Slicing/Dicing?

[Deleted]

1) How much benefit  does one get say over SP500 by slicing dicing into various categories and sectors?
2) How much benefit does one get by changing allocation based on momentum or valuation (reversion to mean) instead of fixed allocation?
 
Example: (you can chose your own %s)

1) 60% SP500 or total us stock market + 30% broad international + 10% multisector Bond fund
or 
2) 40 % SP500 + 20% US small/mid + 30% broad international + 10% multisector Bond fund

Versus

I allocate some to EM, Financials, Energy, Health care, US tech, Large value, small/mid cap value and growth, Developed international etc.


I  get the feeling simple has worked better for me  quite possibly because i am an amateur investor.  the slicing/dicing never worked for me.


I also feel momentum might be the only alpha and that may lead to some slicing dicing and that may give one edge over sp500 if done consistently and well and with good timings.

[steelpony10]

@waffle2 ,

    I never allocated, diversified, rebalanced etc. either. Investing like a juggler is too taxing.

     I did 3 sections of buy and hold, vTI now for growth as a possible income draw for later life issues. A muni turned off reinvestment now after 45+ years boosting my yearly income 25% at this point, and max income in excess of needs with the least dollar amount committed, CEF’s for us.

      Now we’re done, accumulating cash, auto investing into VTI etc. Values are unpredictable and vary daily. They only matter to me as an income investor if/when I ever have to cash anything in. No second guessing here at all. Easy to manage or teach to a successor. Not a lot of investing expertise needed either.

[steadyeddy]

Slicing & dicing makes one feel that somehow they can beat the returns the overall market gives. Some get lucky sometimes. But, usually, over time, it is a fools errand.

There is nothing wrong in trying it and getting past it. Once you outgrow it, you will be happier with a simpler broader portfolio.

[archer]

@waffle2, I do both so I can compare my investing prowess to the overall market. As steadyeddy posted, sometimes I get lucky. I usually get lucky right when I'm about to quit, so I stay on the hamster wheel. I hope to find the balance between just enough time investing to enjoy it but not spend so much time on it that I wish I wasn't.

There are some here that consistently do better than the areas of the market they invest in, so I think it is possible, especially since we are not restricted in ways that fund managers are. I agree with steadyeddy, that momentum is possibly the best for this providing we can recognize it soon enough both going up and down.

[steelpony10]

    Amateurs and pros can’t beat an index over time and that’s a fact.*

    There’s a big difference in the mindset of drawdown and income investors though.

     I just dipped a foot in each pool modifying Buffetts 90/10 VOO to cash recommendation to spend down investors. I am not comfortable spending down and questioning each expenditure throughout retirement. That creates a lot of friction and stress. I added a third rail of reliable income producers to delay any drawdown as long as possible.

      As far as the OP no matter how you cut your salad every piece is subject to the same market conditions. I think diversifying and allocation comes from the old adage of putting all your eggs in one basket.

       My point would be you can overfill the basket. Once you cover equities, income and safer cash like areas what more do you need? There is no for sure solution to future unknowns. You tweak a portfolio as actual facts unfold trying not to add more positions. Any more parts as you age gets more and more cumbersome and adds no more financial security.

        *Let me edit this. It’s 6 a.m. without coffee when I post sometimes like this.

         I accept as fact that most pros and certainly amateurs can’t beat the returns of their category index fund over time. Finding the few that might by projecting years into the future based on past performance remains an unknown result so why not at least try to tip the odds of success in your favor?

[Karen]

Dec 28, 2023 11:54:38 GMT steelpony10 said:

    Amateurs and pros can’t beat an index over time and that’s a fact...

    

We would agree that the majority of amateurs and pros can't beat indexes over time.

But take a look at the performance of FSELX over its Life verses ALL major indexes, including NASDAQ, and perhaps reconsider your statement.

To wit, FSELX, for example, has not just beaten ALL major indexes over its Life and EVERY interim period, it has obliterated them over most periods.

More OEF examples:  

FSPTX and FBGRX, save their 3-yr TR comparison.
BPTIX incepted on 04/30/2003 and has a TR over its Life of 20.2%, far exceeding the TRs of ALL major indexes. Growth of $10K since inception is 2,494% versus FXAIX at 678% per M*.

The "trick" (or "truth"?) in investing, if there is one, is that one of the best investment strategies is to scope out, and BUY & HOLD the relatively consistent % of funds that consistently outperform the indexes. 

