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Since 1972 we can see that Value has outperformed the overall market
Large cap value has outperformed the market and small cap value has then outperformed large cap
There will of course be periods of underperformance but sticking with value long term works
What is your confidence level that this will hold true over the next 50 years as well?
@ccm_brett Its impossible to know but over the long term I would be confident because as with any form of investing, if you buy things for less than they are worth you make money. If you over pay then theres less chance of making money
How do you manage your exposure to small caps? Some context on your own approach would be insightful
@joeyhirendernath That's a great question— what are the pitfalls of heavily weighting a portfolio toward small caps?
@joeyhirendernath The downside with small caps can be that generally speaking they carry more volatility. So if someone wanted to include them in their portfolio then they would need to keep this in mind and manage that accordingly. could be that only a certain percentage is allocated to small caps for example. ultimately it has to fit a risk profile that you would be happy with
@bensparham so in a sense, there is more 'timing risk' with small caps. Due to their volatility, there is more of a possibility that you bought at a 'local top' as their performance goes up and down.
@nathanworden I wouldnt say so because that risk theoretically could be with any asset so its not exclusive to small caps. the general month to month movement can be larger but thats just a generalisation because its not the case all the time
@bensparham fair— I guess just noting the extra volatility is the best way to describe it.
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