this post was submitted on 21 Oct 2024
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FIRE (Financial Independence Retire Early)

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FIRE is a lifestyle movement with the goal of gaining financial independence and retiring early.


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[–] [email protected] 3 points 2 months ago

I've been reading and watching a lot about portfolio structure theory (lots of Ben Felix videos), and I've decided to add in a small cap value tilt, especially since the last 10+ years have had outsized returns for large caps. So I'm shifting to a 10% tilt toward small cap value, and I may end up extending that to 20% depending on how my research goes.

I used to have a small tilt toward small caps and the healthcare sector, but I didn't have good data to back that up and I ended up killing those tilts about 10 years ago. But the research is looking a lot more compelling, and now there are some solid ETFs that have reasonable expenses. Here are the funds I'm looking at:

  • AVUV - small cap value, with an "active" component that removes less profitable companies, but it's all based on data; related funds: DFSV (similar to AVUV, but with some different thresholds), RWJ (S&P 600 small cap value, but revenue weight instead of market weight), IJS (S&P 600 small cap value by iShares)
  • AVDV - int'l small cap value, again with an "active" component like AVUV; related funds: DISV (similar to AVDV, but run by Dimensional International), ISVL (iShares int'l small cap value, but only in developed markets), AVES (same company as AVDV, but emerging markets all cap value)

I'm thinking of splitting between AVUV and DFSV for better diversification (quite a bit of difference), and AVDV and AVES for international (probably not going to bother w/ DISV). I'm still researching, so I'm DCAing the portfolio into the new allocation.

I used to be 100% total market cap, with a small tilt toward US (70/30 US/international), and I'm moving toward the same US/international weight, but adding a 10% tilt toward small value, and I may end up doing a 10% tilt to value across the board (in addition to the 10% small cap value tilt).

Not sure if this is going to work out, but I figure it shouldn't be a huge difference vs a more boring 2-fund or 3-fund portfolio. I'm 100% stocks for now, and I intend to keep it that way until I'm within 5 years of my FI number (and may stick with it, depending on what I choose to do after FI).