Avantis Funds: what's so special about them?

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nedsaid
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Re: Avantis Funds: what's so special about them?

Post by nedsaid »

JohnFromPNW wrote: Wed Dec 14, 2022 12:41 pm 1. Relative to comments regarding the 'past not predicting the future', then just as one may anticipate and believe that factors will not generate higher return, there is then no reason to believe they won't. The potential outcome is 50/50.

2. Relative to comments regarding "looking elsewhere for financial success", someone factor tilting their portfolio is not in some grave danger of ruining their financial situation. The most likely outcome is something that is +/- comparable to the market return (not altogether different). If the greater diversity provides them with comfort, then I see no reason why they shouldn't.

I haven't studied the data in great detail nor care to. I have tilted my portfolio for three reasons: it 'feels' more diverse to me (22% of VTI is in 10 companies), logically makes sense to me that certain 'tilts' would generate higher returns, and I'm a closet dividend lover (despite their irrelevance).

Please note I'm not saying higher risk-adjusted returns, but higher absolute returns. Small cap stocks are small and risky, with large potential upside, although many will fail. Higher risk should generate higher reward. The case for Value outperformance is less clear to me, but value titled provides added diversification, in my opinion, from VOO / VTI which are growth tilted at this point, moving the overall portfolio back to the middle. It also does make some sense that the missed earnings or failures on growth companies would result in outsized negative reaction than it would to lower valued, value companies.

Value also tends to pay higher dividends which YES I KNOW are irrelevant, but I like them nonetheless; perhaps due to my background and career I believe investments should pay you to own them so I like when the companies I own pay me to continue to own them. I'm aware that total return matters though, so I don't go full yield tilt only.

I'm sure both factor advocates and factor opponents will find a fault in nearly everything I've said above, but those are my thoughts.
I think your post is quite reasonable. Don't have any big criticisms of your thoughts above.

For me, the case for Value is this: Wall Street is an anticipation and an expectations game, lower expectations are easier to beat than higher expectations. Sometimes the popular Large Growth Stocks get too popular and so much expectation is reflected in the Stock price that great companies can become poor investments. A stock really can be shown too much love. Pretty much the market gets too optimistic regarding future prospects for Growth stocks and gets too pessimistic regarding future prospects for Value stocks.

Also agree that the S&P 500 and Total Stock Market Index can get too concentrated in relatively few companies. That being said, funds based upon these indexes make very good investments but I think it prudent to dilute that concentration of the top a bit by pairing with a Value fund. I would caution not to make whatever tilts you make too extreme.
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JSPECO9
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

AVUV now approaching $6 billion AUM. Incredibly impressive.

To put it into perspective: They are about to hit $6 billion AUM with an inception date of Sep 24, 2019. DFA Small Cap Value (DFSVX) has $13 billion AUM with an inception date of 03/02/1993.

Feels like Dimensional really dropped the ball on this one. Not to mention, even with their new ETF (DFSV) they're not even trying to compete on cost (30 basis points vs 25 basis points for AVUV).

Anyone feel like Avantis will end up as the Vanguard of factor investing? Forcing the rest of the industries hand with innovation and cost. Even their new ETFs that they filed for last week seem much more innovative that other fund providers (looking at you AVGV - Avantis All Market Equity Value).
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Re: Avantis Funds: what's so special about them?

Post by tj »

There really isn't an industry, is there? It's just Avantis and DFA...
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

tj wrote: Mon Mar 27, 2023 1:58 pm There really isn't an industry, is there? It's just Avantis and DFA...
DFA, Avantis, WisdomTree, AQR, Alpha Architect, JPM, Vanguard and iShares themselves joined the factor train.

Just the ones I could think about off the top of my head but I'm sure there's plenty other. But Avantis is really standing out from the rest right now.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JSPECO9 wrote: Mon Mar 27, 2023 2:05 pm
tj wrote: Mon Mar 27, 2023 1:58 pm There really isn't an industry, is there? It's just Avantis and DFA...
DFA, Avantis, WisdomTree, AQR, Alpha Architect, JPM, Vanguard and iShares themselves joined the factor train.

Just the ones I could think about off the top of my head but I'm sure there's plenty other. But Avantis is really standing out from the rest right now.
I agree, though DFA has been around long enough I think they're a fine option too. But yes, in terms of general accessibility Avantis got out of the gate first, and their performance has been exceptional so far.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JSPECO9 wrote: Mon Mar 27, 2023 1:43 pm AVUV now approaching $6 billion AUM. Incredibly impressive.

To put it into perspective: They are about to hit $6 billion AUM with an inception date of Sep 24, 2019. DFA Small Cap Value (DFSVX) has $13 billion AUM with an inception date of 03/02/1993.

Feels like Dimensional really dropped the ball on this one. Not to mention, even with their new ETF (DFSV) they're not even trying to compete on cost (30 basis points vs 25 basis points for AVUV).

