Firstly, here is my current equity portfolio:
I've considered adding value, specifically small-cap value, and momentum tilt to my portfolio. Here is my plan:
- US vs. Non-US = 60:40
- Market cap weight (MCW) vs. Factors = 75:25
- Value vs. Momentum = 60:40
I've also been studying most ETFs' methodology, and I like Avantis and Alpha Architect. Here are what I plan to add:
- AVUV: Avantis U.S. Small Cap Value ETF
- AVDV: Avantis International Small Cap Value ETF
- QMOM: Alpha Architect U.S. Quantitative Momentum ETF
- IMOM: Alpha Architect International Quantitative Momentum ETF
Here is what my equity portfolio would look like with the tilt:
- VTI = 45%
- AVUV = 9%
- QMOM = 6%
- VXUS = 30%
- AVDV = 6%
- IMOM = 4%
Besides the increased rebalancing difficulties and management fee of this new plan, my biggest concern is how much time I need to commit to it. Both Rick Ferri and Wes Gray agreed that a tilted portfolio may require 25 years of commitment, due to its tracking error. However, in studies, value and momentum have a strong negative correlation, so when both are together, they should help smooth out the performance.
I believe in factor premiums, and I'm confident with this plan. My most considerable doubt is the long-term commitment, which I can't guarantee due to my health condition. My kids may inherit my portfolio once I'm gone, and I assume they might prefer to see some evidence to trust this plan.
I'm looking forward to hearing some feedback about my new portfolio, especially if you have also looked into factor tilting before or have already added one or two factors to your portfolio. Thanks in advance!
Considering adding some tilt, wanted to hear more feedback
byu/oloolaa ininvesting
Posted by oloolaa
1 Comment
Qmom is negative YTD. You’re getting bored with your boring index funds that are doing great and replacing them with the newest fad that sucks.