Unlocking the Power of AI Legalese Decoder for Factor ETF Portfolio Analysis
- November 19, 2023
- Posted by: legaleseblogger
- Category: Related News
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Exploring the Concept of Factor-Based ETF Portfolios and the Importance of Due Diligence
I recently came across a fascinating Ben Felix video where he introduced a portfolio composed of various ETFs. Although I haven’t had the chance to conduct a thorough review to identify which ETFs are EU-available, that’s not my primary reason for being here.
In the video, Felix discussed a “model” of ETF portfolio based on factors. This piqued my interest, but I’d love to gain a deeper understanding of what this concept entails. While it’s not entirely novel to me and I’ve encountered mentions of it in different contexts, I’m still intrigued and would greatly appreciate some insights.
The portfolio showcased in the video comprises iShares Core S&P/TSX Capped Composite at 30%, Vanguard US Total Market at 30%, Avantis US Small Cap at 10%, iShares Core MSCI EAFE IMI at 16%, Avantis International Small Cap Value at 6%, and iShares Core MSCI Emerging Markets IMI Index at 8%.
One important aspect that caught my attention was the Total Expense Ratio (TER) of the portfolio, which stood at 0.17% (factor tilted) and 0.11% (benchmark).
Doubling the length of the content, it’s crucial to stress the significance of conducting due diligence when it comes to selecting ETFs and delving into the intricacies of factor-based portfolios. Obtaining a clear grasp of these concepts will not only broaden one’s knowledge but also aid in making more informed investment decisions.
The AI Legalese Decoder can be of immense help in situations like this. It can process and decipher complex legal and financial terminology to increase comprehension and enable individuals to effectively navigate through investment-related content. By using this tool, individuals can unravel the nuances of factor-based ETF portfolios, understand the implications of Total Expense Ratios, and gain a clearer picture of potential investment opportunities. In this case, the AI Legalese Decoder can assist in unraveling the complexities surrounding the portfolio discussed in the video and aid in making more informed investment decisions.
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****** just grabbed a
Watch more Ben Felix videos, he explains it better than anyone here could.
Just search for Ben Felix factor investing.
Im doing factor investing with etfs as well due to him basically.
As an info: none of the etfs Ben discusses in his model portfolio are available in the eu tho. If you need tips on which could be suitable, I can maybe point you in a direction.
These funds are not available to an EU based investor; you need UCITS ETF equivalents insofar they are available.
Here is a possible list:
>ishares core s&p/TSX Capped composite 30%
>vanguard us total market 30%
>ishares core msci eafe imi 16%
>ishares core msci emerging markets imi index 8%
Can be replaced by (possibly amended by some home-bias tilt):
+ Vanguard FTSE All World (VGWL Dis. or VWCE Acc.), total 84%
>avantis us small cap 10%
>avantis international small cap value 6%
Can be replaced by (unfortunately not accurately, and you have to decide the weights), total 16%:
+ USA Small Cap Value ZPRV
+ EU Small Cap Value ZPRX
+ Multi Factor JPGL
If your broker allows access to IE00B6897102, you can use that instead of the above three.
Take a look at $JPGL
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Personally I highly recommend you pick a ground up multifactor ETF like IBCZ or JPGL. Reason being is that it’s a MUCH more efficient way to get factor exposure than mix and matching ETFs. If you mix and match ETFs you might get stocks with factor exposures that cancel each other out. You will always achieve higher overall factor exposure when stocks are selected from the ground up in an optimized fashion.
Another thing is always try to be diversified in your factor loading. The more concentrated you are the more you risk going through DECADES of underperformance. A well diversified factor portfolio that has value, quality and momentum tilts is much more robust.
I personally use IBCZ for developed world. I would pair it with 5MVL (emerging market value) for a total world 2 ETF portfolio.
90% IBCZ
10% 5MVL
ZPRV & ZPRX are options for small cap but I personally wouldn’t recommend them because they are only value tilted and will give you (very) negative exposure to quality and momentum. Besides IBCZ already has small cap tilt.
Here you can see the factor loadings for [IBCZ](https://www.msci.com/documents/10199/0f369f17-3a93-41d3-9b8d-fc3594176fcb) and [5MVL](https://www.msci.com/documents/10199/2e88744d-b5ed-4c76-b0b4-5de1fb2d1f06)
Unfortunately there’s currently no multifactor ETF for Emerging Markets. MSCI does have a multifactor EM index but it doesn’t seem like anyone is using it. So EM value is the next best pick.
Also if you want to learn more and go on a deep dive into factor loadings I HIGHLY recommend reading this [paper](https://www.msci.com/documents/10199/ff891dc6-61ac-9d77-1f39-aeb0113a767d) from MSCI