Anyone feel like Avantis will end up as the Vanguard of factor investing? Forcing the rest of the industries hand with innovation and cost. Even their new ETFs that they filed for last week seem much more innovative that other fund providers (looking at you AVGV - Avantis All Market Equity Value).
While I generally like what they're doing, I'm worried they're going a little overboard. To me about 8 or so total equity funds seems about right: US, international, emerging, US small cap value, international value/sc value, emerging markets value/sc value, a total equity fund that combines everything, and a total value fund that combines all the value funds.

There is such a thing as having too many options.
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JSPECO9
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

Apathizer wrote: Mon Mar 27, 2023 2:18 pm
JSPECO9 wrote: Mon Mar 27, 2023 1:43 pm AVUV now approaching $6 billion AUM. Incredibly impressive.

To put it into perspective: They are about to hit $6 billion AUM with an inception date of Sep 24, 2019. DFA Small Cap Value (DFSVX) has $13 billion AUM with an inception date of 03/02/1993.

Feels like Dimensional really dropped the ball on this one. Not to mention, even with their new ETF (DFSV) they're not even trying to compete on cost (30 basis points vs 25 basis points for AVUV).

Anyone feel like Avantis will end up as the Vanguard of factor investing? Forcing the rest of the industries hand with innovation and cost. Even their new ETFs that they filed for last week seem much more innovative that other fund providers (looking at you AVGV - Avantis All Market Equity Value).
While I generally like what they're doing, I'm worried they're going a little overboard. To me about 8 or so total equity funds seems about right: US, international, emerging, US small cap value, international value/sc value, emerging markets value/sc value, a total equity fund that combines everything, and a total value fund that combines all the value funds.

There is such a thing as having too many options.
Do you think they're here to stay? Asking for taxable investors. How comfortable would you be buying their funds in a taxable account? My favorite holding period is forever, so I don't want to have to worry about a fund liquidating.
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Re: Avantis Funds: what's so special about them?

Post by Tom_T »

Apathizer wrote: Mon Mar 27, 2023 2:18 pm
JSPECO9 wrote: Mon Mar 27, 2023 1:43 pm AVUV now approaching $6 billion AUM. Incredibly impressive.

To put it into perspective: They are about to hit $6 billion AUM with an inception date of Sep 24, 2019. DFA Small Cap Value (DFSVX) has $13 billion AUM with an inception date of 03/02/1993.

Feels like Dimensional really dropped the ball on this one. Not to mention, even with their new ETF (DFSV) they're not even trying to compete on cost (30 basis points vs 25 basis points for AVUV).

Anyone feel like Avantis will end up as the Vanguard of factor investing? Forcing the rest of the industries hand with innovation and cost. Even their new ETFs that they filed for last week seem much more innovative that other fund providers (looking at you AVGV - Avantis All Market Equity Value).
While I generally like what they're doing, I'm worried they're going a little overboard. To me about 8 or so total equity funds seems about right: US, international, emerging, US small cap value, international value/sc value, emerging markets value/sc value, a total equity fund that combines everything, and a total value fund that combines all the value funds.

There is such a thing as having too many options.
Do they really have a lot, though, in comparison with other places? DFA has 149 funds (!)
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

Tom_T wrote: Mon Mar 27, 2023 2:41 pm
Apathizer wrote: Mon Mar 27, 2023 2:18 pm
JSPECO9 wrote: Mon Mar 27, 2023 1:43 pm AVUV now approaching $6 billion AUM. Incredibly impressive.

To put it into perspective: They are about to hit $6 billion AUM with an inception date of Sep 24, 2019. DFA Small Cap Value (DFSVX) has $13 billion AUM with an inception date of 03/02/1993.

Feels like Dimensional really dropped the ball on this one. Not to mention, even with their new ETF (DFSV) they're not even trying to compete on cost (30 basis points vs 25 basis points for AVUV).

Anyone feel like Avantis will end up as the Vanguard of factor investing? Forcing the rest of the industries hand with innovation and cost. Even their new ETFs that they filed for last week seem much more innovative that other fund providers (looking at you AVGV - Avantis All Market Equity Value).
While I generally like what they're doing, I'm worried they're going a little overboard. To me about 8 or so total equity funds seems about right: US, international, emerging, US small cap value, international value/sc value, emerging markets value/sc value, a total equity fund that combines everything, and a total value fund that combines all the value funds.

There is such a thing as having too many options.
Do they really have a lot, though, in comparison with other places? DFA has 149 funds (!)
True, Avantis has 24 ETFs, which is almost nothing compared to the others. At the end of the day, they are still a business, and need to remain competitive. The options will exist regardless, whether they are the ones providing the options or not.
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Re: Avantis Funds: what's so special about them?

