I don't expect anyone else to believe in small value tilting, and I certainly don't think anyone should tilt more than they believe.Avantis, like DFA before it, has made itself a lot of money, while making investors poorer than if they'd just owned TSM funds (especially on a risk adjusted basis). Markets are as efficient as a diamond is hard. Thinking you've found a free lunch in "small value" stocks, or any other corner of the market, is a rookie mistake IMO. The other explanation, that value is a "risk" story, falls apart as soon as you try to identify what that risk might be vs similar growth stocks. Wealthfront finally figured this out: viewtopic.php?t=369427
There are two arguments for small value stocks, one is behavioral (they're not cool like Tesla and Nvidia) and the other is risk based (they're more likely to go out of business). The first is a "free lunch" but the second is not of course. And there will be LONG periods of time when they underperform overall markets like the last 15-20 years. If you're not okay with that, then best to not invest.
But anyone who drops a SV tilt now in favor of a LG tilt when the valuation gap between them is at a historic high seems foolish. The pendulum will swing eventually, or do you believe LG stocks are trees that grow to the sky? At worst, SV stocks should have long term returns equal to the overall market, no?
Statistics: Posted by White Coat Investor — Sat Aug 30, 2025 9:42 am — Replies 40 — Views 4626