It takes a certain degree of investment knowledge and time to form an opinion about the historical performance of different factors and expected future performance.
People who are knowledgeable about investing, e.g. Ben Todd and Bayesian Investor, have already formed opinions about the future expected performance of different factors. Is there something wrong with non-advanced investors just following their advice? Perhaps this wouldn’t be optimal, but I’m having a hard time seeing how it could be worse than not adding any tilts.
It also requires knowledge and time to determine how to appropriately incorporate factors into a portfolio and how to adjust exposure over time.
If a non-advanced investor using the recommended tilts merely maintains their current level of exposure and they shouldn’t have, it seems unlikely to me that such an investor would end up under-performing a strategy that uses no tilts by much; even if the tilts no longer provide excess returns, I don’t see why they would end up doing *worse* than the market. And perhaps eventually some knowledgeable investor would make a blog post saying you should stop adding tilts towards those factors.
The potential downside (and upside) of diversifying by adding some tilts and consistently sticking with them is limited, so I don’t see a major problem with “non-advanced investors” following the advice. Investors should be aware of things like rebalancing and capital gains tax; perhaps “intermediate investor” is a better term.
People who are knowledgeable about investing, e.g. Ben Todd and Bayesian Investor, have already formed opinions about the future expected performance of different factors. Is there something wrong with non-advanced investors just following their advice? Perhaps this wouldn’t be optimal, but I’m having a hard time seeing how it could be worse than not adding any tilts.
If a non-advanced investor using the recommended tilts merely maintains their current level of exposure and they shouldn’t have, it seems unlikely to me that such an investor would end up under-performing a strategy that uses no tilts by much; even if the tilts no longer provide excess returns, I don’t see why they would end up doing *worse* than the market. And perhaps eventually some knowledgeable investor would make a blog post saying you should stop adding tilts towards those factors.
The potential downside (and upside) of diversifying by adding some tilts and consistently sticking with them is limited, so I don’t see a major problem with “non-advanced investors” following the advice. Investors should be aware of things like rebalancing and capital gains tax; perhaps “intermediate investor” is a better term.