Post by Gaston »

Apathizer wrote: Mon Mar 27, 2023 2:18 pm While I generally like what they're doing, I'm worried they're going a little overboard. To me about 8 or so total equity funds seems about right: US, international, emerging, US small cap value, international value/sc value, emerging markets value/sc value, a total equity fund that combines everything, and a total value fund that combines all the value funds.

There is such a thing as having too many options.
I get what you are saying. The trick with a small number of ETFs, however, is to have the ones that people want.

I certainly understand the simplicity of having a single, international value ETF that covers large cap, small cap and emerging. But with a single ETF, the investor must accept the weights that Avantis chooses. If one wants to select their own weights (say, 50% intl large cap value + 50% intl small cap value), some will prefer having individual ETFs.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

JSPECO9 wrote: Mon Mar 27, 2023 2:34 pm Do you think they're here to stay? Asking for taxable investors. How comfortable would you be buying their funds in a taxable account? My favorite holding period is forever, so I don't want to have to worry about a fund liquidating.
American Century is well established so I think they'll be fine. Eventually they'll be managed by someone else, which is the only annoying thing about non-index funds. If they do eventually go away we can just put the money into something else.
JSPECO9 wrote: Mon Mar 27, 2023 2:50 pm True, Avantis has 24 ETFs, which is almost nothing compared to the others. At the end of the day, they are still a business, and need to remain competitive. The options will exist regardless, whether they are the ones providing the options or not.
I generally prefer quality of quantity, and 24 still seems like too many. But yes, they're a business selling a product, so I get it. It's sort of like Vanguard. Even though Van has I'm guessing over 100 funds, they only recommend a handful to most investors. So even though the specialized/focused funds are unnecessary they do provide additional revenue.
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Re: Avantis Funds: what's so special about them?

Post by Blues Baker »

I heard something recently in a Paul Merriman video. Paul was saying that Avantis chooses companies that are more profitable for their funds. Not sure which funds, but I believe he was speaking of their Small-Cap Value (AVUV) fund.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

Apathizer wrote: Mon Mar 27, 2023 3:40 pm
JSPECO9 wrote: Mon Mar 27, 2023 2:34 pm Do you think they're here to stay? Asking for taxable investors. How comfortable would you be buying their funds in a taxable account? My favorite holding period is forever, so I don't want to have to worry about a fund liquidating.
American Century is well established so I think they'll be fine. Eventually they'll be managed by someone else, which is the only annoying thing about non-index funds. If they do eventually go away we can just put the money into something else.
JSPECO9 wrote: Mon Mar 27, 2023 2:50 pm True, Avantis has 24 ETFs, which is almost nothing compared to the others. At the end of the day, they are still a business, and need to remain competitive. The options will exist regardless, whether they are the ones providing the options or not.
I generally prefer quality of quantity, and 24 still seems like too many. But yes, they're a business selling a product, so I get it. It's sort of like Vanguard. Even though Van has I'm guessing over 100 funds, they only recommend a handful to most investors. So even though the specialized/focused funds are unnecessary they do provide additional revenue.
Avantis does most business through RIAs and each RIA may have different preferences.

There’s no harm in having 24 funds
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Re: Avantis Funds: what's so special about them?

Post by Taylor Larimore »

"There’s no harm in having 24 funds"
Sorry, I disagree. At my age 99, I can't imagine trying to keep track and manage "24 funds." This is what I wrote in the The Bogleheads Guide to The Three-Fund Portfolio:
"A portfolio with fewer funds has many advantages: Lower costs, Fewer hidden turnover costs, Better tax effciency, Less distortion from contributions and withdrawals, Less rebalancing, Less chance of errors, Easier tax-preparation, Less paperwork, Less storage, Less stress, More free time with family and friends."
Best wishes.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

Taylor Larimore wrote: Mon Mar 27, 2023 6:39 pm
"There’s no harm in having 24 funds"
Sorry, I disagree. At my age 99, I can't imagine trying to keep track and manage "24 funds." This is what I wrote in the The Bogleheads Guide to The Three-Fund Portfolio:
"A portfolio with fewer funds has many advantages: Lower costs, Fewer hidden turnover costs, Better tax effciency, Less distortion from contributions and withdrawals, Less rebalancing, Less chance of errors, Easier tax-preparation, Less paperwork, Less storage, Less stress, More free time with family and friends."
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success. -- We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."
I generally agree, though each situation might be different. For instance someone might already hold a total us fund and want exposure to other factors. They might want to just add a couple Avantis funds to round out their portfolio.

But generally I'm with you simplicity is better. For someone just starting to construct a portfolio, they certainly don't need that many funds. Something like AVGE or AVGV if they want stronger tilts is all they really need for the equity portion. Then use a globally diversified Bond fund and you're all set.
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Re: Avantis Funds: what's so special about them?

