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Factors: Small and Value- worth it or fools errand?

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  • Avatar Tangler 
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    I started hard core investing in about 2010. I have a tilt toward small and value. Value is in my Roth IRAs, and Small in both Roth and taxable (Vanguard Tax-managed small cap index fund). I will stick with this, since I have done it for 9 years now and know the data but I wonder if it is a mistake. I know savings rate is more important but still wonder if this small and value tilt is needless complexity. The rest of my portfolio is essentially in the 3 fund bogleheads portfolio and my wife is all 3 fund.

    Anyway, my question is: Small and Value factors. Is this a fools errand or worth it?

    I know value sometimes takes decades to eventually outperform (or at least it once did) but  wonder if the added costs (albeit small with VG) and the fact that everyone knows these factors outperformed in the past + the added risk mean this is dumb.

    Thanks for the wisdom.

     

    #226644 Reply
    Zaphod Zaphod 
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    I’ll let you know in 30 years.

    #226651 Reply
    Avatar Peds 
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    I don’t do it.
    Didn’t we just have this thread?

    #226652 Reply
    Liked by Tangler, Zaphod
    Avatar Tangler 
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    Sorry. I will look for the other tread.

    #226667 Reply
    Avatar Peds 
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    #226669 Reply
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    Avatar Tangler 
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    Head slap, Good lord, here it is!

    Small cap and value premium not worth it?

    #226671 Reply
    Lordosis Lordosis 
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    Earnest refinancing bonus

    I just mirror VTSAX.

    Most people who do it do so with around 10% it seems. So even if it beats the rest of the market by 2-3% it really doesn’t budge the needle much increasing my return by .2-.3%. And that is a big if.

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

    #226672 Reply
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    CordMcNally CordMcNally 
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    Some people do it and some people don’t. Will it work out? Hard to say. Just make sure your asset allocation stays reasonable and you’ll be fine.

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

    #226680 Reply
    Craigy Craigy 
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    I do it.

    From a value perspective, all things equal, if one company has a lower P/E than another, you’re getting more earnings for your money.  However, all things are never equal.  😉

    In my anecdotal experience, smaller companies are hungrier.  Large companies plateau.  For what that’s worth (probably not a lot 😆 ).

    I don’t expect it to wildly outperform, but if if there is a reasonable possibility of a half point of extra growth over an investing career, I’ll take it.

    LEVEL 1 WCI FORUM MEMBER.

    #226995 Reply
    Liked by Tangler
    Avatar Marko-ER 
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    Ok, I will bite… seems like a good idea & to the OP, I presume you have this mutual fund holding in a taxable space, right?  (as implied by the tax-managed moniker).

    So then I looked at the holdings and something like 4-5% is in real estate, not individual stocks, but freakin’ VNQ.  C’mon a REIT in taxable space?  And not pick and choose REIT stock, but just bulk REIT?

    https://investor.vanguard.com/mutual-funds/profile/overview/VTMSX/portfolio-holdings

    Then I looked at VNQ, and it’s not terribly ‘value’ and not terribly ‘small’ (actually leaning toward mid-large cap Growth).  So I would say I find VTMSX does not follow its name as well as for instance VBR:

    http://portfolios.morningstar.com/fund/summary?t=VTMSX

    http://portfolios.morningstar.com/fund/summary?t=VBR

    #227225 Reply

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