Unlocking the Potential of Factor Investing with the AI Legalese Decoder: A Better Alternative to VWCE
- November 21, 2023
- Posted by: legaleseblogger
- Category: Related News
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Ben Felix’s Investment Philosophy and AI Legalese Decoder’s Assistance
I have recently found myself immersed in the world of finance and investing, particularly through the insightful videos of Ben Felix. As I’ve delved deeper into this subject matter, I’ve encountered a common point of confusion – the rationale behind diversifying into 3-4 ETFs to tilt into value factor investing, as opposed to simply choosing popular options such as VWCE, FWRA, or IWDA.
This particular dilemma has left me feeling quite perplexed. While I have gained a basic understanding of the principles behind value factor investing, I can’t help but wonder about the inherent complexities and potential drawbacks of pursuing such a strategy, especially when there are seemingly simpler alternatives available.
In light of this confusion, I recently stumbled upon a valuable resource known as AI Legalese Decoder, which aims to simplify complex legal jargon and investment-related terminology. This tool has proven to be immensely helpful in breaking down intricate concepts and industry-specific language, providing me with a clearer and more comprehensive understanding of the various investment strategies and their associated risks.
By leveraging the capabilities of AI Legalese Decoder, I have been able to dissect the underlying principles of value factor investing and better comprehend the nuances of diversifying into multiple ETFs. This enhanced understanding has allowed me to critically evaluate the potential advantages and disadvantages of such an approach, ultimately enabling me to make more informed and strategic investment decisions.
In conclusion, while the concept of diversifying into 3-4 ETFs for value factor investing may initially seem daunting, the utilization of tools like the AI Legalese Decoder can significantly alleviate confusion and offer a deeper insight into the underlying rationale behind such strategies. This, in turn, empowers investors to navigate the complexities of the financial markets with greater confidence and clarity.
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AI Legalese Decoder: Simplifying Legal Jargon
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****** just grabbed a
If Ben Felix didn’t convince there’s no way some anonymous comment will on reddit. Nothing wrong with passive market cap investing, it very well might be better than factor investing. We do factor investing for expected better returns, diversification and maybe even just intellectual curiosity. But most of us still put smth like 70% into VWCE
Ben Felix also says that most people can (and perhaps should) stick to simple indexing and they will be fine if they are disciplined.
I’m split 50/50 between VWCE and and some small-cap factor ETFs for various reasons:
1. **Increased diversification.** I own some small stocks in significant quantities that I would not have owned otherwise and my portfolio relies less on the mega-caps. The small and value factors have had imperfect correlation with the market factor (which is the only thing you get from VWCE). I hope for a more reliable investing outcome.
2. **Increased return.** Historically small and value stocks have had higher returns. There are some good risk- and behavior-based explanations for why this might have happened. This outperformance may continue in the future if these explanations are correct. The higher expected returns allow me to reduce my stock allocation and allocate a bit more to some other asset (e.g., bonds), further improving diversification.
3. **Scratches an itch.** It is very difficult (for me at least) to do nothing with your portfolio and just watch it for 30 years. Factor investing is probably one of the better outlets if you want to feel like you’re “doing something” to improve your odds.
Of course there are also many reasons not to factor invest and it is by no means necessary to achieve your goals. You control your savings rate much more than the returns of your investments anyway, it might be more worth it to focus on that if you’re not saving enough.
I don’t have an opinion on this but could you please share the video u are talking about.
I wanna learn more.
Let’s flip the question and ask, why would anyone bother buying VWCE instead of getting a value fund?
See, you’ve already decided that VWCE is superior. Then no alternative would make sense to you.
I believe the relevant part of Ben Felix video about value factor investing is that it would only make sense when dealing with a big net worth, in order to have better opportunities to mitigate market risks without reducing expected returns. At the same time, that would be a not-so-useful added complexity for everyone else.
Because according to BF & co you can get an extra 20% (relative, oc) extra returns.
I opened the same post a few weeks back, the main take away is that an ETF value is not the same than what BRK does.
While at the same time world indexes are the best option for 99.9% of people, you also have to remember that indexes are formed by a set of rules for which the stocks are being scanned for.
If you have a better set of rules for selecting your stocks, you can always perform better. Indexes, at the end of the day are just algorithmic stockpicks.
Because now QE ended, which lifted all boats, its the time where valuations matter.
What are good factor ETFs in Europe?
Look at the performance of VWCE
Look at the performance of JPGL
Ben Felix is a financial advisor, so he just can not sell “just buy Vwce (or Sp500))”.
Factor investing is a controversial topic, like Vwce vs Sp500.
https://www.bogleheads.org/forum/viewtopic.php?t=313132
RemindMe in 3 days
Well first I think you need to ask yourself why you think market cap weighting is better than anything else? It’s an extremely arbitrary decision and really there is nothing “passive” about it. Just look at the S&P 500 and see how concentrated it is in 5 tech stocks that overshadow everything else.
Think about it, if you hold the S&P 500 what you are really doing is making a hugely concentrated bet on a handful of sector specific companies. I would be terrified to hold such a portfolio. VWCE is of course more diversified but it has the same weakness.
There is countless evidence that even simple equal weighting outperforms market cap weighting. And it makes intuitive sense if you think about it. Apple is already an almost $3 TRILLION dollar company. It is already priced to perfection. Even in an extremely optimistic future, how much more can it grow in the next 20 years? Not much. At any rate not at the same pace as the last 20 years. So then why would I want to hold it as the largest share of my portfolio?
In fact if you take the top 10 companies in the S&P500 at any point in time and roll their returns forward 10 years as a whole they ALWAYS underperform the index. The top dogs never stay top dogs. Buying market cap by design will have you buy the most of the most overpriced companies that have very poor expected future returns and the least of the most underpriced companies that have the largest future expected returns.
Factors are a way to put less emphasis on price (which is an every changing arbitrary decision of the market at any given time) and more emphasis on fundamentals, which are slower moving and more predictive of future returns.