When investors read that ONLY X% of funds beat the indexes over a given time period, many/most don't understand that it is THE SAME ONES that do it almost all the time!  

[steelpony10]

Karen ,

      I’m not necessarily looking to beat anything. I’m just looking for reliable long term gains and a balance of risk. I was commenting on the never ending pursuit for the holy grail of portfolio construction which doesn’t exist because of future unknowns.

       As mentioned we use VTI for a broad blend of large, medium and small classes to be used for big later life issues if they ever arise. CEF income is where we take risks. This delays spend down for years.

        Maybe I should have excluded sector funds from my comment whose concentration raises risks and often rewards. We chose not to take risks with equities gambling on cap gains instead we chose leveraged primarily bond funds whose long term values don’t matter as much in our situation as income investors by choice.

[johntaylor]

Probably everybody here has read books by Bogle, Malkiel, etc.   Like many others, I keep a core but also run a smaller explore port (trying to beat mkt for fun)

[Karen]

Dec 28, 2023 14:55:24 GMT steelpony10 said:

Karen ,

      I’m not necessarily looking to beat anything. I’m just looking for reliable long term gains and a balance of risk. I was commenting on the never ending pursuit for the holy grail of portfolio construction which doesn’t exist because of future unknowns.

       As mentioned we use VTI for a broad blend of large, medium and small classes to be used for big later life issues if they ever arise. CEF income is where we take risks. This delays spend down for years.

        Maybe I should have excluded sector funds from my comment whose concentration raises risks and often rewards. We chose not to take risks with equities gambling on cap gains instead we chose leveraged primarily bond funds whose long term values don’t matter as much in our situation as income investors by choice.

And I did NOT say you were trying to beat anything so I don't know what you are saying by that now.  

All I said is that what you stated WAS a fact is NOT a fact and I gave three examples to show that. 

Also, of the three funds I used as examples, FSELX is indeed a tech sector, semiconductor fund, but FBGRX and BPTIX are LCG funds.

Can't we all just admit when we make a mistake?

[steelpony10]

Karen ,

    You need to work on your posting and people skills. Start with your tone and the CAPS. Try adding something constructive.

     I believe most funds can’t beat their index which I’ve seem multiple times over the years. I’ll stick with Buffet in that regard.

     Past performance etc.…. You should be familiar with that phrase.

      I don’t think it’s wise to recommend sector funds or any balanced funds that may cost 10-20 times more based on past performance and probably with management changes when the odds factually favor an index at a fraction of the cost to amateurs.

       The OP wants to simplify. I did it this way for ease of succession and to avoid spend down as long as possible not to possibly increase my net worth further.

       What other method(s) do you have to add to that or is that the extent of your advice?

    

[gman57]

Dec 28, 2023 13:46:52 GMT Karen said:

Dec 28, 2023 11:54:38 GMT steelpony10 said:

    Amateurs and pros can’t beat an index over time and that’s a fact...

    

We would agree that the majority of amateurs and pros can't beat indexes over time.

But take a look at the performance of FSELX over its Life verses ALL major indexes, including NASDAQ, and perhaps reconsider your statement.

To wit, FSELX, for example, has not just beaten ALL major indexes over its Life and EVERY interim period, it has obliterated them over most periods.

Hmmmm EVERY??  It didn't beat the SP500 in 2007-2008 or 2022 (I didn't bother looking at any other interim periods) Yes, it has had great returns but all caps EVERY is a strong word...  like can't. 

[chang]

I think steelpony10 was taking a little bit of artistic license when he posited that

    Amateurs and pros can’t beat an index over time and that’s a fact.

I suspect sp10 deliberately left "over time" somewhat vague to avoid pointless arguments. Obviously, over short time frames there will be exceptions. And over long time periods, too: it's been established that many of Vanguard's actively-managed funds beat their index benchmarks over long periods.

I believe sp10's comment can be considered as pretty solid conventional wisdom in the majority of cases, and as a prudent cautionary warning to investors who are prone to over slice and dice, trade excessively, etc., I think his artistic license is justified.

[steelpony10]

chang ,

    Thanks for adding clarity. I edited my original post to align more with what I thought should be common knowledge to all. It was my factual reasoning to simplify our portfolio as we aged. That was an example for those who wanted simplicity. Equities, reliable income (cash flow), and an element of safety.