Post by SafeBonds »

I recall and interview from 20-25 years ago where Jack Bogle was questioned about having so many funds and Vanguard. His answer was something like, perhaps our new Small Growth fund would be wanted by an investor who has a lot of blue chip stocks in a taxable account they with high unrealized capital gains. I thought that was a reasonable answer. The multitude of Avantis funds could be explained away as well.
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Re: Avantis Funds: what's so special about them?

Post by abuss368 »

Nathan Drake wrote: Mon Mar 27, 2023 5:27 pm
There’s no harm in having 24 funds
Yikes! Ouch!

😩

Jack Bogle: “Simplicity is the master key to financial success”.

Best.
Tony
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Re: Avantis Funds: what's so special about them?

Post by 8000m »

Some of the recent replies read like the context of Nathan Drake's original '24 funds' comment was overlooked. Or perhaps I read it incorrectly. Perhaps Nathan Drake can clarify, but I don't believe he was in any way stating a position or advocating for an individual to hold 24 funds in their portfolio. It was merely a comment about how many funds Avantis offers investors. While this number is sure to keep changing, 24 funds is a much tighter offering portfolio than most other relevant firms... including Vanguard & DFA (as mentioned in earlier posts).
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

SafeBonds wrote: Mon Mar 27, 2023 7:01 pm I recall and interview from 20-25 years ago where Jack Bogle was questioned about having so many funds and Vanguard. His answer was something like, perhaps our new Small Growth fund would be wanted by an investor who has a lot of blue chip stocks in a taxable account they with high unrealized capital gains. I thought that was a reasonable answer. The multitude of Avantis funds could be explained away as well.
But Vanguard's site states that investors can achieve all the exposure they need with four funds: vti, vxus, BND, and bndx.

At this point I think Vanguard only has so many funds to generate a little more revenue. I think an argument can be made for their general small cap and small cap value funds, but that's about it. Their niche sector funds seem entirely unnecessary to me.
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Re: Avantis Funds: what's so special about them?

Post by snowday2022 »

Apathizer wrote: Mon Mar 27, 2023 7:34 pm
SafeBonds wrote: Mon Mar 27, 2023 7:01 pm I recall and interview from 20-25 years ago where Jack Bogle was questioned about having so many funds and Vanguard. His answer was something like, perhaps our new Small Growth fund would be wanted by an investor who has a lot of blue chip stocks in a taxable account they with high unrealized capital gains. I thought that was a reasonable answer. The multitude of Avantis funds could be explained away as well.
But Vanguard's site states that investors can achieve all the exposure they need with four funds: vti, vxus, BND, and bndx.

At this point I think Vanguard only has so many funds to generate a little more revenue. I think an argument can be made for their general small cap and small cap value funds, but that's about it. Their niche sector funds seem entirely unnecessary to me.
They’re not dumb. If it didn’t make them money they would close them down. Same with Avantis. Most people in the world are not BHs.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

snowday2022 wrote: Mon Mar 27, 2023 7:37 pm
Apathizer wrote: Mon Mar 27, 2023 7:34 pm
SafeBonds wrote: Mon Mar 27, 2023 7:01 pm I recall and interview from 20-25 years ago where Jack Bogle was questioned about having so many funds and Vanguard. His answer was something like, perhaps our new Small Growth fund would be wanted by an investor who has a lot of blue chip stocks in a taxable account they with high unrealized capital gains. I thought that was a reasonable answer. The multitude of Avantis funds could be explained away as well.
But Vanguard's site states that investors can achieve all the exposure they need with four funds: vti, vxus, BND, and bndx.

At this point I think Vanguard only has so many funds to generate a little more revenue. I think an argument can be made for their general small cap and small cap value funds, but that's about it. Their niche sector funds seem entirely unnecessary to me.
They’re not dumb. If it didn’t make them money they would close them down. Same with Avantis. Most people in the world are not BHs.
Exactly. If it makes them money and keeps costs low, I guess we shouldn't complain. It's just sort funny Vanguard recommends a small portion of their own funds, yet the other funds attract enough investors to be financialy viable.
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Re: Avantis Funds: what's so special about them?

Post by beezlebub »

A while back I ended up owning AVUS during a round of TLHing where I ran out of viable partners for VTI. The more I read about it, the more uncomfortable I became with it. Avantis uses the term “financial science” which translates to hogwash and future predicting to me. You can dress up speculating any way you want, but at the end of the day anything other than total market is exactly that. I ended up selling AVUS and repurchasing VTI early , thus giving back some of my harvested losses in the process. No regrets.
Last edited by beezlebub on Mon Mar 27, 2023 8:51 pm, edited 1 time in total.
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Re: Avantis Funds: what's so special about them?

