The Shocking Truth About Value Pornography: Why Chasing “Free” Content Is Killing Your Business Growth (And What To Do Instead)

Ever find yourself scratching your head over those market returns that just don’t add up? Like, how does an ETF dubbed “Value Factor” suddenly rocket to 34.2% year-to-date while the “Minimum Volatility” one barely budges? It’s almost like the marketplace is playing a game of hide and seek with us investors. A few weeks back, I took a deep dive into the numbers behind some factor ETFs based on the MSCI World universe—those neat little packages that systematically play active strategies over and over again. What I found wasn’t just a lesson in numbers, but a wake-up call about patience, timing, and the quirks of luck—yes, luck. Picture this: value investing, traditionally the tortoise in the race, suddenly sprinting ahead—courtesy of a tech stock named Micron—and leaving the market cap-weighted indexes staring in disbelief. But hey, is it skill, strategy, or fortune’s favor? That rollercoaster of “Area of Pain” and eventual sweet reward might just be part of investing’s dance. So, if you’ve ever wondered whether you picked the ‘right’ ETF or felt that sting of underperformance, stick around. Let’s unravel the twists, turns, and surprising pivots of factor investing in the MSCI World ETFs. LEARN MORE

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I been meaning to do a separate post to illustrate to my personal investment advice to my friend that I wrote about last week.

One day a few weeks ago, I went through the numbers of the factor ETFs that is based on the same universe of MSCI World. These are systematic active strategies that comes in one neat ETF that helps you execute a very specific and repeatable strategy again and again.

I kind of knew from work and also reporting Daedalus that develop ex US isn’t doing as well but also market cap weighted index isn’t doing as well. I have this 6-10% year-to-date return in mind.

So I went through them (YTD up to 18 Jun 26):

1. IWMO | iShares Edge MSCI World Momentum Factor UCITS ETF: 26.9% (expected. That is what you would expect of momentum. They manage to capture a lot of the chip and hardware companies that benefit from AI)
2. IFSW | iShares STOXX World Equity Multifactor UCITS ETF: 11.8% (I reported this frequently since it is in my portfolio)
3. IWDA | iShares Core MSCI World UCITS ETF: 9.9%
4. IWQU | iShares Edge MSCI World Quality Factor UCITS ETF: 9.2%
5. IWVL | iShares Edge MSCI World Value Factor UCITS ETF: 34.2% (wait… what???)
6. MVOL | iShares Edge MSCI World Minimum Volatility UCITS ETF: -0.44%

The returns of value and minimum volatility is the most surprising. The minimum volatility’s almost flat returns shows us that not everything did well this year.

And if you are looking at what has not work, and would like to take a chance with that, then MVOL is for you.

IWVL does a systematic strategy.

1. From the universe of developed world markets
2. Rank the securities by a composite price-to-book, price-to-forward-earnings, enterprise value-to-operating cash flow.
3. Pick and own the top 300

It wasn’t surprising after the initial surprise to consider that Micron (MU) fell into the screen.

The sight of the chart of IWVL (blue) versus IWDA (red) is a sight to behold:

The returns of the Value Factor ETF have lagged the blended market cap weighted indexes since inception in 2015. It’s a time when the index is very much dominated by hyperscalers, Apple, Netflix and the market cap-weighted index is dominated by more quality companies. You could also give the argument that the force of passive indexing, new monies flowing into retirement accounts made the cap weighted index so strong.

Those who may not notice would say that the factors aren’t working.

But if quality is a factor and it is not working, then it won’t do better if not keep pace with the index (it did. Check out the performance of IWQU vs IWDA).

We often compare not because we want to but because we are told by don’t know who that we need to check against the benchmark. The benchmark often ends up as that blended market-cap weighted index.

Imagine if you are not so well versed, and were deciding between the IWDA and IWVL in 2015, not sure if you wish to buy in to all these talk about value and so decide to take your chance with this IWVL.

You would live through the following experience since you invested up to 2024:

I call the gap between lines as the “Area of Pain”.

It is an area of pain because if you don’t know how to interpret things, that pain reminds you that you are losing out to someone. That you are making a mistake.

At first you can take it, holding on to the hope that the factors will show up. But as time passes, your willpower becomes weaker.

