Comments by "JP 72" (@739jep) on "Five Factor Investing with ETFs" video.

  1. I’m in the EU also. I was lucky to be able to get access to Avantis products. I would recommend the ‘small cap value’ products offered by SPDR instead. The problem with investing in small caps is that if you include small cap growth stocks then the size premium appears to take a big hit. SPDR doenst as good a job managing for this but they do better than vanguard in my opinion (at least in Europe)
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  2. I’m not sure if there’s much theoretical consensus on why they’re riskier , but an explanation I like (which is a long run economic concept) is that profitable firms are known to be profitable , so they attract more competition to the industry and this will eat away at profits / margins.
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  3.  @lorenzo121191  I’m not sure the indexes being market weighted was really relevant to the arguments for and against the possibility of an index fund bubble. It was more the passive nature of the funds , which would indiscriminately purchase stocks if they were in the index - the same type of thing happens with five factor investing just in a slightly different way. Small cap value funds , although perhaps slightly more active, still purchase stocks based on a simple set of rules and will hold them simply because they meet a certain set of criteria. Also people investing in small cap value funds 1) likely still hold a market weighted fund 2) likely don’t know much about the individual stocks within the small cap value funds they’re investing in. I could be wrong though. 🤷‍♂️ I doubt the the arguments in favour of their not being a index bubble have changed though. It is still relevant how much trading is being done by the funds and the grossman Stiglitz paradox still holds here.
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  4. He believed in at least one factor. The market factor - which also comes and goes. That’s why tilting towards several could be beneficial as it provides a diversification benefit
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  5. They don’t define everything that outperforms the market as risky. To be a factor it has it be persistent and robust - because theoretically if it wasn’t a risk factor then it would just be arbitraged away. These factors also allow the building of models that have predictive power. That is also important to remember. But if it makes you feel better , you can call it whatever you like , perhaps you think the market is just slow to learn and hasn’t arbitraged away the ‘alpha’ associated with value , size etc yet. If you believe it will still persist then what you label it changes nothing in terms of the practicality of how you invest. If you don’t believe it will persist that’s fine too, but to be consistent you should probably question also whether market returns/risk will persist as well.
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  6. Not Canadian , but I think this applies to a lot of countries. There can be a tax advantage to having a home country bias.
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  7. Those are American funds.
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  8. Quality video as always.
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  9. Market timing is never a good idea.
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  10. - It attracts competition , threatening margins - more profitable firms tend to have more of their cash flow in the distant future which is more uncertain.
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  11. Why do you think it would change the arguments?
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