FYI: (This is a follow-up article.)
Investor’s dream: You score companies on a simple formula involving their finances. You buy the good ones. You beat the hell out of the market.
People have been trying to do this for as long as computers have been around. Now comes Vanguard, the titan of index investing, with a scheme to beat the indexes. It has just joined the large Wall Street mob using “factors” to enhance performance.
Regards,
Ted
https://www.forbes.com/sites/baldwin/2018/02/26/six-magic-potion-funds-from-vanguard/#65febcf82f0e
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From the article:
Regards,
Ted
https://www.motifinvesting.com/motifs#catalog=overview
From the article: A low-vol fund gives you more of sleepy Microsoft (MSFT)
>>> Things change, times change, managers change. Microsoft is not currently a sleepy company.
Sample: growth to value and value to growth:
---Durant-Dort Carriage Company was a manufacturer of horse-drawn vehicles in Flint, Michigan. Founded in 1886, in 1900 it was US's largest carriage manufacturer.
This very successful business made the partners rich men and it became the core on which William C Durant and J Dallas Dort began to build General Motors.
Durant sold out of this business in 1914 and it finished carriage manufacture in 1917.
>>>With the assumption of being able to purchase stock in the above, one may suspect those who poo-poo'd the demise of carriages and those who poo-poo'd rise of the motor car. Who and when someone may have bought or sold shares in either organization would have allowed them a more complete understanding of growth becoming value and value becoming growth scenarios, yes?
Below chart is factor investing, too. Large cap value vs large cap growth, from 2 different vendors. Simple etf models, although I don't know about internal holdings changes over the years. In particular, since early 2016 value can not find as many friends.
http://stockcharts.com/freecharts/perf.php?JKE,JKF,IVW,IVE&p=6&O=011000
I will guess that active individual investors are/were 50% inclined to be "factor or smart beta" investors before the terms became fashionable, eh? One makes personal investment choices for whatever reasons. One makes choices based upon many "factors" in their own world of risk and knowledge.
A few possible factors might include:
---age
---financial status, being employed and young with a good wage and prudent personal financial habits; being near retirement or being retired with a comfortable financial position
--- How hungry are you? = I'm young and hungry, I'm almost retired and don't want to lose what I've worked so hard to attain or I'm retired, and don't want to lose what I've attained, but still need to be invested in something reasonable. Among all of this at any age level is the aptitude/attitude involvement which may lead one to a more hands off approach of a plain joe/jane balanced fund style of investment or the Robo advisors.
One sorts and searches for whatever investment style floats their boat of comfort.
Factor or smart-beta investments offer more choices and hopefully not more confusion.
In closing, I'll offer the below partial lyric as the "theme song" for the ever evolving world of etf choices. Build it and they may come, eh?
Kinda like the simple lyric of this Dave Clark Five song (I Like It Like That) from the mid-60's:
Come on (come on let me show you where it's at)
Ah, come on (come on let me show you where it's at)
Whoa!, come on (come on let me show you where it's at)
I said the name of the place is I like it like that
The music is all around us, all we have to do.....is listen.
Take care,
Catch
I'm considering the Multifactor ETF. We'll see.