I'm not too sure attributing interest rates paints a valid picture for outperformance. Most of the return came from November 2020 to February 2021, at which point interest rates had been left untouched. The outperformance can be attributed, more broadly and accurately, to heavier factor loadings. Just because it is actively managed, it doesn't mean that they are making purely active choices about the "qualitative" components of companies. Rules-based active management can be a step above from indexing since indexing is also "rules-based". I think taking an index and tilting further into factors we know explain outperformance, is overall a better set up over the long term.
While AVUV deviates from an index, I still think of it as passively managed because they select their stock with an algorithm. In effect, they are creating their own index and sticking to that.
I have heard that if you want to brag about your actively managed mutual fund performance, you should use Russell 2000 as the benchmark. With that in mind, I would prefer to choose another benchmark for AVUV, like VIOV (S&P 600 small cap value)
Yes, the value screen that AVUV applies likely selects more value-y stocks than does the Russell 2000 Value Index. Plus, AVUV also applies a profitability screen to weed out some of the deadwood. Time will tell if this factor-based approach outperforms.
can you please do an update? ive been hearing from some very knowledgeable investors that financials will be, and have been, encountering major headwinds for the forseeable future. as you know, financials are a large part of AVUV's holdings, so i'd really like to know your thoughts on this given where we are in early November 2023
Thanks so much for this close look at AVUV. I had come to the same conclusion as you regarding the comparison between AVUV and VBR and a few other “small cap value” funds - AVUV is the smallest and value-est! However, to my frustration, the fund cannot be purchased in my Merrill Edge account, I believe because of the short track record. I’d love some information about how brokers decide which funds they allow (or disallow) in their accounts. Cheers!
I have the VOO currently, do you think it’s better to get AVUV or get VBR if I want to maximise returns? I personally think AVUV can have better performance but has its drawbacks like volatility and lack of track record. Maybe a young investor in their 20s like me can stomach the volatility
3:20 can’t the same thing be said about VTI and VOO? Since now everybody thinks investing in those etf’s are the best thing since sliced bread, wouldn’t that hurt their future performance?
This cannot be emphasized enough. VTI and VOO are full of growth companies that have lower expected returns due to inflated prices. Especially considering we have a huge value spread between expensive companies and value companies - It is far from that. Value, by definition, are companies have less interest in them. Comparing ARKK and AVUV misses the whole point in valuation theory.
great video! i was just looking to try and find a decent quality small cap value ETF that i'll have no trouble holding long term to compliment my portfolio this sounds right up my alley
How does the increased popularity of passive investing into index funds by and the increased number of investors who soley invest into the s&p 500 or tech funds affect the small cap value premium going into the future? Can small cap value appreciate if investors are mainly taught these days to just blindly keep investing into the s&p 500 and tech (qqq)? Where will capital inflows come in to increase scv value if all the money will consistently keep pouring into s&p 500/ tech by the new generation of passive investors?
Hi Rob, love your videos! Have you done a video concerning JEPI or Similar ETF! If not, I would like to hear your take since this is a similar strategy used by professional traders. Thanks! Allen D.
What fund is a good replacement for Vanguard Total international stock market? in the UK we Can't buy that fund as it's unavailable to us. Any help would be appreciated.
I 'd be interested to hear what other people think. There is a lot of attention around Dimensional funds lately. However, VIOV has actually outperformed DFSVX over the last decade. How could that be explained?
DFA funds target smaller stocks and lower-priced value stocks than traditional index funds (just like an all-stock fund has more equity exposure than a 60/40 balanced fund), so when value & small cap stocks underperform-as they have for the last 10 years-then the fund with deeper size/value exposure will temporarily underperform. Over time, value & small stocks have outperformed growth & large stocks over 75% of 5-year periods and 90% of 10-year periods, so it’s a safe bet that DFA will do better over time.
@@ericnelson7613 Fair enough. At the same time, DFA and Avantis have ended up with very different portfolios while, in principle, applying the same approach from the Fama-French research. Eg they have quite different median cap and quite different P/B ratios. I guess we could expect the one that goes deeper into SCV to be able to provide the highest expected return. Yet, we are in a section of the market that has less liquidity, so I struggle to see how the fund that offers best exposure to SCV today can guarantee to continue doing so in the future. And as new SCV-focussed funds will be created, how is one supposed to know in advance which one will do best?
@@costanzojr DFA & Avantis have different weighting schemes so they’re going to own different stocks. You don’t have to always be in the fund with the absolute smallest/cheapest stocks, but smaller/cheaper (in the case of DFA vs Vanguard or S&P) is a clear advantage, as is daily management/rebalancing vs periodic index reconstitution (index funds). DFA does the best of combining broad diversification (DFSVX has 1,000+ stocks) along with targeted size & value exposure while screening out low profitability stocks.
@@ericnelson7613 - I’m not 100% sure - but it also seems like DFA weighs the smallcap factor a bit more than Avantis whereas Avantis seems to weigh Profitability factor a bit more than DFA does. No hard facts on my part just cursory observation and I could be wrong.
I’ve heard that the out performance of AVUV as compared to other small cap value funds can be attributed to its exposure to energy. If you remove that, the fund does not outperform and performance will suffer once energy falls.
Even if that's true, the holdings are continuously monitored so if/when energy companies' value characteristics decrease their allocation will be reduced.
