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Gareth Hargreaves
Posted: 21 October 2023 07:29:42(UTC)
#1

Joined: 20/03/2022(UTC)
Posts: 14
Wondering your thoughts on the Vangaurd small cap index.

In my sipp with 20 years to accumulate.

Have VWRP as my core, but concerned about valuations of the seven.

Aiming to have about 50% of portfolio in low cost trackers.

Also, hold a handful of IT in an attempt to gain some alpha. In small med caps have JMI, FAS, BASC, FSV, IEM, AIE.

Is the index a good vehicle for small caps? Always thought IT better for these and being able to be selective on which small caps to hold.

Jeremy Grantham advising that Russell 2000 bad place to invest as as high level of zombie companies with high debt and most effected by raising interest rates. Obviously world small cap index about 60% USA.
Thanks

Gareth
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Fuzzy Beats
Posted: 22 October 2023 21:54:09(UTC)
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Joined: 24/02/2015(UTC)
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I hold the WLDS ETF to balance out my core holding in VWRL.

If it wasn't for the need to avoid the dreaded HL fund tax I would probably consider the Vanguard small cap fund as it's TER is slightly cheaper.

Conventional wisdom appears to suggest that stockpickers do better at beating the index in small caps, but I'm unwilling to pay the higher fees associated with small cap funds to line the managers pockets.

I'm holding WLDS with a minimum 10 year view. The current valuation at 12x earnings doesn't seem too demanding relative to the market.
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Gareth Hargreaves on 07/11/2023(UTC)
ben ski
Posted: 23 October 2023 00:33:08(UTC)
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I'm not convinced there's any real benefit. The 'size effect' (the idea you get higher returns from taking more risk with smaller companies) seems to have been down to bad data – Cliff Asness 'debunked' it a few years back. And even with the inaccurate data, the effect seemed to vanish in the 80s.

Many large companies are just portfolios of smaller companies. The large/small valuation gap may be something you can bet against – but it's very hard to say whether big tech's really overvalued. How much more is a business like Apple worth paying for? I think probably a lot.
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Tim D on 23/10/2023(UTC), Gareth Hargreaves on 07/11/2023(UTC)
Johan De Silva
Posted: 24 October 2023 09:56:40(UTC)
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ben ski;283440 wrote:
I'm not convinced there's any real benefit. The 'size effect' (the idea you get higher returns from taking more risk with smaller companies) seems to have been down to bad data – Cliff Asness 'debunked' it a few years back. And even with the inaccurate data, the effect seemed to vanish in the 80s.


Read https://www.aqr.com/Insi...ze-Effect-Daily-Edition

But hang on!!!!

Small index (like WSML) will outperform large cap index out of every crisis due to volatility. We are in one now. Plenty of research to suggest this is a good idea.

And buying active trusts on a discount could amplify the return....may take a while to happen.

https://www.schroders.co...rm-better-in-recessions/
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Thrugelmir on 24/10/2023(UTC), Fuzzy Beats on 24/10/2023(UTC), Gareth Hargreaves on 07/11/2023(UTC)
Raph Antoine
Posted: 04 November 2023 11:04:43(UTC)
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Joined: 02/01/2023(UTC)
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There is also a good piece about Small Cap Quality from GMO here (See Factor Investing Section), alongside other reads.
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Gareth Hargreaves on 07/11/2023(UTC)
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