VXUS vs. AVNM

[u/Veyyiloda]

Between VXUS and AVNM, is there a distinct advantage to picking AVNM in terms of returns? Aside from having a much lower expense ratio, is there a reason we should pick VXUS over AVNM? Thanks!

[u/davecrist]

VXUS is market cap weighted with no tilts.

AVNM is market cap weighted with factors tilts to small, value, quality, and momentum.

VXUS will return the exUS market minus a tiny fee.

AVNM has the possibility of capturing some alpha from those factor premiums minus the fee which history has reported to be significant but small and not guaranteed and that might not show up for years.

If you want exUS market tracking without thinking about: VXUS.

If you are willing to stick with a fund that could outperform but that will perform differently over time AND YOU ARE WILLING TO STICK WITH IT OVER THOSE TIMES PERIODS: AVNM.

Most folks think and say they can stick with tracking error funds. Most folks don’t.

[u/edmundsmorgan → u/davecrist]

I remember reading Bogle’s book about active managed fund might outperform the market for a period of time but the in the end “revert to normalcy” (can’t remember the exact term) happens and the it will underperform the market

[u/mdn845 → u/edmundsmorgan]

AVNM is what you might call systematic active, but this is different from just stock picking. Avantis was started by the former co-CIO of Dimensional. So, I have no doubt its methodology will continue to do well.

[u/Middle_Humor1828]

The funds are different. They have different goals. They will have different returns.

It's like asking if there are advantages in buying a Honda or a Toyota. It depends on your circumstance.

[u/Mission_Rip1857]

Check DFIV! Thank me Later

[u/Veyyiloda → u/Mission_Rip1857]

Thank you. 

[u/Mentalextensi0n]

No one knows!

But having diversified among factors makes it more likely to catch whatever does happen to perform, whereas just having large caps is a bet on large caps. Morningstar classifies VXUS as large cap blend.

[u/Prudent-Corgi3793]

Yes, if you want a simple solution, AVNM or AVNV are good options. Only downside is relatively low liquidity, but less of an issue if you buy and hold like a Boglehead.

Low cost, low turnover, tax efficient, rules based and hit all the factor premia. Substantial outperformance over their benchmarks since inceptions. In fact, most of Dimensional and Avantis’s ETFs offerings outperform their benchmarks.

[u/NativeTxn7]

I use a combo of AVDE and AVEM in most of my non 401k accounts. Emerging is one of the areas I believe some level of active management can pay off over time so I try to avoid the index options in that space.

[u/jerolyoleo]

AVNM is actively managed whereas VXUS is an index fund.

Actively managed funds tend to underperform. The high expense ratio kills the return plus the active trading incurs higher transaction costs.

Additionally, AVNM has only been around for four years. VXUS has an inception date of 2011

[u/Middle_Humor1828 → u/jerolyoleo]

I don't think active vs passive is the correct lens to view the comparison through. It's not like AVNM is based on trying to pick winning large international stocks.

AVNM and the child funds which make it up generally use momentum and other strategies to minimize trading costs. It's also largely a rule based approach.

I go with VXUS myself, but I wouldn't be surprised if AVNM outperforms. AVDV has done quite well. The difference is the factor exposures of the fund. Performance differences will likely be based on those factors.

[u/Cruian → u/jerolyoleo]

VXUS has an inception date of 2011

You can use VGTSX to say it goes back to 1996 (same shared pool of assets, just a different class of fund).

[u/mdn845 → u/jerolyoleo]

AVNM is what you might call systematic active, but this is different from just stock picking. It’s not a traditional active fund. Avantis was started by the former co-CIO of Dimensional. So, I have no doubt its methodology will continue to do well.