Small cap value investments can be beneficial for long-term growth and portfolio diversification.
Historical performance data show small cap value stocks outperforming large-cap indices like the S&P 500 over time.
Deep dives
The Debate on Small Cap Value
The podcast delves into a debate on the effectiveness of small cap value investments among notable figures like Rob Berger, Paul Merriman, and Carsten. While some, like Rob Berger, choose to eliminate small cap value from their portfolios, others believe in its long-term benefits, especially for younger investors. The discussion highlights differing perspectives on the role of small cap value and its potential impact on investment portfolios.
Historical Performance of Small Cap Value
The episode discusses the historical performance of small cap value stocks, emphasizing their outperformance compared to large-cap indices like the S&P 500 over the years. Insights are shared on the benefits and drawbacks of investing in small cap value, with a focus on the significant returns and volatility associated with these investments.
The Importance of Diversified Portfolios
The importance of maintaining diversified portfolios, including exposure to small cap value stocks, is underscored in the podcast. The episode highlights the benefits of incorporating asset classes like small cap value to enhance returns and manage risk over extended periods. The discussion touches on strategies like the four-fund portfolio, emphasizing the potential advantages of balanced and diversified investment approaches.
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Defending Small-Cap Value: Addressing Critiques and Misconceptions
There has been a lot of anti small cap value articles and podcasts over the last several years. I have been asked many times whether I think the small cap value premium is a thing of the past.In this podcast I have addressed the most commonly discussed criticisms of small cap value. During the presentation I reference a blog entitled, "Small-Cap Value Stocks: Diversification or Di-WORSE-fication?"
The Early Retirement Now newsletter is written by Karsten Jeske, PhD, CFA. Here is a video of a friendly debate that Karsten and I had on the “Forget About Money” podcast. Listeners will learn that Karsten and I have very different beliefs about what returns best represent the small cap value premium. I reference the real time Morningstar performance results of DFFVX (2000 to present), DFSVX (1993 to present) and AVUV (2019 to present).