Matthew Frankel, The Motley Fool Published 7:00 a.m. ET May 1, 2018 CLOSE The nine-year stretch of rising stock prices won’t last forever. So now’s a good time for investors to bear-proof their 401(k)s before the next financial storm. USA TODAY Or is this common theory wrong? Question: I'm 30 and selecting my 401(k) investments. Should I put most of my money in a small-cap stock fund, since they tend to beat large-cap funds over time? Answer: The idea that a given group of small-cap stocks will outperform a group of large-cap stocks over time certainly makes sense. After all, small-cap companies tend to have much more room to grow. In other words, it's typically far easier for a company with a $1 billion market cap to double in size than it is for, say, Microsoft. However, while the common perception is that small caps tend to outperform large caps, the data doesn't entirely support that view. In fact, from 1979 through 2015, the broad small-cap Russell … [Read more...] about Investing Q&A: Do small-cap stock funds beat large-cap funds?
Small cap stocks index
Small-cap stocks enjoyed huge success last year until they peaked in December 2016. The Russell 2000 small-cap index moved mostly sideways through August and since then has added about 100 points to 1,476 now. But if some small-cap market analysts are right, these small fry are headed for a big comeback sometime soon. Several of these market pros suggest that a new "small-cap cycle" is on its way that would power the group's renewed vigor. "We're seeing a synchronized global economic recovery that should benefit some of the more economically sensitive or cyclical areas of the overall market" and small caps in particular, said Francis Gannon, co-chief investment officer at Royce & Associates. In a recent report to clients, Gannon argued that in the current environment, the globally exposed small-cap cyclicals represent an attractive opportunity and that investors should focus on revenue growth among small-cap companies. Although only a small percentage of revenue is generated … [Read more...] about Small-cap stocks may be poised to move higher
(MoneyWatch) In 1981, Rolf Banz published the paper "The Relationship Between Return and Market Value of Common Stocks." Banz found that small-cap stocks provided higher returns than large-cap stocks. The finding fits nicely with modern portfolio theory -- just as riskier stocks should provide higher expected returns than safer bonds, riskier small-cap stocks should provide higher expected returns than safer large-cap stocks. However, some have questioned the paper's findings, specifically making three challenges. Let's address those concerns. Benefited from time period used We address that issue by looking at the data. We find that in the period from 1927 through 1980, the small-cap premium (the annual average return of small-cap stocks minus the average annual return of large-cap stocks) was 4.1 percent. From 1981 through 2011, there was still a small-cap premium, although it had shrunk to 1.5 percent. It's worth noting that an explanation for the apparent shrinking is that … [Read more...] about Can small-cap stocks boost your returns?
(MoneyWatch) One argument stock pickers have been making is that investing in index funds results in stocks having higher correlations. Assets with high correlations tend to move in tandem, which make it harder for active managers to harvest the winners. There's good news for active managers, though: This doesn't appear to be true for large-cap stocks or commodities, and it doesn't appear to be the case for small-cap stocks, either. Another top mutual fund loses its touch Swedish investors should thank John Bogle When it comes to investing, women are the fairer sex Through September 24, the Russell 2000 Index (an index comprised of small-cap stocks) had returned 15 percent year-to-date. The following facts reflect on the amount of dispersion in returns among the individual stocks in the index: The top performer had returned 658 percent 10 stocks had returned more than 200 percent. 75 stocks had returned more than 100 percent 551 stocks had negative returns 30 stocks had lost at … [Read more...] about Is indexing ruining small-cap stocks?
Small is still beautiful, especially when it comes to stock investing. And interestingly, after a long period of underperformance, small-cap stocks have been besting the large-caps since February. Close watchers of the market’s various sectors argue that small-cap investing has proven to be the better play over the long term. These little-company stocks are the typically included in the Russell 2000 rather than the S&P 500, which tracks the market’s large-value shares. “It is well documented that one dollar invested in small cap stocks from 1925 to today would return $27,000, as compared to only $5,000 for the S&P 500 and only $110 for U.S. Treasury securities,” said Nick Galluccio, head of small-cap investing at Teton Advisors, a unit of investment firm Gabelli & Co. He noted that small-cap stocks are generally investment plays on the U.S. economy, which continues to outperform the economies of other major countries. True, the small caps have … [Read more...] about 3 small-cap stocks that may be worth big bets