcome whether the tilt was right or wrong in the first place; it is general behavior risk subject to any investor regardless of their choices. Explain to me why the value tilt is right for you regardless of the outcome.
A value tilt is right for me regardless of the outcome because I am set to have more than enough when I retire (10mil+ assuming a conservative 5% growth rate) and am willing to take on the risk of market underperformance (and larger drawdowns, which value stocks do occasionally have) in order to achieve potentially greater returns.
But why not just stocks then (or even just growth stocks)? I do not mean to be a bother, but I think it is seriously important to hold them for the right reasons. You suggest a tilt that has less than normal effective duration despite a very long investment timeframe, a tilt that correlates more with economical conditions, and a tilt that is more tax sensitive (not on your side but also on the corporate side). The first point certainly increases risk for the long-term, the second is more of a risk if one's employment is sensitive to economical conditions, and the third may be relevant if you already pay a lot of taxes. With possibly more points to consider, are you sure that this is to your advantage regardless of the outcome?
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Re: Is a factor tilt warranted?

Post by burritoLover »

isaachemingway wrote: Tue Jun 06, 2023 3:45 pm
secondopinion wrote: Tue Jun 06, 2023 3:18 pm
isaachemingway wrote: Tue Jun 06, 2023 2:49 pm
secondopinion wrote: Mon Jun 05, 2023 12:38 pm
isaachemingway wrote: Mon Jun 05, 2023 11:44 am

I would highly recommend this resource: https://www.youtube.com/watch?v=zlexP0hIprg&t=37s
But this does not describe how that value is riskier for yourself or that you understand how the risks relate to you favorably or not. I have read it; still does not explain the personal portfolio choice. e.g. Should you be taking the risk in the first place? Is it even a risk in composite to your situation?
In my mind, the main risk associated with factor tilts is the common occurrence of underperforming the market for long periods of time and giving up on the strategy right before it has a massive comeback. However, because (with an assumed 5% rate of return, very conservative) I will have $10,000,000+ at retirement, I never plan to add bonds to my portfolio and therefore have a very long (60+ year) stock investing time horizon for the factor tilts in my portfolio to beat the market (assuming I live into my 90s).
This is not the risk as this is a potential outcome whether the tilt was right or wrong in the first place; it is general behavior risk subject to any investor regardless of their choices. Explain to me why the value tilt is right for you regardless of the outcome.
A value tilt is right for me regardless of the outcome because I am set to have more than enough when I retire (10mil+ assuming a conservative 5% growth rate) and am willing to take on the risk of market underperformance (and larger drawdowns, which value stocks do occasionally have) in order to achieve potentially greater returns.
is that 5% nominal?
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Re: Is a factor tilt warranted?

Post by nyejos11 »

I was very enthusiastic about the whole factor tilting idea when I first read a bunch of books by PHDs and financial advisors. So I put a small amount into low cost Vanguard small value and large cap value etc. not a huge tilt. After reading so many other’s opinions against the idea, This has become my approach to the factor investing :

1) I keep my tilts forever as I am a buy and hold investor. I only add as much per month on going basis in direct proportion to my “ belief “ level in such factors.

2) The way I look at it is if there is really something there the funds will prove it to me- I’m waiting, I’ve got the rest of my life we will see. If they are so “fantastic “ I shouldn’t need to add much to them anyway right? Because they will grow by leaps and bounds on their own ? Right?

3) If they don’t outperform, they will make something and I get to keep most of it because they are super low cost Vanguard funds.

4) If I wind up having $949, 000 when I reach the age of 78 instead of the 1.4M if I would have just stuck with total market, it’s not going to matter too much to ME because I can’t take it with me when I depart.

5) Nobody can know the future, as Jack Bogle said- Nobody knows nothing
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Re: Is a factor tilt warranted?

Post by TheContrarian »

[/quote]
I don't regret my 30% SCV tilt but I'm realistic that I might be worse-off with this tilt even over a long time-frame. There are no certainties in investing. There have been many in the past that thought they had a fool-proof strategy based on the prevailing wisdom at the time only to find out that the market does something unexpected. Decades from now, what we know about the markets will likely change drastically. The only real certainty is cost and adapting a strategy that is higher cost (whether ER and/or taxes) is already facing an instant headwind (which can add up over many decades of compounding).[/quote]

I agree with everything you said here. Thanks for sharing!
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Re: Is a factor tilt warranted?

Post by ttboy »

I have been investing since 1978, read hundreds of books on investing, wsj daily, read all of Berkshires's annual reports, etc etc but this forum has introduced me to a new term, "factor". I cringe at the term for some reason.
secondopinion
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Re: Is a factor tilt warranted?

Post by secondopinion »

ttboy wrote: Sun Jun 11, 2023 6:57 pm I have been investing since 1978, read hundreds of books on investing, wsj daily, read all of Berkshires's annual reports, etc etc but this forum has introduced me to a new term, "factor". I cringe at the term for some reason.
That is because you and many others do not understand it; it is a natural part of learning to fear the unknown. I have learned to engage in the learning process even if it does not change my opinion.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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