Notes 2022-05-26

Value Fund

ref: Investopedia

A value fund is a pooled investment that follows a strategy focusing on shares that are undervalued based on fundamental analysis.

Value investing is often contrasted with growth investing, which focuses on emerging companies with high growth prospects.

The premise behind a value investing strategy is that once the market realizes the true value of these stocks, the share price will increase and the value fund investor will gain from this increase

Examples of Value Funds

ETFs That Replicate Buffett's Investment Strategy

ref: Investopedia, Optimized Portfolio

Buffett is probably most accurately described as a long-term value investor. He does not look so much for stocks selling at a bargain-basement price as he does for reasonably priced stocks of companies he believes will continue to be financially solid with long-term growth potential.

A basic part of Warren Buffett's investment strategy is to invest in companies that have a competitive advantage in their industry, which can offer investors a protective "moat". The term "moat" as it relates to investing was coined by Buffett to describe any company with a competitive advantage within an industry that offers it moat-like protection.

Most investors who want to follow Buffett's strategies invest in his company, Berkshire Hathaway.

While there aren't ETFs that track Buffett's investment picks directly, some do follow his general strategy.

However, contrary to popular belief, the Warren Buffett ETF Portfolio is actually a fairly high-risk portfolio.

The Warren Buffett Portfolio asset allocation is as follows:

  • 90% US Large Cap Blend
  • 10% Short-Term Treasury Bonds

90/10 using short bonds still has 99% of the portfolio's risk being contributed by the stocks side. That is, 90/10 using short bonds is not materially different – in terms of volatility and risk – from a 100% stocks portfolio. In Buffett’s eyes, this 10% might be less of a stocks hedge and is simply more like a parking garage for cash.

Going back to 1977, here’s a comparison of the Warren Buffett ETF Portfolio and the S&P 500 through 2019. The results have been very close, with the Warren Buffett achieving a slightly higher risk-adjusted return (Sharpe) due to the small diversification benefit of the inclusion of short-term treasuries.


Using entirely low-cost Vanguard funds, we can construct the Warren Buffett Portfolio with the following ETFs. Although this approach does not have the "moat" factor as two previously mentioned ETFs

  1. Invesco S&P 500 Enhanced Value ETF (SPVU)
  2. VanEck Morningstar Wide Moat ETF (MOAT)
  3. Vanguard Equity Income Fund Investor Shares (VEIPX)
  4. Vanguard Short-Term Treasury ETF (VGSH)
  5. iShares MSCI USA Quality Factor ETF (QUAL)
  6. iShares MSCI USA Value Factor ETF (VLUE)


  1. topic.etf
  2. topic.investment