[Karen]

Dec 29, 2023 3:22:12 GMT gman57 said:

Dec 28, 2023 13:46:52 GMT Karen said:

We would agree that the majority of amateurs and pros can't beat indexes over time.

But take a look at the performance of FSELX over its Life verses ALL major indexes, including NASDAQ, and perhaps reconsider your statement.

To wit, FSELX, for example, has not just beaten ALL major indexes over its Life and EVERY interim period, it has obliterated them over most periods.

Hmmmm EVERY??  It didn't beat the SP500 in 2007-2008 or 2022 (I didn't bother looking at any other interim periods) Yes, it has had great returns but all caps EVERY is a strong word...  like can't. 

By "EVERY interim period," I was referring to the standard, industry-wide accepted interim periods of YTD, 1-, 3-, 5-, 10-year and Life.

In my post, I also noted an exceptions for one of those standard interim periods, just in case anyone wanted to nit-pick my comment, as you have here.

[Norbert]

@waffle2

"1) How much benefit does one get say over SP500 by slicing dicing into various categories and sectors?
2) How much benefit does one get by changing allocation based on momentum or valuation (reversion to mean) instead of fixed allocation?"

There are many ways to invest wisely. Some of us are better at it than others ...

Regarding (1) categories and sectors, anyone who overweighted Tech and stuck to it has done very well. Of course, simply owning the S&P 500 has led to overweighting Tech, since the index is driven by market cap. It's now 27% of the index.

Overweighting Finance & Banks heading into the subprime crash would have hurt your portfolio. Once again, just owning the S&P 500 would have accomplished the same thing. It fell like a rock. Indexing is essentially momentum investing.

"You've got to ask yourself one question: 'Do I feel lucky?' Well, do you, punk?'" (Dirty Harry)

All this is obvious with the benefit of hindsight. It's more challenging to get this right looking forward.


Regarding (2) asset allocation based on momo or valuations, sure, it's great if you're able to do it competently.

There's actually a free lunch here, by the way: rebalancing. When stocks crash, add to achieve your target allocation. You'll be buying cheaply. Ditto after a big run-up: sell to get back down to your target allocation. You'll be selling at a good price. No forecasting or market analysis required. But, lots of self discipline is needed. That's the secret to successful investing.

Personally, I stay away from indexing. It doesn't prove anything, but try comparing the Vanguard Balanced Index VBINX to Vanguard's Wellington. Index funds get clobbered during the bad years and it's challenging to recover. I'll bet my money on a low-fee, team-managed fund like Wellington any day. Let those guys figure it all out while you go out and enjoy life.

"Life moves pretty fast. If you don't stop and look around once in a while, you could miss it." (Ferris Bueller)

[mozart522]

Norbert ,

Wellington benchmarks against the 500 index and corporate bonds. 65% VOO and 35% VCIT beats Wellington over the last 10 years. VBINX and Wellington are quite close over the last 10 years. The drag on VBINX is that it uses the TBM IIRC for its bonds.

[Mustang]

Curious. If they use 65% VOO and 35% VCIT for an index then why wouldn't they use the same for VBINX? Just a random thought. VOO doesn't go back 15 years so I compared it to some other funds for 10 years using Portfolio Visualizer. www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=5inBC0iAezURooSyv8O714

You are correct during the last 10 years it beat Wellington (VWENX) but it didn't beat Fidelity Balanced Fund (FBALX). Both have a heavier concentration of growth stocks than Wellington which gave then a little advantage.  Wellington only moved into the blend category a couple of years ago.  And according to the chart Wellington beats VBINX.

Anyway, I prefer to use a more common index. M* Index is almost universally used. Here are comparisons to their Index which is used for all moderate-allocation funds.
 
                     M* Index      FBALX       VWENX      AMBFX      VBINX
1-yr               17.97%         23.11%         15.47%         15.25%       18.90%
3-yr                3.79%           5.80%            5.50%          5.55%         3.80%
5-yr                9.01%         12.56%            9.83%          9.28%         9.68%
10-yr              6.98%           9.11%            8.01%          7.82%         7.65%
15-yr             8.80%          11.20%          10.03%         10.25%        9.60%

Most people would say that they all beat the index (except for 1-yr returns). Morningstar certainly thinks so they said VWELX (Wellington's Investor shares) and AMBFX are two of their best balanced fund picks. www.morningstar.com/funds/best-balanced-funds  Forbes thinks so too. It is one of their 9 best retirement fund picks. www.forbes.com/advisor/retirement/best-retirement-income-funds/  And, US News thinks its one of the 7 best funds for retirement. money.usnews.com/investing/funds/slideshows/best-mutual-funds-for-retirement

Who am I to argue with all of those experts?  For an index, I'll continue to use Morningstar's.

