Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Larrry Swedroe: Small Caps Still Outperforming

FYI: As the director of research for The BAM Alliance—a community of about 140 like-minded RIA firms who believe in providing a fiduciary standard of care using an evidence-based investment strategy—I often get requests from other advisors for my help in answering questions from clients about articles they’ve read in the financial media.


  • Small cap value is a misunderstood stock universe and many investors shy away from it in favor of popular large cap universe or / 60 / 40 balanced fund affairs.
    Swedroe's work is important as it presents returns data via evidence based vs. anecdotal analysis.
    I promote the small cap value universe to "young" demographic investors as they have time on their side for compounding of assets
    A tactical asset allocation process applied to SCV has produced further risk managed alpha premium.
  • If I recall from some papers in the past, both small and value show a premium that portfolio theory cannot explain because they are less volatile rather than more volatile. Larry Swedroe isn't correct on that point.

    I find these studies over decades and decades of history as if longer is necessarily better. Given how much industry compositions have changed over years and the trading instruments have changed, none of the arguments of the past such as small cap being less liquid hold. IWO or IWM is as liquid as SPY.

    One big evidence of the futility of such statistics is that currently small caps especially in growth have become proxies and so highly correlated with biotechs. In periods where BioTechs do well, small caps will do well and the opposite. Why that implies anything regarding small caps in general is beyond me.

    Sometimes statistics become replacements for lack of insight.
  • Sometimes statistics become replacements for lack of insight.

    I nominate that pithy little tidbit for the MFO Hall of Fame of market quotes. That's assuming of course you aren't on steroids!!
  • Small value funds require a lot more patience and the willingness to double down when value is out of favor. Most of the gains made in the last 10 years for small value happened in 2003 and 2013. Maybe it's better to be in a massive small cap index fund which is a lot less likely to liquidate. I'm still plugging money in WSCVX, though.
  • Still holding on for dear life - ARIVX and ICMAX.
    Waiting to enter BRSIX or BRSVX. Hope I remember and time it right.
Sign In or Register to comment.