JF10977

[JF10977 @jf10977]

@BarbellFactors @QuietProsperity @benjaminfelix @OptimizedPort @egr_investor @HML_Compounder @dollarsanddata @awealthofcs Also interesting how AVUV has a much better lost year but a higher maximum drawdown.

[JF10977 @jf10977]

@BarbellFactors @QuietProsperity @benjaminfelix @OptimizedPort @egr_investor @HML_Compounder @dollarsanddata @awealthofcs Would be interesting to see results AVLV + AVUV instead of large cap growth

[JF10977 @jf10977]

@PFOInvestor @egr_investor Are you aware of such comparsions?

[JF10977 @jf10977]

@PFOInvestor @egr_investor Mauboussin's research finds, funds that underperform tend to have either low active share or high turnover. It'd be more useful to compare active managers who share the same portfolio characteristics as the S&P 500 — securities selection quality (profitability) and low turnover.

[JF10977 @jf10977]

@PFOInvestor Im not so sure that the author of the papaer got to your same conclusion.

Returns to "Do-Nothing" Portfolios
https://t.co/hvBbvw4YUG

https://t.co/4NG52pG1Sb

[Darren r-σ²/2 @ReformedTrader]

@jf10977 @MebFaber Yes - his paper argued for diversification rather than cap weighting. An equally weighted portfolio is likely to be more diversified than a cap-weighted portfolio anyway if both have an equal number of stocks.

https://t.co/8R6JK0OgP5

[JF10977 @jf10977]

@myersbradley @MebFaber But Japan said the same thing, and it was proven wrong. Point is to build a portfolio that can ride through these macro regimes, not bet on one framework holding forever.

[JF10977 @jf10977]

@myersbradley @MebFaber Also, who decides markets are expensive? P/E alone doesn't account for whether the economy has structurally changed.

Tangible to intangible transition, R&D not capitalized, lower tax rates, lower inflation expectations. all can justify higher P/E.

[JF10977 @jf10977]

@PFOInvestor Point being, prepare your portfolio for any regime, not just the one we're used to.

[JF10977 @jf10977]

@PFOInvestor There's also the Nifty Fifty scenario worth thinking about of high valuation concentration at the top, but instead of getting wiped out, the rest of the market just caught up and it evened out over time.

[JF10977 @jf10977]

@EricBalchunas We don't want to realize that markets don't need a bear market to have low returns. They can just go sideways too.

[JF10977 @jf10977]

@BarbellFactors @jaykaeppel @SystematicIRE If you think about it, everyone in aggregate needs to hold the market portfolio. But a portfolio tilted away from cap weight gives you a better hedge, historically. That only works because most others stay cap weighted. You're the contrarian on the other side.

[JF10977 @jf10977]

@myersbradley You finally got there to stop buying the total market. 2022 expected returns were higher for total market amid the drawdown.

[JF10977 @jf10977]

@ReformedTrader Wow, should have found your post earlier. Some confirmation bias finally.

Six years later every article still cites the study to justify cap weight. The prof himself, on podcasts, when asked how he invests - tilts dividend stocks and international.

[JF10977 @jf10977]

@PFOInvestor People don't get the real distinction that long-only, your capital is what's at risk. As long as you hold something valuable, you can wait for recovery. With margin, you can get blown out before recovery ever comes. Time stops being on your side.

Thanks for your posts.

[JF10977 @jf10977]

@PFOInvestor Thanks for the post. Nice to see some confirmation bias for once.
These products are marketed as a core beta replacement pitched as diversification using historical correlations. But it's just a levered portfolio. Higher cost, fatter left tail.

[JF10977 @jf10977]

@EricBalchunas @MebFaber Everyone who took his previous paper as a case for cap weighting missed the point entirely. His paper showed that long term stock returns are highly skewed and most companies don't stay in business that long. That was never an argument for cap weight.

[JF10977 @jf10977]

@myersbradley The question is equity construction. tilt away from expensive names, go further with an Avantis value strategy as core, or is the sleeve small enough in retirement that it barely matters?

[JF10977 @jf10977]

@myersbradley Agreed that starting valuation matters for income planning. Just settling for the average market return has real drawbacks when you need income now.