![]() Here's my explanation of Momentum with Q&A of some frequently asked questions in the responses. Can also email wes(at)alphaarchitect(dot)com if you have any specific questions regarding these strategies). Each ETF with 50 holdings, rebalanced quarterly and systematically (they are considered 'active' by regulatory definition only, in order to save on costs and red tape. They essentially automate stockpicking globally to a Momentum strategy and a Value strategy, respectively. If you want the concentration of stockpicking without the same type of risk of picking stocks that don't have strong fundamentals or lose their fundamentals without you being fully aware I'd suggest looking to the ETFs QMOM/IMOM and QVAL/IVAL. I would at least consider decreasing the allocation to these speculative bets. Sector bets are just stock picking lite, and we know stock picking is a fool's errand on average. That's a bet that these firms will exceed expectations and/or that you somehow know something about them that the market doesn't. You also seem to have some pretty big narrow sector bets there with the clean energy funds (as well as BLOK and SOXX). I also fully acknowledge that we can't know the future and I could be completely wrong, but I would argue that's the whole reason for broad diversification in the first place. At the end of the day, we're still paying for a discounted sum of all future cash flows Growth cannot get more expensive forever. Historically, wide value spreads have also reliably preceded massive outperformance by Value. ![]() Of course, we expect Value to outperform every day when we wake up anyway due to what we think is a Value risk factor premium. ![]() The spread between Value and Growth was recently as wide as it's ever been, meaning greater expected returns for Value and lower expected returns for Growth. Big Tech already has extremely high expectations priced in. P/S of tech has surpassed 2000 levels, and fundamentals do not explain current valuations. Tech stocks have done great the past decade, but we wouldn't expect that to continue. Would you still be as enthused about QQQ? Logically, we should be more willing to buy when prices are low, but I'd be willing to bet the honest answer to this question for most folks would be "no." A rational investor should want to avoid expensive stocks and buy cheap stocks, but this unfortunately isn't how investors' highly-emotional brains work. After the previous decade, the S&P 500 is down by about 10% for that time period versus the Nasdaq 100 being down about 50%. Imagine for a second that this is January, 2010. ![]() Regarding the Nasdaq 100, buying it is pure performance chasing at this point IMHO. Moreover, tech revolutions have actually been bad investments historically. ![]() The best companies tend to make the worst stocks and the worst companies as a group tend to make the best stocks. Specifically, economic output and stock returns are actually slightly negatively correlated. Remember that things being "the future" or something we're "always gonna need" has little to do with stock returns. Probably prudent to diversify outside the US with stocks. Unless I missed something, you also have no international exposure other than KRBN. Looks like a lot of large cap growth stocks, the market segment with the lowest expected returns. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |