A couple of months ago I wrote about John Bogle’s doubts that stocks have a persistent value premium. I’ve since persuaded myself that Bogle defines value stocks differently from other researchers. It seems that a value premium has persisted for some time. I’m not certain that it will exist into the future in a form that can be captured in returns after costs, but I’ve decided to modify my portfolio on the premise that I might be able to capture a value premium.
I had owned the Vanguard exchange-traded fund VB, which holds U.S. small cap stocks. Vanguard also offers two ETFs that split small cap stocks into value stocks (VBR) and growth stocks (VBK). I’ve sold my VB and bought VBR. This isn’t exactly a huge change in my portfolio, but it is the biggest change I’ve made in some time apart from adding new money.
I was adding a block of new money and did a currency exchange using the Norbert Gambit. By making the change from VB to VBR at the same time, I saved a few transactions.
Over the past decade, U.S. small cap growth stocks (VBK) have actually outperformed small cap value stocks (VBR) by 1.5% per year. So, I’m lucky to have split the difference by owning VB instead of VBR before now. Here’s hoping that VBR gives the higher returns in the coming decades.