Post by muffins14 »

Taylor Larimore wrote: Mon Mar 27, 2023 6:39 pm
"There’s no harm in having 24 funds"
Sorry, I disagree. At my age 99, I can't imagine trying to keep track and manage "24 funds." This is what I wrote in the The Bogleheads Guide to The Three-Fund Portfolio:
"A portfolio with fewer funds has many advantages: Lower costs, Fewer hidden turnover costs, Better tax effciency, Less distortion from contributions and withdrawals, Less rebalancing, Less chance of errors, Easier tax-preparation, Less paperwork, Less storage, Less stress, More free time with family and friends."
Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "Simplicity is the master key to financial success. -- We ignore the real diamonds of simplicity, seeking instead the illusory rhinestones of complexity."
I think your post was somewhat a misunderstanding. They offer 24 funds as an entire company. I’m sure vanguard offers more like 240
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

beezlebub wrote: Mon Mar 27, 2023 8:33 pm A while back I ended up owning AVUS during a round of TLHing where I ran out of viable partners for VTI. The more I read about it, the more uncomfortable I became with it. Avantis uses the term “financial science” which translates to hogwash and future predicting to me. You can dress up speculating any way you want, but at the end of the day anything other than total market is exactly that. I ended up selling it AVUS and repurchasing VTI thus giving back some of my harvested losses in the process. No regrets.
That seems ideological rather than practical. While I'll admit the term financial science is mainly for marketing, tilting towards assets with higher expected returns make sense. This definitely is not speculation. It's diversifying across different market segments for higher and more consistent return.

I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
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Re: Avantis Funds: what's so special about them?

Post by beezlebub »

Apathizer wrote: Mon Mar 27, 2023 8:57 pm
beezlebub wrote: Mon Mar 27, 2023 8:33 pm A while back I ended up owning AVUS during a round of TLHing where I ran out of viable partners for VTI. The more I read about it, the more uncomfortable I became with it. Avantis uses the term “financial science” which translates to hogwash and future predicting to me. You can dress up speculating any way you want, but at the end of the day anything other than total market is exactly that. I ended up selling it AVUS and repurchasing VTI thus giving back some of my harvested losses in the process. No regrets.
That seems ideological rather than practical. Well I'll admit financial science is mainly for marketing, tilting towards assets with higher expected returns make sense. This definitely is not speculation. It's diversifying across different market segments to expand potential sources of risk for higher and more consistent return.

I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
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Re: Avantis Funds: what's so special about them?

Post by Nathan Drake »

8000m wrote: Mon Mar 27, 2023 7:29 pm Some of the recent replies read like the context of Nathan Drake's original '24 funds' comment was overlooked. Or perhaps I read it incorrectly. Perhaps Nathan Drake can clarify, but I don't believe he was in any way stating a position or advocating for an individual to hold 24 funds in their portfolio. It was merely a comment about how many funds Avantis offers investors. While this number is sure to keep changing, 24 funds is a much tighter offering portfolio than most other relevant firms... including Vanguard & DFA (as mentioned in earlier posts).

Yes, that's correct. I did not intend to say that 24 funds for an individual investor was recommended.

Avantis' primary customers are not retail investors, but registered investment advisors (RIAs). Each RIA is going to have their own unique strategy they prefer to place their clients in. Or each client will have unique taxable circumstances that may drive different allocation decisions.

Ironically, the added fund lineup allows for MORE SIMPLICITY because you can have a specific fund-of-fund that is useful in one situation while another fund-of-fund may be better in another. Their funds are NOT intended to be universally used by everyone. They are simply different tools that can be tailored to unique situations or preferences.
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Re: Avantis Funds: what's so special about them?

Post by muffins14 »

beezlebub wrote: Mon Mar 27, 2023 9:02 pm
Apathizer wrote: Mon Mar 27, 2023 8:57 pm
beezlebub wrote: Mon Mar 27, 2023 8:33 pm A while back I ended up owning AVUS during a round of TLHing where I ran out of viable partners for VTI. The more I read about it, the more uncomfortable I became with it. Avantis uses the term “financial science” which translates to hogwash and future predicting to me. You can dress up speculating any way you want, but at the end of the day anything other than total market is exactly that. I ended up selling it AVUS and repurchasing VTI thus giving back some of my harvested losses in the process. No regrets.
That seems ideological rather than practical. Well I'll admit financial science is mainly for marketing, tilting towards assets with higher expected returns make sense. This definitely is not speculation. It's diversifying across different market segments to expand potential sources of risk for higher and more consistent return.

I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
The value factor is a simple regression over 100 years of data.

There is no ARKK factor with that history or simplicity. The two aren’t really similar at all in their theoretical basis or implementation
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Re: Avantis Funds: what's so special about them?

