Facts and fictions of small-cap-value returns – Part II


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By Paul Merriman. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.


In last week’s podcast, I responded to some recent controversies about small-cap-value returns. I examined and shared my findings of a study that looked at the history of returns for many of the popular asset classes: S&P 500, Total Market Index, Large-Cap Value, Small-Cap Blend, Small-Cap Value, U.S. Long-Term Bonds, U.S. Treasury Bills and Inflation. (Slide 1: History of returns for popular asset classes).

This week, I continue my discussion from Part 1 regarding the potential benefits of adding more small cap and value to a portfolio. This is of particular concern as I learned about the young investors who are part of the FIRE movement. One of the biggest mistakes these young people are likely making is in thinking a Total Market Index really gives them all the small cap and value they need to maximize their future performance. (Slide 2: Comparison of Returns: S&P 500 vs. equity asset classes).

I read a portion of a remarkable article from Mark Hulbert in which he discusses the research of academics who have concluded stocks don’t make much more than bonds. Investors always have to make the decision who they should trust. If these academics are right, maybe the smartest thing you can do is beef up your exposure to equity asset classes that have outperformed the S&P 500 and Total Market Index over almost every 20 year period.

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