Edit: A little off topic but if you click on the link above to Morningstar you end up at a log in page.  But if you search "Morningstar Best Balanced Funds" the internet search finds the article and you can read it without logging in.

[mozart522]

Mustang,

VOO/ VCIT beat Wellington over 10 years and VYM/VCIT beat Wellesley over 10 years. VBINX has less equity and far fewer corporate bonds and much more government bonds. If one picks the correct index asset classes they tend to do as well as the actively managed funds. W&W are great funds, but someone who doesn't want the restrictions of a balanced fund could use index combos and have more flexibility in my opinion.

[Norbert]

Dec 29, 2023 17:33:08 GMT mozart522 said:

Norbert ,

Wellington benchmarks against the 500 index and corporate bonds. 65% VOO and 35% VCIT beats Wellington over the last 10 years. VBINX and Wellington are quite close over the last 10 years. The drag on VBINX is that it uses the TBM IIRC for its bonds.

I see two problems with this comparison: (1) The Wellington bond sleeve is actually 24% government debt at present, so VCIT is not an ideal match; (2) A 10-year timeframe is too short, representing a period when the government juiced the stock market with its unconventional monetary policy.

You have a point that the VBINX bond allocation is heavier in government paper than VWELX. Of course, their stock portfolios differ also. Active management allows for portfolios that differ from the total market. (God knows what Wellington's bond holdings looked like 30 years ago.)

Here's a run comparing VWELX to VFINX + FBNDX (65/35), starting in 1985. Maybe not a perfect (?) comparison, but I want to illustrate the problem of index stock funds.

(Click to enlarge; Wellington in blue.)




Wellington wins by $65,000 assuming a $10,000 initial investment.

As explained above, market cap index funds are a momentum play. Valuations are ignored. The "magnificent seven" now comprise 27% of the S&P 500. (By comparison, PRWCX holds about 12% of equities from this group of high flyers, focused on four of the seven. And Giroux has a top record.)

So, when a serious correction happens (think dot com and subprime bubbles), they crash hard and have trouble recovering.

That's why I want active management involved: to pay attention to valuations and profitability!

By the way, I picked Wellington as a solid, long-term success, but there are several funds with better long-term records, like PRWCX cited above. It was born in 1986.

(Click to enlarge, PRWCX is #3.)

[mozart522]

Norbert,

Fair enough, but you are the one who used the VBINX comparison, and neither yours of mine are real good direct comparisons. However, I'm suggesting that someone who doesn't want a balanced fund could use my comparison and do fine over a 10 year period with indexes. We will have to disagree that 10 years is too short, and I believe going back to 1985 when stock dividends were very high and Wellington was pure value with 7% corporate bonds is history that is not likely to repeat for this 78 year old or likely most who post here. I personally use both active and passive and don't see one as better than the other. I know good investors who use all active and others that use all passive and still others that use both.

[Norbert]

Dec 30, 2023 15:38:42 GMT mozart522 said:

Norbert,

Fair enough, but you are the one who used the VBINX comparison, and neither yours of mine are real good direct comparisons. However, I'm suggesting that someone who doesn't want a balanced fund could use my comparison and do fine over a 10 year period with indexes. We will have to disagree that 10 years is too short, and I believe going back to 1985 when stock dividends were very high and Wellington was pure value with 7% corporate bonds is history that is not likely to repeat for this 78 year old or likely most who post here. I personally use both active and passive and don't see one as better than the other. I know good investors who use all active and others that use all passive and still others that use both.

All true. There are many ways to invest successfully. Backtests are certainly flawed in many respects, though they may sometimes offer useful clues.

When I assert that market-cap indexing is a momentum play, that doesn't make it bad. Momentum is a real market phenomenon. Yes, there's the risk that indexing can lead to blindly chasing unreasonable price action, but it can also lead to large gains. As you point out, indexing has worked nicely for the past ten years.

No system is perfect.

[mozart522]

Norbert,

Agree that market-cap indexing is a momentum factor, but actively managed funds in the same category often have to continue to buy the Mag 7 type funds also so they don't underperform their benchmark. At that point ERs become important. But there are a lot of non-market cap indexes now that didn't exist back in the old M* days. For example three of my favorites are SCHD, SCHY and COWZ.