Post by km91 »

beezlebub wrote: Mon Mar 27, 2023 9:02 pm “Higher expected” returns is speculating by definition.
Why? If I bought AVUS in January 2022 at $80 was considering buying again tomorrow at $70, I can say for certain which lot has the higher expected return, and all I needed to know was the price. I can say which bond will have the highest expected return with near certainty given just the current yield. When I rebalance, I am automatically buying more of the assets that have gotten cheaper, and sell assets that have gotten more expensive. Are bogleheads playing a dangerous game of speculation every time we rebalance?
Apathizer
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

beezlebub wrote: Mon Mar 27, 2023 9:02 pm
Apathizer wrote: Mon Mar 27, 2023 8:57 pm
beezlebub wrote: Mon Mar 27, 2023 8:33 pm A while back I ended up owning AVUS during a round of TLHing where I ran out of viable partners for VTI. The more I read about it, the more uncomfortable I became with it. Avantis uses the term “financial science” which translates to hogwash and future predicting to me. You can dress up speculating any way you want, but at the end of the day anything other than total market is exactly that. I ended up selling it AVUS and repurchasing VTI thus giving back some of my harvested losses in the process. No regrets.
That seems ideological rather than practical. Well I'll admit financial science is mainly for marketing, tilting towards assets with higher expected returns make sense. This definitely is not speculation. It's diversifying across different market segments to expand potential sources of risk for higher and more consistent return.

I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
That's not even a remotely equivalent analogy. A better analogy is comparing stocks and bonds. Stocks are riskier than bonds, but have higher expected returns. If you accept this Factor tilts are based on the same reasoning. Some stocks within the market most notably small value stocks have higher expected returns than the total market. It's essentially the same reasoning as stocks and bonds, but instead of two entirely different types of assets, we're tilting towards segments of the market in a particular asset which is stocks.

Woods approach was essentially stock picking. That's different from the systematic approach of tilting. Tilts are an extension of the efficient market hypothesis rather than contrary to it.
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JSPECO9
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Re: Avantis Funds: what's so special about them?

Post by JSPECO9 »

beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
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Re: Avantis Funds: what's so special about them?

Post by Tom_T »

Factor investing is constantly debated on this board. There's a very long thread here:

https://bogleheads.org/forum/viewtopic. ... &start=250

Just because some people say that it has higher expected returns doesn't mean everyone else agrees. I don't have a strong feeling either way, but when people make declarative statements about one investing strategy or another, just note that there's almost always someone on the other side of the debate. And a thread dedicated to such a debate is the better place to discuss it.
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Re: Avantis Funds: what's so special about them?

Post by beezlebub »

JSPECO9 wrote: Tue Mar 28, 2023 10:06 am
beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
Stocks and bonds are a different ball game. Buying a company and buying a debt instrument aren't equivalent to tilting stock market factors . I will say that stocks have an undetermined expected return compared to bonds predetermined return; there's no speculation in that, it just is the nature of the different assets.

As for my portfolio, it is roughly 50% VTI, 50% VOO (TLH trade partners).
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Re: Avantis Funds: what's so special about them?

Post by CletusCaddy »

beezlebub wrote: Tue Mar 28, 2023 10:46 am
JSPECO9 wrote: Tue Mar 28, 2023 10:06 am
beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
Stocks and bonds are a different ball game. Buying a company and buying a debt instrument aren't equivalent to tilting stock market factors . I will say that stocks have an undetermined expected return compared to bonds predetermined return; there's no speculation in that, it just is the nature of the different assets.

As for my portfolio, it is roughly 50% VTI, 50% VOO (TLH trade partners).
I don’t think you understand the definition of “expected return”
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Re: Avantis Funds: what's so special about them?

Post by beezlebub »

CletusCaddy wrote: Tue Mar 28, 2023 11:02 am
beezlebub wrote: Tue Mar 28, 2023 10:46 am
JSPECO9 wrote: Tue Mar 28, 2023 10:06 am
beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
Stocks and bonds are a different ball game. Buying a company and buying a debt instrument aren't equivalent to tilting stock market factors . I will say that stocks have an undetermined expected return compared to bonds predetermined return; there's no speculation in that, it just is the nature of the different assets.

As for my portfolio, it is roughly 50% VTI, 50% VOO (TLH trade partners).
I don’t think you understand the definition of “expected return”

You can use every forecasting tool available across an infinite amount of factors to help you derive an expected return and I can guarantee you it will be incorrect, and over the long term the actual return will not beat the market. That I do understand.
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Re: Avantis Funds: what's so special about them?

Post by 20cm »

beezlebub wrote: Tue Mar 28, 2023 11:09 am
CletusCaddy wrote: Tue Mar 28, 2023 11:02 am
beezlebub wrote: Tue Mar 28, 2023 10:46 am
JSPECO9 wrote: Tue Mar 28, 2023 10:06 am
beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
Stocks and bonds are a different ball game. Buying a company and buying a debt instrument aren't equivalent to tilting stock market factors . I will say that stocks have an undetermined expected return compared to bonds predetermined return; there's no speculation in that, it just is the nature of the different assets.

