Factor Investing and Tax Strategies with Wes Gray & Rick Ferri

Factor Investing and Tax Strategies with Wes Gray & Rick Ferri What happens when a hard-core value investor, PhD student of Eugene Fama, ETF designer, and tax minimization obsessive sits down with a Boglehead®? In this Bogleheads® University 2025 session, Rick Ferri interviews Wes Gray, CEO of Alpha Architect, about the uncomfortable tension between market efficiency, factor investing, and the brutal reality that even “smart” strategies can lag simple index funds for a decade or more. Wes walks through his journey from trying to prove Fama wrong with a PhD thesis on value investing, to building quantitative value and momentum strategies, to ultimately admitting that factor investing is “possibly the worst idea ever” for most investors—not because the theory is wrong, but because humans cannot live through 10–15+ years of underperformance. From there, the conversation shifts to where he believes the real opportunity lies: taxes. Rick and Wes dig into how ETF structure can dramatically improve tax efficiency, why tax drag can dominate fee differences, and how products like cash-like “box spread” ETFs and broad-market, tax-aware ETFs are engineered to defer or reduce taxable distributions for investors. The discussion also explores advanced topics rarely covered in mainstream investing content: how large taxable investors and family offices think about structuring portfolios, the mechanics of Section 351 exchanges to move appreciated holdings into an ETF, and why some entrepreneurs and investors relocate to Puerto Rico under Act 60 to reduce their overall tax burden. Throughout, Rick keeps the conversation grounded in Boglehead® principles—cost matters, taxes matter, behavior matters—while Wes provides an insider’s view from the factor and ETF design world. Recorded at the Bogleheads® 2025 Conference, this session is part of the John C. Bogle Center for Financial Literacy’s mission to provide education to help investors become better informed, more skeptical of complexity, and more intentional about taxes—not just fees—when building long-term portfolios. Chapters: 0:00 Introduction 2:07 PHD thesis on value investing vs efficient investing 5:05 Beginnings of Alpha Architect 8:45 The long game of value investing 13:04 The art of Factor investing 16:35 Tax minimization strategies 20:18 Inception of Boxx 23:15 Rick's distillation 25:48 How Boxx operates 29:28 351 ETF structure in depth 32:48 Tax efficiency avoiding dividends 36:13 Business in Puerto Rico Recorded on October 17, 2025. The John C. Bogle Center for Financial Literacy (https://boglecenter.net/) is a non-profit organization dedicated to improving financial literacy. The Center’s mission is to expand the legacy of John C. Bogle, the founder of Vanguard, by promoting the principles of successful investing and financial well-being through education and community. The Center envisions a world of well-informed, capable, and empowered investors. Community outreach is achieved through multiple social media channels, the Bogleheads® forum, wiki, and blog, as well as in-person and virtual Bogleheads® chapters worldwide. Bogleheads® is a registered trademark of the John C. Bogle Center for Financial Literacy.