JOHN L from NJ posted over 2 years ago:

According to Jeremy Siegel in Stocks For the Long Haul 6th edition; "the size factor has added nothing to returns for almost 40 years." When you exclude the period 1975 to 1983 returns for small stocks have matched the S&P 500. "Some economists question if a true size factor ever existed and whether it was other characteristics associated with small stocks that explained the small stock out performance." Maybe this community has nothing to discuss!

DAVID R from WI posted over 2 years ago:

A small company that has growth potential, due to a disruptive new product, that can stay relative, and has good management most certainly is going to be successful for investors, and being small means that there is a smaller supply of stock, which means it may go up even faster. Size definitely is a factor.

DOUG L from VA posted over 2 years ago:

Small stocks are less followed by the big boys - they can't buy enough to move the needle for them. That gives us a chance to find stocks that are mispriced. But if you just buy a small cap ETF, not sure you will reap that benefit. Maybe a small cap value ETF? Or maybe active management, or pick your own.

JOHN L from NJ posted over 2 years ago:

Doug L - Yes small stocks are followed less by the big boys. What you are suggesting is widely known and believed but is it still true? Do small investors irregularly under price small caps? Perhaps but I could also believe that a lot of well informed small investors could be working this corner of the stock market and systematically eliminating any under pricing. As an example of this small cap market efficiency: Shadow Stock performance was outstanding from 2000 to 2008. However, the Shadow Stock portfolio has not materially outperformed the S&P 500 and small stock index since 2008.

Bruce H from CA posted over 2 years ago:

John, your point is what I think every time I see the celebration about the AAII shadow stock portfolio. It does not materially outperform the index ETFs. So why should I care? Are we waiting for these value picks to finally shine for a few years after more than a decade of being unremarkable?

BARRY J from TX posted over 2 years ago:

Jenna, thanks for spreading the word on the “small cap” opportunity 2024 presents. This is something I am experimenting with for 2024. In October 2023, I added an 8% exposure in my portfolio to small caps through 5 ETFs. I needed multiple ETFs to get exposure to the different indexes that focus on different “deciles” of small caps -- SPX, RUT 2K, and RUT 3K. I selected candidates on these criteria (1) low ER <0.06, (2) liquidity AUM >$1B, (3) daily volume > $100K, and (4) low tracking error <+/- 0.10. I have only been invested for 2-3 months. I got a pop from the end-of-year flash bull market. I am making a 5% profit so far, but since 1/1/24 the market has been “psycho” because of the ongoing Greek drama between the heavy focus on the concentrated, overbought, overvalued M7 and the “schizoid” FOMC that is yoyoing markets around because they change their mind with each new data point. My big concern is that it may be difficult to find momentum to support small-value stocks. The large majority of the money in the markets is chasing M7 and AI and soon Bitcoin ETFs too. Investing in small value is counterintuitive for large segments of the market. And it is my understanding that the charters of most institutional investors that might provide momentum for our plan DO NOT invest in small-value stocks. So. I ask, where do you see the momentum coming from? My primary motivation for my small stake in small-cap was to add diversification not to get rich. The get rich part of this plan is going to have to come from buying on a market dip like the last tech boom provided in March 2000. John L raises another BIG issue we face: How many miners have already grubstaked a claim to this lode? The Gatlin Brothers admonition about “All the gold in California … “ is to be heeded as well as hummed. Some folks say the efficient market hypothesis is only a theory. So is gravity, but I don't see them trying to fly.