As for my portfolio, it is roughly 50% VTI, 50% VOO (TLH trade partners).
I don’t think you understand the definition of “expected return”

You can use every forecasting tool available across an infinite amount of factors to help you derive an expected return and I can guarantee you it will be incorrect, and over the long term the actual return will not beat the market. That I do understand.
No one on BH agrees on what 'the market' is, but everyone on BH agrees that whatever it is, it can't be beat. :D
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

beezlebub wrote: Tue Mar 28, 2023 11:09 am
CletusCaddy wrote: Tue Mar 28, 2023 11:02 am
beezlebub wrote: Tue Mar 28, 2023 10:46 am
JSPECO9 wrote: Tue Mar 28, 2023 10:06 am
beezlebub wrote: Mon Mar 27, 2023 9:02 pm
“Higher expected” returns is speculating by definition. Why stop at AVUS then? Cathie Woods and her ARKK funds had higher expected returns by her math, and they did for a short while. There is no difference between and ARKK and an AVUS since they both are predicated on making a guess about the future based on the past. I’m not in the guessing/betting business , and it is antithetical to the Boglehead approach.
As someone who's on the fence with no horse in the race, let me ask you: do you feel the same way about stocks over bonds? Do you feel like it's speculation to say that stocks have a higher expected return over bonds?

Also just curious if you don't mind sharing: what's your portfolio?
Stocks and bonds are a different ball game. Buying a company and buying a debt instrument aren't equivalent to tilting stock market factors . I will say that stocks have an undetermined expected return compared to bonds predetermined return; there's no speculation in that, it just is the nature of the different assets.

As for my portfolio, it is roughly 50% VTI, 50% VOO (TLH trade partners).
I don’t think you understand the definition of “expected return”

You can use every forecasting tool available across an infinite amount of factors to help you derive an expected return and I can guarantee you it will be incorrect, and over the long term the actual return will not beat the market. That I do understand.
If by 'the market' you mean the MCW TSM, you're perceived understanding is presumptuous and wrong. The market price is determined by available information regarding a particular stock's potential risk and return. Tilting towards certain riskier stocks with certain characteristics has been shown to increase the likelihood of higher returns over MCW.

Empirically small value and small stocks have out-performed a MCW portfolio over the long term. There are theoretical and behavioral reasons to expect this to persist at least to some extent. Perhaps a refresher is in order.
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Taylor Larimore
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Re: Avantis Funds: what's so special about them?

Post by Taylor Larimore »

I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
I did just that. The 10 year average return for AVUS was 7.33%. For VTI (Total Stock Market) it was 11.41%.

Best wishes.
Taylor
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Apathizer
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

Taylor Larimore wrote: Tue Mar 28, 2023 2:53 pm
I suggest you compare the returns of avus and vti. AVUS outperformed by about 2% annually.
I did just that. The 10 year average return for AVUS was 7.33%. For VTI (Total Stock Market) it was 11.41%.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "My preferred index fund happens to be the total stock market which includes large, medium, and small stocks."
AVUS has only existed for about 3 years, so where exactly did you get that figure? Over those 3 years VTI has returned about 8% while AVUS has returned about 10%, so your statement seems to be completed fabricated. Here's the actual data:
https://www.portfoliovisualizer.com/bac ... ion2_2=100
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Re: Avantis Funds: what's so special about them?

Post by Taylor Larimore »

Apathizer:

Thank you for the correction.

AVUS has indeed outperformed VTI during the past 3 years: Avus 21.12% -- VTI 17.65%.

Best wishes.
Taylor
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Re: Avantis Funds: what's so special about them?

Post by rushrocker »

Note that AVUS performed in lockstep with VTI from 2020-2021 (23.00% vs 23.33% CAGR).

In 2022 it crashed less, because while the market factor returned negative, the value premium was positive.

A product of convenient timing that make its results look so good.

Its performance difference from VTI going forward will be almost entirely due to its value tilt.
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Re: Avantis Funds: what's so special about them?

Post by CletusCaddy »

rushrocker wrote: Tue Mar 28, 2023 4:37 pm Note that AVUS performed in lockstep with VTI from 2020-2021 (23.00% vs 23.33% CAGR).

In 2022 it crashed less, because while the market factor returned negative, the value premium was positive.

A product of convenient timing that make its results look so good.

Its performance difference from VTI going forward will be almost entirely due to its value tilt.
I mean that’s the point of the fund is it not?

And the reason those of us who use it is that we expect the value premium to be positive more often than not in the long run.
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Re: Avantis Funds: what's so special about them?

Post by rushrocker »

CletusCaddy wrote: Tue Mar 28, 2023 5:23 pm
rushrocker wrote: Tue Mar 28, 2023 4:37 pm Note that AVUS performed in lockstep with VTI from 2020-2021 (23.00% vs 23.33% CAGR).

In 2022 it crashed less, because while the market factor returned negative, the value premium was positive.

A product of convenient timing that make its results look so good.

Its performance difference from VTI going forward will be almost entirely due to its value tilt.
I mean that’s the point of the fund is it not?