[Norbert]

Dec 30, 2023 18:25:37 GMT mozart522 said:

Norbert,

Agree that market-cap indexing is a momentum factor, but actively managed funds in the same category often have to continue to buy the Mag 7 type funds also so they don't underperform their benchmark. At that point ERs become important. But there are a lot of non-market cap indexes now that didn't exist back in the old M* days. For example three of my favorites are SCHD, SCHY and COWZ.

To summarize, @waffle2 posed questions about the advantages of sector-based investing; and about the wisdom of timed asset allocation vs. static allocations.

I replied that it's challenging to execute market-beating strategies, but that some inspired fund managers and retail investors have been successful.

I recall that near the bottom of the subprime crash, a M* poster named Oildog disclosed that he had just gone 100% stocks. And there TRP's Giroux, who has used both stock selection and shifting asset allocation to provide strong, index-beating returns for his clients.

We drifted into a discussion of market-cap index funds, which I criticized because valuations and profitability are ignored, occasionally leading to high downside volatility. But, I admitted that they work well as a momentum play, momentum being a strong market force that can and does often persist for long periods.

I recommended rebalancing as a simple, mechanical technique for portfolio management. It leads to buying low and selling high.

You mentioned market-cap index-hugging active mutual funds, but I don't see opportunity there as their ERs are typically unattractive.

-----

Finally, you point to the emergence of interesting non-market cap indexes, which are used by funds like SCHD. MOAT is another example. The construction of these "indexes" (lists?) is intelligent. Factors like corporate financial health, free cash flow versus debt, dividend sustainability, and valuation are built into the logic. It's definitely interesting stuff. I'd argue that we're getting into AI here, essentially automating the thinking of a competent active fund manager.

Are the new "smart" indexes another way to gain advantage? Or, will their strengths be arbitraged away over time? I don't know the answer to that question. What do you think?

N.

[chang]

Norbert I believe SCHD is market cap weighted (follows the Dow Jones U.S. Dividend 100 Index). The index does have "intelligent" construction factors.
www.spglobal.com/spdji/en/indices/dividends-factors/dow-jones-us-dividend-100-index/#data

AVUV is similar - an index fund with "factor weighting". I like this approach to small caps to weed out unprofitable companies. (Avantis, DFA,…)

Aren't these smart indexes just quant funds? That term seems to have fallen out of favor.

[fishingrod]

SCHD also caps each individual stock to no more than 4% and each sector at 25%. It rebalances quarterly.

[Norbert]

Dec 31, 2023 8:54:47 GMT chang said:

Norbert I believe SCHD is market cap weighted (follows the Dow Jones U.S. Dividend 100 Index). The index does have "intelligent" construction factors.
www.spglobal.com/spdji/en/indices/dividends-factors/dow-jones-us-dividend-100-index/#data

AVUV is similar - an index fund with "factor weighting". I like this approach to small caps to weed out unprofitable companies. (Avantis, DFA,…)

Aren't these smart indexes just quant funds? That term seems to have fallen out of favor.

Here's a description of the DJ Dividend 100 Index construction algorithm. It's a VERY modified market cap based index!

(Click to enlarge.)



It crossed my mind too that these kinds of "smart indexes" are kind of like quant funds, but I actually don't understand what passes as a quant fund.

It seems to me that focusing on healthy fundamentals and profitability is a big improvement over a simple market cap based index, though I guess the advantage might disappear as the market catches on and drives up the prices for these categories of stocks.

[Mustang]

Dec 27, 2023 21:35:54 GMT @waffle2 said:

1) How much benefit  does one get say over SP500 by slicing dicing into various categories and sectors?
2) How much benefit does one get by changing allocation based on momentum or valuation (reversion to mean) instead of fixed allocation?
 
Example: (you can chose your own %s)

1) 60% SP500 or total us stock market + 30% broad international + 10% multisector Bond fund
or 
2) 40 % SP500 + 20% US small/mid + 30% broad international + 10% multisector Bond fund

Versus

I allocate some to EM, Financials, Energy, Health care, US tech, Large value, small/mid cap value and growth, Developed international etc.


I  get the feeling simple has worked better for me  quite possibly because i am an amateur investor.  the slicing/dicing never worked for me.


