That's great! But 80% might be overweighed too much? Growth makes money too, those tech stocks could have periods of booms and big gains. Is your other 20% blended or growth?Hey man, I totally agree with everything you said there. I've had a portfolio of 40% AVUV and 40% AVDV since late May and I can't complain. It's such a nice feeling to sleep at night not wondering whether your money is exposed to idiosyncratic AI hype and sentiment
Okay, here it is:
Royce Investments “The Case for Allocating to International Small-Cap Stocks” white paper (Oct 2025)
- Shows international small-cap stocks have lower correlation to U.S. large caps, making them additive in a global portfolio.
- Shows internationally small-caps have outperformed international large-caps over long horizons, with competitive risk-adjusted returns.
Why this matters: It supports the diversification benefit of iSCV, which is part of the argument for a large allocation.
Value and small factor research globally
The article “Evidence of the Value and Small Premium in International and Emerging-Market Equities” shows systematic small-cap and value premiums exist in international contexts. (Investment Moats)
The article “Small Caps Are Where to Find Value” (CFA Institute blog, Apr 2025) notes small caps often trade at more attractive valuations and have higher expected returns, including internationally. (CFA Institute Daily Browse)
Why this matters: It gives theoretical and empirical backing to the idea that small & value in foreign markets have higher expected returns.Interpreting the evidence: What it doesn’t show
1. The evidence does not guarantee iSCV will outperform in the next 10 years.
2. Much of the research is about international small‐cap in general, not always small-cap value.
3. The size of the allocation (e.g., 40%) is more a strategic choice than something explicitly tested in these papers. There is no major paper that says “allocate exactly 40 % to iSCV in your portfolio.”
4. Some of the outperformance comes from small + value + international, but depends on market regime, valuations, currency, etc.
5. The evidence is more compelling for “there is a premium” than for “this premium will be extremely large every decade”.Why the 40% figure can be supported by the evidence
1. Given the evidence above, here is how I translate it into the 40% allocation:
2. iSCV offers both a value premium and a small size premium, internationally, which suggests a higher expected return than a baseline “international large-cap” or “U.S. large-cap” equity.
3. Because of low correlation with the U.S. large-cap market (60% S&P part of your portfolio) the diversification benefit is large. The evidence from Royce shows low correlation and additive benefit.
4. Your long-horizon and “not watching” mindset means you can tolerate the volatility and underperformance risk that iSCV brings; the research suggests these premiums are long-term phenomena but involve risk.
5. To capture meaningful premium you need a meaningful weight. A small allocation (5-10%) might not capture enough premium given fees and drift. Thus choosing 40% is a strategic decision to meaningfully tilt the portfolio toward that segment, given your belief and evidence.
6. So, while the research doesn’t say “exactly 40%,” it does provide support for doing a substantial allocation to iSCV. Your 40% is a reasoned number given your high conviction and your capacity to stick with it.
Interpreting the evidence: What it doesn’t show
Why the 40% figure can be supported by the evidenceStatistics: Posted by K8ya — Mon Dec 01, 2025 12:48 am — Replies 79 — Views 6368