And the reason those of us who use it is that we expect the value premium to be positive more often than not in the long run.
Yes indeed. Personally, I use AVUV and AVLV to tilt my US equity holdings.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

CletusCaddy wrote: Tue Mar 28, 2023 5:23 pm
rushrocker wrote: Tue Mar 28, 2023 4:37 pm Note that AVUS performed in lockstep with VTI from 2020-2021 (23.00% vs 23.33% CAGR).

In 2022 it crashed less, because while the market factor returned negative, the value premium was positive.

A product of convenient timing that make its results look so good.

Its performance difference from VTI going forward will be almost entirely due to its value tilt.
I mean that’s the point of the fund is it not?

And the reason those of us who use it is that we expect the value premium to be positive more often than not in the long run.
Yes, though for me it's about diversity and consistency more than anything else. Since value and small value stocks are imperfectly correlated with the total market and growth stocks in particular, tilting towards them makes sense to me since it seems likely to improve return consistency.

To me MCW TSM is generally fine, but allocates too much to large growth. I certainly want some exposure to this sector, but don't want to be too heavily dependent on it.
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Tom_T
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Re: Avantis Funds: what's so special about them?

Post by Tom_T »

The discussion going on here is one you may want to participate in.

https://bogleheads.org/forum/viewtopic. ... &start=300
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Re: Avantis Funds: what's so special about them?

Post by zero_coupon »

rushrocker wrote: Tue Mar 28, 2023 6:05 pm ...I use AVUV and AVLV to tilt my US equity holdings.
I've read that AVLV contains a bunch of large growth companies (in addition to large value companies, of course).
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Re: Avantis Funds: what's so special about them?

Post by rkhusky »

There is a less than perfect correlation between LV, LG, SV, and SG. So, for maximum diversity one should own all of them. TSM is the easy way to do that. Although one could also use four funds at various proportions.
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Re: Avantis Funds: what's so special about them?

Post by comeinvest »

rkhusky wrote: Thu Mar 30, 2023 9:23 am There is a less than perfect correlation between LV, LG, SV, and SG. So, for maximum diversity one should own all of them. TSM is the easy way to do that. Although one could also use four funds at various proportions.
"So, for maximum diversity one should own all of them." - That is not what the factor "experts" are trying to make us believe. They want to convince us that "value" is a source of return, and "growth" is a source of negative return. In the long run, or in the sense of "expected" returns, of course; not realized returns.

Rebalancing the individual components would theoretically create some excess return, if we believe in mean reversion. I'm sure there is a study quantifying this.
Last edited by comeinvest on Thu Mar 30, 2023 7:10 pm, edited 3 times in total.
Apathizer
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

rkhusky wrote: Thu Mar 30, 2023 9:23 am There is a less than perfect correlation between LV, LG, SV, and SG. So, for maximum diversity one should own all of them. TSM is the easy way to do that. Although one could also use four funds at various proportions.
What exactly do you mean own all of them? If you believe nothing is correlated and owning everything is beneficial, that would seem to me in equal weight index rather than market cap weights.

You don't really get the benefit of imperfect correlation by only owning a modicum of stocks that are not large caps, and large growth especially. Getting diversification benefits from small value stocks means owning them in weights higher than they exist in the market.
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rkhusky
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Re: Avantis Funds: what's so special about them?

Post by rkhusky »

Apathizer wrote: Thu Mar 30, 2023 5:55 pm
rkhusky wrote: Thu Mar 30, 2023 9:23 am There is a less than perfect correlation between LV, LG, SV, and SG. So, for maximum diversity one should own all of them. TSM is the easy way to do that. Although one could also use four funds at various proportions.
What exactly do you mean own all of them? If you believe nothing is correlated and owning everything is beneficial, that would seem to me in equal weight index rather than market cap weights.

You don't really get the benefit of imperfect correlation by only owning a modicum of stocks that are not large caps, and large growth especially. Getting diversification benefits from small value stocks means owning them in weights higher than they exist in the market.
Equal weights for the four sectors is certainly reasonable.
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Re: Avantis Funds: what's so special about them?

Post by Apathizer »

rkhusky wrote: Thu Mar 30, 2023 7:32 pm
Apathizer wrote: Thu Mar 30, 2023 5:55 pm
rkhusky wrote: Thu Mar 30, 2023 9:23 am There is a less than perfect correlation between LV, LG, SV, and SG. So, for maximum diversity one should own all of them. TSM is the easy way to do that. Although one could also use four funds at various proportions.
What exactly do you mean own all of them? If you believe nothing is correlated and owning everything is beneficial, that would seem to me in equal weight index rather than market cap weights.

You don't really get the benefit of imperfect correlation by only owning a modicum of stocks that are not large caps, and large growth especially. Getting diversification benefits from small value stocks means owning them in weights higher than they exist in the market.
Equal weights for the four sectors is certainly reasonable.
You realize owning everything in equal weight with regular re-balancing would essentially mean 0% long term returns?
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
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