The wider the gap, the harder it is to live with. You would not be happy with making 5.7% p.a. over 9 years when you can make 9.9% p.a. over the same period had you “pick the right choice”. In their mind, had they pick the right choice in 2015, the wealth that they compound would be different.

What is difficult for them to see is that, in another time period, they would have picked IWDA, and IWDA would be the one having 4% LESS return than IWVL.

There is always this risk of underperformance and because of this risk, there is a chance of higher return.

When the pain threshold reaches a certain point they sell in 2024.

Then that was when you see the tables turn:

This is a year-to-date chart, but if we measure from 2024 onwards, IWDA would have done 59% while IWVL would did 100%.

What you have to realize is in this game there are seldom definite. Are you going to tell me that when you start this investing journey in 2004, you would know that there is going to be a great crash, and out of that to save it, interest rate is going to be brought so low that it provides so much liquidity that the US market is going to do so well. At the same time web 2.0 took off and there is a huge demand for cloud computing. And there are no significant conflict during this period.

If we operate in a less definite world, you either have to trade more nimbly or that you have to hold longer term, and more diversified. One takes more effort and sophistication, one takes much less effort and sophistication.

IWVL Was Lucky

Actually I think IWVL’s outperformance was solely due to Micron.

Micron did about 260% just this year alone.

Here is IWVL’s top holding at the end of 2025:

IWVL reconstitute or it redo all these ranking and portfolio changes semi annually, likely in May and Nov. Based on then Micron ends up as the top holding.

Isn’t it luck that those value stocks end up….. being AI beneficiary? Probably so:

1. MU did 260%
2. CSCO did 57%
3. INTC did 240%
4. QCOM did 33%

But i can tell you much of these return take place after April.

This is how it looks like today:

Holy shit, that Micron position is seriously big not. just that now you see Kioxia and NXP popping up.

But Kyith, IWVL should have reconstituted isn’t it? After Micron and these firms go up so much how come they are still considered value?

Because the metrics says so. The forward earnings and forward operating cash flow are likely so much that the valuation is still considered as cheap.

IWVL current PE is 16.9 times lol. It is lower than IWDA’s still.

In what fxxk world does this make sense?

In a world where fundamental value still make sense. I would question how long the forward cash flow will be like this though. This is where Mr Market would often get wrong (and so do we).

Emerging Market Value is Just as Spectacular

Since we are on the topic whether factors show up my often example is… its showing up in International but also emerging market.

iShares also have this iShares Edge MSCI EM Value Factor UCITS ETF (EMVL) that was incepted in Dec 2018. We can compare it against the iShares Core MSCI EM IMI UCITS ETF (EIMI) or iShares MSCI EM UCITS ETF USD Acc (SEMA).

Here is the performance since inception:

You can see that there were periods where EIMI did well, and there were periods where value turn out to be better.

Here is the year to date:

It is good to look at EMVL at the end of 2025:

And how EIMI look at the end of 2025:

I think the biggest difference is the allocation of SK Hynix, Ali Baba and Tencent.

Epilogue

The value factor comes in spurts just like this.

You can say its lucky but… if value is about reversion to the mean, and you keep positioning your portfolios this way, can you say that you expanded this luck?

I think it is always good to consider the opposite: The market capitalization may not always going to be so quality and profitable.

And we are seeing it happen, dominated by more cyclical companies. Would you like to invest in more cyclical companies (albeit doing very well right now!). The high quality companies are going to see their free cash flow cut drastically, and IWQU would look pretty different from IWDA.

So what will IWDA become? Beats me.

That is something I took a while to get used to: Not knowing what will be inside AVGS, IFSW, AVGC, JPGL, AVEM.

And just going with the flow.

The longer I invest, the more I lean towards “I don’t know what’s gonna happen” than “I am damn well sure its gonna be like that for the next 20-30 years”.

While it is uncomfortable not to know what will be in the funds, whether we will get lucky or not, I think that is the reality.

If you buy a market cap weighted index, you will still go through the same thing.

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1. All my personal notes about how my philosophy behind my own money and how I manage it.
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Kyith worked as an IT operations engineer from 2004 to 2019. Currently, he works as a Senior Solutions Specialist in Fee-only Wealth Advisory Firm Providend. All opinions on Investment Moats are his own and does not represent the views of Providend.

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