Anyone regret tilting their portfolio in a particular way?

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  • Avatar JK 
    Status: Physician
    Posts: 140
    Joined: 01/09/2016

    I’m relatively new to investing having only been at it for the last 5 years (relatively new attending). I’ve essentially read most everything on WCI and several of his partners sites (as well as Bogleheads and some other forums). My entire portfolio is all low cost vanguard index funds (average ER of my portfolio is 0.07) and have it essentially modeled after the Boglehead’s 3 fund portfolio. However, in addition to the typical 3 fund portfolio, I’ve also added slight tilts that made sense to me after doing my research/homework approximately 5 years ago.

    10% to Vanguard REIT via VGSLX: trying to diversify and get some real estate exposure

    10% to small cap value via VSIAX: trying to take advantage of Fama/French research and improved returns in the LONG term

    It happens that my tilting has worked against me since starting ~5 years ago which I’m certainly fine with as the goal with all of these investments is for the long term (30+ years). I haven’t sold a thing and continue to invest according to my allocation whenever I have new money. I’m pretty methodical when it comes to that.

    Essentially, I’m just interested in opinions of people who have been doing it a lot longer than me what their thoughts have been on tilting their portfolios. On one hand you have the Paul Merriman’s of the world saying SCV and factor tilting will drive huge returns in the LONG term (and I have a long time horizon). On the other hand you have Allan Roth (latest podcast with WCI) saying it’s overrated now that everybody is doing factor investing, it’s not a “secret” anymore and that will likely erode premiums. And then you have WCI/PoF stating some REASONABLE tilting is likely a good thing but not more than you believe in it…hence why I only have max of 10% in each of the tilts listed above.

    By all definitions on this forum I am a super saver and it won’t make/break me at all whatever I decide, but I’m wondering from other people who fall into that super saver camp and have been doing it for at least 15+ years… was the tilting worth it. And by worth it, I don’t just mean the added “premium” these sectors are looking to provide. But also the additional complexity for rebalancing, holding the different funds across different types of accounts, worrying that your spouse will be able to handle/balance things after an untimely death, etc… It hasn’t been very challenging for me thus far as I enjoy learning and doing financial things, but wondering how that will extrapolate over the next several decades.



    #228311 Reply
    Liked by docnews
    CordMcNally CordMcNally 
    Status: Physician
    Posts: 2806
    Joined: 01/03/2017

    If you’re asking this question then doing a tilt may not be for you. That’s the risk of a tilt. Better returns and also worse returns. It’s been a while but I thought that Fama’s research showed that short term variations are possible and to be expected. 5 years is a fairly short term.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #228315 Reply
    Avatar lucas 
    Status: Physician
    Posts: 40
    Joined: 01/17/2016

    I am currently tilted with REITs, small value, and emerging markets and on my next rebalancing am planning to simplify to 3 fund portfolio.  It’s too cumbersome particularly since a majority of my savings are in my taxable account where I refuse to buy any of these tilts so it ends up throwing off my allocation immediately and exponentially (ok maybe not quite) after each  monthly taxable contribution.  Even if I didn’t have this taxable account issue I would probably simplify anyways.  I find it to be annoying keeping track of all these small tilts and question the real benefit particularly with the pace at which i’m trying to reach FI.

    #228317 Reply
    Liked by Tim
    Lordosis Lordosis 
    Status: Physician
    Posts: 1807
    Joined: 02/11/2019

    Things have been going good in the market recently. Value gas been lagging but still going up. Most people who tilt can probably handle that. However when the market takes a dive it will be much harder to stay the course. Especially if value or whatever tilt you follow falls harder.
    I buy VTSAX. It is the only thing I can have enough faith in over the next 30-60 years.

    “Never let your sense of morals prevent you from doing what is right.”

    #228324 Reply
    Liked by EndoRobert, Tim
    Avatar G 
    Status: Physician, Small Business Owner
    Posts: 1799
    Joined: 01/08/2016

    I’m too lazy to figure out the quantitative success/failure of tilting in my portfolio, but I have a written plan and it gives me something to “do” even though that is pretty much nothing.

    I hadn’t thought about my spouse trying to continue this with an untimely death…it is unlikely to matter.

    #228356 Reply
    The White Coat Investor The White Coat Investor 
    Status: Physician
    Posts: 4521
    Joined: 05/13/2011

    I’ve regretted all my tilts at one point or another! Isn’t that the point of diversification, to always have something doing well and something not doing so well?

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #228359 Reply
    Avatar Tim 
    Status: Accountant
    Posts: 3030
    Joined: 09/18/2018
    Earnest refinancing bonus

    I decided to split US, Intl, and Em into 3 components. I find myself needlessly seeing some going up and some going down. It makes me “wish” everything went up at the same rate, maybe VTSAX would have been better, maybe not.

    #228364 Reply
    Avatar Infinity 
    Status: Physician
    Posts: 91
    Joined: 05/25/2019

    I have 85% in US and 15% international over the past 10+ years.

    Every time when I look at my portfolio, I am very disappointed with the poor performance of international funds.

    However, my positive thinking tells me that it is better for me this way when compared it to if US done poorly.

    #228369 Reply
    Liked by Tim
    Avatar Simsima 
    Status: Physician
    Posts: 22
    Joined: 05/07/2018

    My roth used to be 100% small cap value but now 50/50 small cap blend and midcap blend. No regrets on the small cap value but i like the 50/50 plan better due to more diversification. 401k just has a TDF.
    Solo 401k just has total bond market.
    Wife roth is 100% VTSAX.
    Im aggressive with keeping things simple

    #228476 Reply
    ENT Doc ENT Doc 
    Status: Physician
    Posts: 3500
    Joined: 01/14/2017
    Splash Refinancing Bonus

    If a decision was made with good information I think having regrets simply reflects an outcome bias.  If, however, time/wisdom has taught you to look at things from a different/better perspective or you wish you had considered facts that were relevant at that time I suppose having regrets is reasonable.  But most relevant is what actions will you take now to address things where you realize mistakes were made?

    #228482 Reply
    Liked by docnews, Zaphod
    Zaphod Zaphod 
    Status: Physician, Small Business Owner
    Posts: 6177
    Joined: 01/12/2016

    I regret anything thats ever gone against me, but thats not very good reasoning for changing it. You either stick with something or you cant. If you cant, you should change to something you can stick with.

    #228512 Reply
    Avatar docnews 
    Status: Physician
    Posts: 410
    Joined: 01/09/2016

    I think your question is very valid. The main point people are not addressing is tilting is even newer than indexing. Indexing has the rationale of owning most of the market. Tilting just has the rationale of “retrospectively these sectors did better”. Some tilt because some indexing leaves out many small companies so they do it to include more fully all of the market. But the cost of including them (let alone their higher risk) is often higher. For this higher risk/cost/complication there better be some premium. What was your rationale for tilting? Have you lost faith in it?

    #228524 Reply
    Liked by Simsima, Zaphod
    Craigy Craigy 
    Status: Spouse
    Posts: 2049
    Joined: 09/16/2016

    Not yet.


    #228713 Reply

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