Personal Investments • AVUV

What does it mean?

It means certain sectors of the market are undervalued each year, so positioning one’s portfolio by tilting to undervalued areas may enhance returns over the long run. These undervalued areas may change each year so how you should position a portfolio alludes to how to tilt a portfolio away from concentrating in overvalued sectors. It doesn’t mean change the portfolio to undervalued sectors and expect outperformance the following year.

It does not mean every undervalued sector will outperform in the following year so you should change the portfolio each year as you have alluded to or insinuated.

So if I understand you well, if I trust M*’s recommendation and want to implement their strategy, i would tilt the Portfolio to SCV by buying a small percent, and hope that it will do the job. The next year, if SCV is no longer recommended by M*, I would sell, no matter if the strategy worked or not, and do something else with the money.

Yes. That way you are always buying high and selling low.

That is certainly very possible. BTW, I never sell equities, and never rebalance. The purchase of the SCV was just a thought after some money freed out from a CD

You did not understand me. I own SCV. I never intend to sell. Long term historical outperformance of SCV includes long periods of underperformance.

The M* article has little to do with my decision to own a small amount of SCV.

I am simply stating that according to my interpretation of the article, the author is NOT saying every undervalued sector will outperform the market in the following year. Stating that a sector is undervalued is not the same as stating that the sector will outperform the very next year. Sectors can remain undervalued or overvalued a long time.

Certainly many people will interpret this article to mean that every year you should change your entire portfolio to M* undervalued sectors and expect outperformance the next year. I don’t interpret the article that way. M* is saying you should position your portfolio to undervalued sectors by indicating which sectors are undervalued each year. That is not the same as saying the undervalued sectors will outperform within a year.

Statistics: Posted by smartinvestor2020 — Sun Dec 31, 2023 2:44 am — Replies 33 — Views 1892

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