Altruist Financial Advisors LLC
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Foreign Dev Mkts Sml Cap Val Funds

 

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There is at least one good reason why most investors should consider investing a portion of their portfolios in foreign stocks:

bulletForeign stocks have imperfect correlations with domestic stocks, so including them in a portfolio should improve the portfolio's risk/return characteristics.

For more information on investing overseas, see here.

Further, there are at least two good reasons why most investors invest a portion of their portfolios in small cap stocks:

bulletSmall-Cap stocks may have better long-term risk-adjusted returns than large-cap stocks.
 
bulletSmall-Cap stocks have relatively low correlations with large-cap stocks, so including them in an otherwise large-cap stock portfolio should improve the portfolio's risk/return characteristics.

Additionally, there is good reason to believe that small value stocks will, in the long run and on average, tend to have higher risk-adjusted returns than small growth stocks.

There are several similar-seeming investment options available.  Which is best?

The funds are listed in rough order of our overall preference.

Preferences are listed separately for use in retirement accounts and for taxable accounts.

For a listing of our preferences in other asset classes, see here.

Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)

bulletDFA International Small Cap Value Portfolio (DISVX).  E/R: 0.49%.  This fund invests in international companies whose size (market capitalization) is less than $800 million and whose book-to-market ratio falls within the highest 30% of companies in the respective country. Company weighting is roughly proportional to its market capitalization. Target country weighting conforms to the MSCI EAFE+Canada index.
 
bulletAvantis International Small Cap Value Fund (AVDVX).  E/R: 0.36%.  This Fund attempts to invest in Small-Cap Value stocks with high profitability in developed market countries outside the US.
 
bulletAvantis International Small Cap Value ETF (AVDV).  E/R: 0.36%.  This ETF attempts to invest in Small-Cap Value stocks with high profitability in developed market countries outside the US.  For more information on ETFs, see here.
 
bulletiShares International Small Cap Value Factor ETF (ISVL).  E/R: 0.30%.  This ETF tracks the FTSE Developed ex US ex Korea Small Cap Focused Value Index of small-cap value stocks in developed market countries outside the US and Korea.  This index starts with the stocks in the FTSE Developed ex US ex Korea Small Cap Index, eliminates the highest 20% for 12-month realized volatility, the highest 20% for leverage, and the lowest 20% for liquidity.  Then it screens out companies with negative sentiment around earnings and stocks with negative price momentum.  The remaining stocks are scored on three measures of value and ranked on their value measure.  Stocks are added to the index until it contains 25% of the number of stocks in the original index.  Those stocks are weighted by market-cap.  For more information on ETFs, see here.

Taxable Accounts

bulletAvantis International Small Cap Value ETF (AVDV).  E/R: 0.36%.  This ETF attempts to invest in Small-Cap Value stocks with high profitability in developed market countries outside the US.  For more information on ETFs, see here.
 
bulletiShares International Small Cap Value Factor ETF (ISVL).  E/R: 0.30%.  This ETF tracks the FTSE Developed ex US ex Korea Small Cap Focused Value Index of small-cap value stocks in developed market countries outside the US and Korea.  This index starts with the stocks in the FTSE Developed ex US ex Korea Small Cap Index, eliminates the highest 20% for 12-month realized volatility, the highest 20% for leverage, and the lowest 20% for liquidity.  Then it screens out companies with negative sentiment around earnings and stocks with negative price momentum.  The remaining stocks are scored on three measures of value and ranked on their value measure.  Stocks are added to the index until it contains 25% of the number of stocks in the original index.  Those stocks are weighted by market-cap.  For more information on ETFs, see here.
 
bulletDFA International Small Cap Value Portfolio (DISVX).  E/R: 0.49%.  This fund invests in international companies whose size (market capitalization) is less than $800 million and whose book-to-market ratio falls within the highest 30% of companies in the respective country. Company weighting is roughly proportional to its market capitalization. Target country weighting conforms to the MSCI EAFE+Canada index.
 
bulletAvantis International Small Cap Value Fund (AVDVX).  E/R: 0.36%.  This Fund attempts to invest in Small-Cap Value stocks with high profitability in developed market countries outside the US.

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This web page contains the current opinions of Eric E. Haas at the time it is written and such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo provide disclosure of Mr. Haas' opinions to prospective clients.  We believe that prospective clients are well-served by being made aware of what they are buying and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. 

No investor should invest solely on the basis of information listed here.  Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.  Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser.  If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.

 

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