I also feel momentum might be the only alpha and that may lead to some slicing dicing and that may give one edge over sp500 if done consistently and well and with good timings.

You said, "I get the feeling simple has worked better for me quite possibly because i am an amateur investor. the slicing/dicing never worked for me."

 

What are your goals? Knowing someone's goals is important to understanding their investment strategy.  My goals for my portfolio are 1) provide a reliable income for my wife and 2) have a simple portfolio that will easy for her to maintain and manage.  I don't slice and dice. That is the opposite of simple and it sounds like a lot of work.  Simple also means I diversify by using balanced funds letting the fund manager and analysts select stocks, bonds, and asset allocation (within a certain range).

Everyone says use index funds but when stress testing them they fail to perform as well as a good managed funds.  But I have tested against some sliced and diced portfolios such as  60/40 Total Stock Market (VTSMFX) and Total Bond Fund (VBMFX) or even an aggressive 50/50 Total Stock Market Fund (VTSMX) and Nasdaq-100 (QQQ).  I have not tried more complicated portfolios.  I don't see the sense in it.  Complicated is the opposite of simple.

A retirement fund needs to be tested for performance during good times and bad.  There will be a market crash and recession during everyone's retirement.  It is important for a portfolio to perform well during those times. This is a test of sequence-of-returns.  Bad returns during the first 10 years can have a severe impact on portfolio performance especially when withdrawals are taken. Since my primary goal is supporting my wife I tend to only look at the withdrawal phase.  Here is a test of Wellington VWELX (blue), 60/40 VTSMX/VBMFX (red), 50/50 VTFMX/QQQ (yellow) and SP500 (green).  That is some combinations of most of the indexes: 2000-2023, $10,000 starting amount 3.33% initial withdrawal adjusted for inflation.  www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=piEFAr3u81zoKfetMBedb

Against Wellington the others had absolutely dismal performance. Dismal.  Ending balances: VWELX $31,903, 60/40 VTMSX/VBMFX $16,415, VFINX $10,930, and VTMSX/QQQ $2,004.  I couldn't test using a 4% withdrawal.  It crashes the program. VTSMX/QQQ runs out of money in 2016.  www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=3xmtXnzdWG5QRQs6Xrq8yG

But that is with withdrawals.  Not everyone is taking withdrawals.  Here is the results without withdrawals.  www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=osCduAZcGQqwlLKWSKdqd

This was a bit of a surprise.  I didn't expect VWELX to hold up that well. It took the lead and its lead kept growing until 2020.  2020 was a magical year.  Our government, both elected and not, started playing havoc with our economy:  shutting it down, over stimulating demand, causing inflation, and cracking down on inflation. Bonds suffered and growth stocks, especially tech, took off.  If not for the previous lead VTMSX/QQQ would have passed VWELX.

Who knows what will happen in the future.  Some say a recession this year.  Others say no.  Is tech stocks the place to be or is it a bubble?  I have no idea.

I don't know if slicing and dicing is beneficial.  Everything I've read says buy and hold will outperform trading in the long run.  The saying is "It's time in the market not timing the market."  Even those who slice and dice often have core investments and explore investments that they trade with.

It sounds like you are uncertain.  Write down your goals and make sure what you do works toward those goals.  If you want to try trading use a small part of your portfolio to play with and use tools like portfolio visualizer to test ideas.  A lot of people enjoy the challenge of trading.  It just doesn't align well with my goals.

[mozart522]

Norbert,

"Finally, you point to the emergence of interesting non-market cap indexes, which are used by funds like SCHD. MOAT is another example. The construction of these "indexes" (lists?) is intelligent. Factors like corporate financial health, free cash flow versus debt, dividend sustainability, and valuation are built into the logic. It's definitely interesting stuff. I'd argue that we're getting into AI here, essentially automating the thinking of a competent active fund manager.

Are the new "smart" indexes another way to gain advantage? Or, will their strengths be arbitraged away over time? I don't know the answer to that question. What do you think?

N."

I don't either, but IIRC, the second quintile of dividend payers have outperformed the market over time, and this fund doesn't accept the highest payers (payout percentage). I think it will be fine to fill my lg value slot.

[anitya]

"[T]he second quintile of dividend payers have outperformed the market over time"

Is there a fund that specifically targets this cohorts? Apologies if it is already mentioned in this thread. Sorry, I was not following this thread until I saw chang's post in my Recent Posts reading.